Seimas on Tuesday adopted some of the government's proposed tax changes, with the remaining ones scheduled for approval later this week.
Parliament taxed almost all non-life insurance contracts at a rate of 10 percent, increased the corporate tax rate to 17 percent, introduced a so-called sugar tax, and adopted changes to the value-added tax (VAT).
"Better 500 million to the Defense Fund than nothing"
The projects, the revenues from which will be allocated to national defense, were supported by opposition conservatives.
Meanwhile, the opposition Liberals said Tuesday morning they would not support any tax increases.
"We consistently hold the view that this path will not bring significant benefits to defense financing, will slow down the economy, and we do not support the method chosen by the ruling party to transfer money from one pocket to another," he told reporters. The Seimas said Viktorija Čmilytė-Nielsen, leader of the Liberal Movement.
Prime Minister Gintautas Paluckas called for support for the changes.
"It's better to have 500 million euros in the Defense Fund than nothing in the Defense Fund," he told reporters in the Seimas.
The government planned that if its proposed tax changes were adopted, an additional €280 million would be collected into the state budget next year, and €2027 million in 552.
The majority of these funds are promised to be allocated to national defense, but these figures will change somewhat because they have been adjusted in the Seimas since the projects were submitted.
Corporate tax increases for the second time in a year
The so-called security contribution, which will be taxed on insurance contracts, was adopted by the Seimas with 104 MPs voting in favor, 11 against and 15 abstentions.
Insurance tax exemptions will apply to insurance of personal automobile civil liability and crops and plants, as well as the health of farm animals.
The Seimas also increased the standard corporate tax rate by 1 percentage point to 17 percent, and the preferential rate by 1 percentage point to 7 percent.
The corporate income tax rate was increased from 15 to 16 percent last year as well.
When calculating corporate income tax, it will no longer be linked to the number of employees in the company - ten people. Now, small companies with an annual income of up to 300 thousand euros and up to ten employees are subject to a 6 percent rate.
96 members of the Seimas voted in favor of the amendments to the Law on Corporate Income Tax, 19 voted against, and eight politicians abstained.
Taxed sweetened drinks, abolished VAT relief for heating
On Tuesday, parliamentarians also introduced a new tax on non-alcoholic sweetened beverages by 84 votes in favor, with 12 Seimas members voting against and 30 abstaining.
For sweetened beverages containing 100–2,5 grams of sugar per 8 milliliters, a rate of 7,4 cents per liter has been set, and if the sugar content is more than 8 grams, a rate of 21 cents has been set.
The rates of 1,05 euros per liter, or 4,3 euros per kilogram, will apply to beverage concentrates. Beverages containing natural sugars, such as those from fruit or milk, will not be taxed.
The Seimas also abolished the VAT exemption for central heating, hot water and firewood.
Also, the preferential VAT rate has been increased from 9 percent, which is currently in effect, to 12 percent. This means that VAT will increase for accommodation, passenger transportation, art and cultural events, and from January, VAT on heating will reach 21 percent. The VAT rate for books and non-periodical publications has been reduced from 9 to 5 percent.
77 parliamentarians voted in favor of the amendments, 19 against, and 16 abstained.
Prime Minister G. Paluckas said on Tuesday that after the VAT exemption for heating is abolished, the most vulnerable residents will receive compensation, as they have done so far, and more people will be able to benefit from it.
Remaining fees – Thursday
The Seimas is preparing to adopt amendments to real estate (RE) and personal income taxation on Thursday.
The latest version of the real estate taxation, among other changes, provides that the main House would be taxed from a value of 450 thousand euros, and the next one – from 50 thousand euros.
Parliamentarians will also decide on the Government's proposal to introduce an intermediate 20 percent rate for people with higher incomes, in addition to the current 32 and 25 percent personal income tax (PIT) rates.
The same law also includes President Gitanas Nausėda's proposal to apply an additional tax-free income (NPD) for families, which was abandoned in 2018. It is planned to establish an additional NPD of 1044 euros per year (87 euros per month) for each child or adopted child.
G. Paluckas previously said that the changes to the NPD could come into effect not from 2026, but from 2027, when the positive effect of the tax changes on the state budget will be fully felt.
Lithuania intends to allocate an additional several billion euros to defense by 2030 in order to develop an army division. According to government representatives, this will require allocating 2026 to 2030 percent of the gross domestic product to national defense in 5–6.
Authors: Saulius Jakučionis, Sniegė Balčiūnaitė
