Cost of Living

Lithuania's progressive personal income tax (PIT) reform took effect on 1 January 2026. It replaces the previous effectively flat rate for most earners with a three-band progressive system. The key impact: the old 15% flat rate for self-employed individuals on business income above certain thresholds was abolished. All personal income is now subject to the same progressive schedule regardless of whether it is employment income, freelance income, or dividend income.

Lithuania's corporate income tax (CIT) rate was raised slightly from 16% to 17% in the 2026 reform, with the SME reduced rate rising from 6% to 7%. However, the most significant business incentive — the 0% CIT for newly registered companies — was extended from 1 year to 2 years, making Lithuania even more attractive for company formation.

Lithuania's cost of living is substantially below the Western European average. Vilnius is routinely ranked as one of the most affordable EU capitals for quality of life. Groceries cost 35–40% less than in Germany, a restaurant meal is €8–15, and a good glass of wine costs €4–6 at a bar. The largest expense for most expats is rent — still a fraction of London, Amsterdam, or Berlin levels.

Lithuania's fintech leadership extends to banking infrastructure. Traditional Baltic banks (SEB, Swedbank, Luminor) offer full retail services. Lithuania is also the base for Revolut's EU banking operations and has a deep ecosystem of e-money institutions and payment service providers. Opening a bank account requires an asmens kodas and address registration — most expats start with a Revolut or Wise account for daily spending while setting up a local bank account.

Lithuania is increasingly popular for company formation due to the 0% CIT for two years, fast online registration, and low bureaucratic overhead. A UAB (uždaroji akcinė bendrovė — closed joint-stock company, equivalent to a UK Ltd or German GmbH) can be registered online in 1–3 business days with a minimum share capital of €2,500. For freelancers, the 2026 reform means the old flat-rate self-employment benefit has been reduced — but forming a small UAB can still be tax-efficient.