---
title: "Lithuania Tax and Payroll 2026 | GPM, Sodra"
description: "Lithuania payroll 2026: employer Sodra from 1.77%, employee 19.5%, and a new three-band income tax topping out at 32%."
canonical: https://www.teamed.global/country-hiring-guides/lithuania/tax-and-payroll
---

Lithuania · Tax & payroll child

Served by Teamed vetted partner-entity network in Lithuania

# How does *Lithuania payroll tax* work in 2026?

Most of the payroll weight in Lithuania sits on the worker, not the firm. The employer pays Sodra at just 1.77% on a permanent contract, while the employee carries 19.5%. On top of that, 2026 brings a new three-band income tax that climbs from 20% to 32%.

Last reviewed 13 June 2026 · Lithuania guide

![Vilnius old town at golden hour with the red rooftops and church spires of the historic centre below Gediminas Hill.](/images/country-guides/lithuania-tax-payroll.webp)

Illustration · Vilnius, Lithuania

Answer.cite this

Lithuania payroll runs through Sodra, the state social insurance fund. The employer pays a small contribution. On a permanent contract it is 1.77% of gross pay. On a fixed-term contract it is 2.49%.

The employee carries most of the load. Sodra takes 19.5% of gross pay. That total includes health insurance at 6.98%. Contributions stop once pay passes the annual ceiling of €138,729.

Income tax (GPM) changed in 2026. It now runs across three bands. The first 20% applies to most salaries. Higher pay meets 25%, then 32% at the top. Dividends are taxed separately at 15%.

## What does an employer pay in Lithuania payroll taxes?

The employer pays Sodra at 1.77% of gross pay on a permanent contract. On a fixed-term contract the rate is 2.49%.

Both rates already include accident cover at 0.14% for a normal-risk employer. There is no separate employer pension charge (Sodra 2026 rates).

| Employer contribution | Rate | Applies to |
| --- | --- | --- |
| Sodra, permanent contract | 1.77% | Gross pay, up to the annual ceiling |
| Sodra, fixed-term contract | 2.49% | Gross pay, up to the annual ceiling |
| Accident cover, normal-risk firm | 0.14% | Already inside the rates above |

### Why the employer rate is so low

Lithuania splits the social insurance bill unevenly. The employer pays a thin slice and the employee carries the rest. On a permanent contract the employer rate is 1.77% of gross pay. It is built from unemployment cover, accident cover, the guarantee fund, and the long-term employment fund. A fixed-term contract costs more, at 2.49%, because the unemployment portion is higher.

### Accident risk groups

The accident and occupational-disease element sits inside those rates. A normal-risk firm pays the Group I rate of 0.14%. Higher-risk industries pay more, in steps up to a top group. Most office and remote roles stay in Group I, so the headline employer figure holds. Sodra sets these rates each year ([Sodra 2026 contribution rates](https://sodra.lt/imoku-tarifai/imoku-tarifai-taikomi-uz-samdomus-darbuotojus?lang=en)).

## What does an employee pay from their Lithuania salary?

Sodra takes 19.5% of the employee's gross pay. That single deduction covers pension, sickness, maternity, and health cover.

Health insurance alone is 6.98% of that total. Deductions stop once yearly pay passes €138,729 (Sodra 2026 rates).

| Employee deduction | Rate | Applies to |
| --- | --- | --- |
| Sodra total | 19.5% | Gross pay, up to €138,729 a year |
| of which, health insurance (PSD) | 6.98% | Inside the Sodra total above |

### One deduction, four purposes

The employee pays 19.5% of gross pay to Sodra. It looks like one line on the payslip, but it funds four things. Pension is the largest part. Sickness and maternity cover come next. Health insurance is 6.98%. The employer withholds the whole amount and sends it to Sodra.

### The contribution ceiling

Sodra deductions are not endless. Once an employee's pay for the year passes €138,729, the main social insurance parts stop. The health portion is treated differently and continues. For most salaries the ceiling never bites, but it matters for senior hires. The figure tracks 60 average wages and moves each year ([VMI 2026 guidance](https://www.vmi.lt/evmi/5725)).

## Lithuania GPM income tax bands for 2026

Income tax (GPM) runs across three bands in 2026. Most salary income is taxed at 20%.

Pay above 36 average wages meets 25%. Pay above 60 average wages meets 32%. This three-band design is new for 2026 (Law on Personal Income Tax).

| Annual employment income | Rate |
| --- | --- |
| Up to 36 average wages | 20% |
| From 36 to 60 average wages | 25% |
| Above 60 average wages | 32% |
| Distributed profit and dividends | 15% |

### A new progressive scale

Until 2026 Lithuania ran a simpler income tax. From 1 January 2026 it added a middle band, so there are now three rates. The first 20% covers ordinary salaries. The 25% band starts above 36 average wages, which works out near the social insurance ceiling of €138,729. The top 32% band starts above 60 average wages. Each band applies only to the slice of income inside it, not the whole salary.

### Dividends are taxed apart

Distributed profit and dividend income do not join the progressive bands. They are taxed at a flat 15% and kept out of the annual salary total. The State Tax Inspectorate (VMI) publishes the bands and the average-wage values each year ([VMI: Law on Personal Income Tax](https://www.vmi.lt/evmi/5725)). The bands shift with the average wage, so the cash thresholds move every January.

## How does Lithuania payroll filing and Sodra reporting work?

Employers withhold GPM income tax and the full Sodra contribution from every salary, then report and pay it monthly.

GPM goes to the State Tax Inspectorate (VMI). Sodra contributions go to the social insurance fund. Wages must be paid at least twice a month.

VMI · Personal income tax (GPM)

Employers withhold GPM from employee pay at the rates above and remit it to the State Tax Inspectorate. Income tax and Sodra contributions are reported and paid on the monthly cycle the authorities set. The employer is the withholding agent for both, so the worker receives net pay and the state receives the deductions directly.

Source: [VMI: Law on Personal Income Tax](https://www.vmi.lt/evmi/5725)

Lithuania pays wages on a frequent cycle. The law requires payment at least twice a month, or once a month if the employee asks. In every case the pay for a calendar month must reach the employee within 10 working days of month-end. Each run follows the same path:

- **GPM income tax** withheld and remitted to the State Tax Inspectorate (VMI)
- **Sodra** employee 19.5% and employer 1.77% contributions reported and paid to Sodra
- **Payslip** issued in writing or electronically, at least once a month

The payslip must show the amounts calculated, paid, and deducted, plus the hours worked, with overtime listed separately. A late or wrong filing can trigger Sodra penalties and interest, so the deduction order and the monthly deadline both matter (Labour Code, Art. 146 and Art. 148).

1. Collect pay data Gather salary, hours, overtime, and any taxable benefits for the month before the run closes.
2. Calculate Sodra Work out the employee Sodra deduction and the employer Sodra contribution on gross pay, checking the contract type and the annual ceiling.
3. Withhold GPM income tax Apply the income tax bands to the salary, taking the higher rates only on the slice of pay above each threshold.
4. Report and pay File GPM with the State Tax Inspectorate and the Sodra contributions with the social insurance fund on the monthly cycle.
5. Issue the payslip Give the employee a written or electronic payslip showing amounts calculated, paid, and deducted, with overtime listed separately.

## Pension and social cover in the Lithuania payroll stack

There is no separate employer pension charge in Lithuania. Pension cover sits inside the employee's 19.5% Sodra contribution.

Health insurance is funded the same way, at 6.98% of gross pay. Both stop at the annual ceiling of €138,729 (Sodra 2026 rates).

Lithuania bundles pension, sickness, maternity, and health into the single Sodra contribution. The employee pays 19.5% of gross pay and that one deduction covers all four. There is no auto-enrolment scheme and no extra employer pension percentage to add on top.

- **Pension** is the largest slice of the 19.5% Sodra deduction.
- **Sickness and maternity** cover come next, funding the state benefits paid during leave.
- **Health insurance (PSD)** is 6.98% of gross pay, inside the same total.

Employees may pay extra into a second-pillar pension fund by choice, but that is voluntary and not part of the employer's bill. Because the employer rate is only 1.77%, the true cost of a Lithuania hire is close to gross salary plus that thin Sodra slice. The contribution ceiling of €138,729 caps the main social parts on very high pay, while the health portion runs on.

## How does Teamed handle Lithuania payroll for you?

Teamed becomes your legal [employer of record](/lp/employer-of-record) in Lithuania for [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency.

GPM income tax, the full Sodra filing, and the rest of the Lithuania employment law stack run on **one platform**.

**Real HR and legal experts** handle your Lithuania hires, from the first contract through every monthly GPM withholding and Sodra remittance. **An actual person**, not a chatbot or a pooled queue. There is **no setup fee** and **no exit fee**. Employer cost **passes through at cost, itemised** on every invoice, so you see the Sodra contribution and the new income tax bands as separate lines, never a blended figure.

EOR payroll, contractor onboarding, and entity setup all live on **one platform**. A Lithuania contractor who converts to payroll keeps their record. That same employee can **graduate** from EOR to your own Lithuania entity without switching systems. Run the [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost) to see the full picture, including the 2026 three-band income tax. EOR is the right model for a first Lithuania hire, **until it isn't**. Start from [the Lithuania hiring overview](/country-hiring-guides/lithuania).

Key sources: [VMI Law on Personal Income Tax](https://www.vmi.lt/evmi/5725), [Sodra 2026 contribution rates](https://sodra.lt/imoku-tarifai/imoku-tarifai-taikomi-uz-samdomus-darbuotojus?lang=en), and the [Labour Code of the Republic of Lithuania](https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/10c6bfd07bca11e6a0f68fd135e6f40c).

## Frequently asked questions

What does an employer pay in Lithuania payroll taxes in 2026?

The employer pays Sodra at 1.77% of gross pay on a permanent contract, or 2.49% on a fixed-term contract. Both rates already include accident and occupational-disease cover, which is 0.14% for a normal-risk firm. There is no separate employer pension charge in Lithuania.

What is deducted from a Lithuania employee's salary?

The employee pays a single Sodra contribution of 19.5% of gross pay, which covers pension, sickness, maternity, and health cover. Health insurance alone is 6.98% of that total. GPM income tax is then withheld on top. The main social parts stop once yearly pay passes €138,729.

What are the Lithuania income tax bands for 2026?

Income tax (GPM) runs across three bands from 2026. Most salary income is taxed at 20%. Income above 36 average wages meets 25%, and income above 60 average wages meets 32%. Each rate applies only to the slice of income inside its band. Distributed profit and dividends are taxed separately at a flat 15%.

How are GPM and Sodra paid in Lithuania?

The employer is the withholding agent. It withholds GPM income tax and the full Sodra contribution from each salary, then reports and pays them on the monthly cycle. GPM goes to the State Tax Inspectorate (VMI) and Sodra goes to the State Social Insurance Fund Board. Wages must be paid at least twice a month, and within 10 working days of month-end.

Does Lithuania require a 13th-month salary?

No. Lithuanian law does not require a 13th- or 14th-month payment. The Labour Code wage chapter sets the minimum wage, the payment frequency, and bonus rules, but it does not create an annual extra-month entitlement. Any year-end bonus in Lithuania is a matter of contract or employer policy, not a legal requirement.

Is there a cap on Lithuania social insurance contributions?

Yes. The main Sodra social insurance parts stop once an employee's pay for the year passes €138,729, which tracks 60 average wages. The health insurance portion of 6.98% continues above the ceiling. For most salaries the cap never applies, but it matters for senior hires.

Teamed Legal Operations

The Lithuania surprise for new employers is how little the company pays into Sodra. At 1.77% on a permanent contract, the employer slice is one of the lowest in Europe. The catch sits on the worker side, where the 19.5% deduction and the new three-band income tax decide what actually lands in net pay. Model both sides before you set a salary.

A note from Tom Price-Daniel

In Lithuania the employer pays Sodra at only 1.77% on a permanent contract, while the worker carries 19.5%.  
From 2026 the income tax runs across three bands, from 20% up to 32% on the highest pay.  
See the employer slice and the new bands before you set the salary.

Tom Price-Daniel · Co-founder, Teamed

## Related Lithuania guides

- [Hiring in Lithuania, overview](/country-hiring-guides/lithuania)parent
- [Lithuania termination and severance](/country-hiring-guides/lithuania/termination-and-severance)sibling
- [Lithuania cost breakdown](/country-hiring-guides/lithuania/cost-breakdown)sibling
- [Employer of Record overview](/lp/employer-of-record)core
- [Pricing, Zero FX Fixed](/pricing)core
- [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost)tool
- [Talk to an expert](https://www.teamed.global/contact)CTA

A note on this page.

This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction. Verify current requirements with the State Tax Inspectorate (VMI) and the State Social Insurance Fund Board (Sodra), or speak to a qualified professional, before relying on any specific figure. The three-band income tax took effect on 1 January 2026 and the band thresholds move with the average wage each year. The 2026 statutory minimum wage was not confirmed in the source research at the time of review, so any minimum-wage figure should be checked with the Ministry of Social Security and Labour before use.