What taxes do I pay on individual activity under a certificate in Lithuania?
Individual activity under a certificate is subject to three main taxes - personal income tax (GPM), state social insurance (VSD) and compulsory health insurance (PSD) contributions - though the certificate itself is issued free. The popular myth that income is taxed at a 'flat 15%' is inaccurate: thanks to the income tax credit, the effective income tax starts at 5% (when taxable income does not exceed 20,000 Eur a year), rises gradually and reaches 15% at the 35,000 Eur mark. From income you can deduct either actual, documented expenses or a flat 30% of income. VSD (12.52%) and PSD (6.98%) contributions are calculated on 90% of taxable income. Another myth is that no Sodra is due; in reality VSD and PSD are compulsory. The annual GPM311 return is filed by 1 May, and you must register as a VAT payer once you pass the 45,000 Eur annual income threshold.
📋 The rules
- The individual activity certificate is issued free; you pay GPM, VSD and PSD
- Effective income tax runs from 5% (up to 20,000 Eur) to 15% (from 35,000 Eur) via the tax credit
- From income you deduct actual expenses or a flat 30% of income
- VSD (12.52%) and PSD (6.98%) are calculated on 90% of taxable income
- The GPM311 return is due by 1 May; VAT registration is compulsory from 45,000 Eur
🔓 Exceptions
- Instead of an individual activity certificate, some activities can use a business certificate with a fixed fee
- If individual activity is carried out alongside employment, the 30% expense rule may not apply to income from the employer
- Minimum PSD contributions may be due even in months when no activity is carried out or no income is earned
⚠️ Penalties & fines
The main consequences come not from carrying out the activity itself, but from not paying the taxes and contributions on time. If income is not declared or GPM is paid late, the VMI assesses the tax, late-payment interest and can impose a fine. What people miss: VSD and PSD contributions are administered by Sodra and are compulsory even when profit is small - if unpaid, a debt builds up, which can lead to health insurance being cut off and free treatment being suspended. Once you pass the 45,000 Eur annual income threshold, you must register as a VAT payer; if you do not, VAT is charged retroactively anyway. If the accounts are not kept in order or the documents supporting income and expenses are not retained, an inspection may disallow the expenses and calculate tax on the full income. So it is important to keep the activity journal and retain the documents for the required period.
📎 Official sources
- VMI · individual activity and its taxation →
- Sodra · VSD and PSD contributions on individual activity →
- e-seimas · Law on Personal Income Tax →
❓ Frequently asked
What taxes does a person on individual activity pay?
Individual activity under a certificate is subject to three main taxes: personal income tax, state social insurance and compulsory health insurance contributions. The certificate itself is free, and the amount of tax depends on the income earned and the chosen method of deducting expenses.
Is individual activity income tax really 15%?
No, that is a simplification, because thanks to the income tax credit the effective income tax starts at 5% and only gradually rises to 15%. The full 15% rate applies in practice only once taxable income reaches 35,000 Eur a year.
Do I have to pay Sodra contributions?
Yes, individual activity income is subject to VSD (12.52%) and PSD (6.98%) contributions, which are calculated on 90% of taxable income. These contributions are compulsory, and if unpaid a debt builds up at Sodra and free health-care services can be suspended.
How do I choose the way to deduct expenses?
From individual activity income you can deduct either actual, documented expenses or a flat 30% of income. The flat 30% method is convenient when actual costs are small or hard to prove, but with large expenses the actual method is often more beneficial.
When must I register as a VAT payer?
You must register as a VAT payer once your activity income over the last 12 months passes the 45,000 Eur threshold. Below that threshold you may register voluntarily, but then you take on the duty to calculate and declare VAT in the prescribed way.
🔎 Common searches
What people search to land here:
- “individual activity taxes lithuania”
- “individual activity certificate income tax lithuania”
- “individual activity sodra contributions lithuania”
- “is individual activity income tax 15 percent lithuania”
- “individual activity 30 percent expenses lithuania”
- “when to register for vat lithuania”