Tax Incentives for Expatriates and Digital Nomads in Lithuania
Lithuania, a Baltic nation renowned for its technological advancements and welcoming business environment, offers a range of tax incentives tailored specifically to expatriates and digital nomads. These incentives aim to attract skilled professionals and remote workers to the country, fostering economic growth and innovation.
Eligibility Criteria
To qualify for these tax breaks, individuals must meet the following criteria:
- Expatriates: Expatriates are defined as individuals who are not Lithuanian citizens or permanent residents but have relocated to Lithuania for employment purposes. They must have a valid work permit and reside in Lithuania for at least 183 days per year.
- Digital Nomads: Digital nomads are individuals who work remotely for clients outside of Lithuania. They must have a stable income and be able to demonstrate that their work is performed primarily from Lithuania.
Types of Tax Breaks
Expatriates and digital nomads in Lithuania can benefit from the following tax breaks:
- Personal Income Tax Exemption: Expatriates who earn income from foreign sources are exempt from paying personal income tax on that income for a period of five years. This exemption applies to both employment income and passive income, such as dividends and interest.
- Reduced Corporate Income Tax Rate: Digital nomads who establish a business in Lithuania can benefit from a reduced corporate income tax rate of 5%. This rate applies to profits earned from activities related to their remote work.
- Social Security Contributions Exemption: Expatriates who are employed by a foreign company and do not receive any income from Lithuanian sources are exempt from paying social security contributions.
Application Process
To claim these tax breaks, expatriates and digital nomads must follow the following application process:
- Expatriates: Expatriates must apply for a work permit and register with the Lithuanian Tax Inspectorate. They must also submit a declaration of foreign income to claim the personal income tax exemption.
- Digital Nomads: Digital nomads must register as self-employed individuals with the Lithuanian Tax Inspectorate. They must also submit a business plan and proof of their remote work activities to qualify for the reduced corporate income tax rate.
Legal Framework
The tax incentives for expatriates and digital nomads in Lithuania are established through the following legal instruments:
- Law on Personal Income Tax: Article 17(1) provides for the personal income tax exemption for foreign-sourced income.
- Law on Corporate Income Tax: Article 15(1) establishes the reduced corporate income tax rate for digital nomads.
- Law on Social Insurance: Article 4(1) exempts expatriates from paying social security contributions on foreign income.
Rationale and Objectives
These tax policies aim to attract skilled professionals and remote workers to Lithuania, fostering economic growth and innovation. By offering tax incentives, the Lithuanian government seeks to create a favorable environment for expatriates and digital nomads, encouraging them to relocate to the country and contribute to its development.
