As a new year approaches, so do important tax changes. In 2026, Lithuania will implement a comprehensive tax reform package that impacts corporate income tax (CIT). Understanding these changes now is essential for proactive financial planning and ensuring your business remains compliant and competitive.

The New Tax Rates for 2026

The most significant change for the upcoming year is an adjustment to the main CIT rate, as well as the rate for small businesses.  

• Standard Rate: The general corporate tax rate will increase from 16% to 17%. This rate applies to the taxable profits of most businesses in Lithuania. This change is part of a broader government initiative to increase funding for national defense and social programs.  
• Support for Small Businesses: Lithuania continues to offer a preferential tax rate to support smaller companies. The reduced CIT rate for qualifying businesses will increase from 6% to 7%. This rate applies to companies that have fewer than 10 employees and an annual gross revenue of up to €300,000.  
• 0% Rate for Startups: The existing 0% CIT rate for new, small companies will be extended from one year to a full two years of operation. This is a powerful incentive designed to give startups more runway to establish themselves without a tax burden.

Key Changes in 2026

The tax reform isn’t just about rate increases; it also introduces new benefits and rules that business owners must be aware of.

• “Instant” Depreciation Allowance: A major new incentive for 2026 is the ability to instantly depreciate the full value of certain fixed assets, such as machinery, equipment, software, and trucks. This allows businesses to deduct the full cost in the year of purchase, significantly reducing their taxable income.  
• Limitation on Loss Carryforwards: To prevent tax avoidance, companies will be limited in how much they can use past losses to offset current taxable income. From 2026, tax loss carryforwards will be capped at 70% of a company’s taxable income for a given year.  
• Deductions for STEM Scholarships: Businesses can now deduct up to €2,500 per year for scholarships paid to students and researchers in science, technology, engineering, and mathematics (STEM) fields. This encourages private sector investment in education and innovation.

What’s Not Changing

For now, other key aspects of the tax system remain stable, providing a degree of certainty.

• VAT Rates: The standard Value Added Tax (VAT) rate remains at 21%.  
• R&D Tax Incentives: The generous triple-deduction for qualifying R&D expenses will continue to be a powerful tool for tech and innovation-focused businesses.
• Free Economic Zones: The tax exemptions for companies operating within Free Economic Zones will remain in place, offering a full CIT exemption for the first 10 years of operation.

Key Actions for Business Owners in 2025

With the 2026 changes just a few months away, here are some steps you should take now:

• Review Your Financial Forecasts: Adjust your financial projections to account for the new CIT rates.
• Assess Eligibility: Reconfirm if your business qualifies for the new 7% reduced rate or the extended 0% startup rate.
• Evaluate Asset Purchases: Consider accelerating or delaying capital expenditures to take full advantage of the new instant depreciation allowance.