TL;DR: Lithuania’s three main self-employment structures for 2026 are individuali veikla (no employee cap, VAT registration threshold €45,000 unchanged), Business Licence (Verslo liudijimas) for narrow activity lists, and UAB company structure (corporate tax 17% standard, 7% small business, 0% first year). The personal income tax (GPM) gained a new tri-band structure for 2026: 20% up to roughly €83,237, 25% up to €138,729, 32% above. The SoDra (social insurance) contribution base shifted to 90% of taxable income from 2026 (previously 50% for individuali veikla), with the contribution cap at €99,422.45 and the PSD healthcare floor at €80.48/month.

Individuali Veikla, Business Licence or UAB? Choosing the right Lithuanian structure for freelance and small-business work

If you are setting up a freelance, consultancy or small-business operation in Lithuania, the most consequential early decision is which legal structure to run it under. Lithuania has three meaningful options for solo operators and small teams, each with different tax treatment, different administrative weight, and different fit for different income levels.

This piece walks through what each structure is, how the tax actually works in 2026 (using the new PIT brackets that came into force with the VMI reform letter R-2727), and which structure fits which kind of operator. All figures are 2026 primary-source figures from the State Tax Inspectorate (vmi.lt) and SoDra (sodra.lt). Where a number is from a less authoritative source, I have flagged it.

The three structures

Business Licence (verslo liudijimas). The simplest self-employment structure. A flat fee licence for specific permitted activities (defined by classification code). Suitable for very small operators with predictable, low-complexity income. Strict income ceiling – above the ceiling, you must switch structures.

Individual Activity (Individuali veikla). The mid-tier self-employment regime. Permits a broader range of activities than the Business Licence, allows deductions, has progressive tax treatment, and is the structure most freelance writers, consultants, designers, IT contractors, and similar professionals will end up using.

UAB (Uždaroji akcinė bendrovė). The Lithuanian private limited company. A formal corporate structure with shareholders, share capital, director responsibilities, separate tax filings. Suitable for growth-track businesses, founders, teams above the solo level, and any situation where corporate-tax treatment is more advantageous than personal-income-tax treatment.

The decision between them is rarely close once you understand what each is for. The error pattern is choosing UAB when Individuali veikla is the right answer (over-engineering), or sticking with Business Licence when Individuali veikla would fit better (under-engineering).

Business Licence (verslo liudijimas): the simple option

The Business Licence is Lithuania’s flat-fee self-employment regime. You pay a fixed annual fee that depends on your municipality and your classified activity, and that fee discharges your personal income tax obligations for the activities the licence covers.

The licence has restrictions:

  • Activity restrictions: Only specific permitted activities qualify. The list is defined by the State Tax Inspectorate. Most professional services (consultancy, IT, design, writing) are NOT eligible – the Business Licence is more oriented to traditional trades, certain teaching activities, and specific small-business categories.
  • Income ceiling: The licence is valid only up to a defined annual income ceiling. Above that, the licence is automatically lost and you must switch to Individuali veikla or another structure.
  • No deductions: The flat fee replaces income tax. You cannot deduct business expenses against your taxable income because there is no taxable income calculation – the flat fee is what you pay.

For most professional freelancers serving foreign clients, the Business Licence is not the right structure because their activity does not qualify. If your activity does qualify, the licence is the cheapest and simplest option as long as you stay within the ceiling.

The structure is worth being aware of mostly so you can rule it out cleanly and move to Individuali veikla, which is what most readers of this piece will need.

Note: The specific Business Licence fee schedule and income ceiling for 2026 should be verified at vmi.lt before relying on it for budgeting – these figures update annually.

Individuali Veikla: the freelancer default

For most freelance, consultancy and professional services work in Lithuania, Individuali veikla is the right structure. The category captures the broadest range of self-employed activities and has the most workable tax treatment for typical freelance income levels.

How the 2026 tax works:

  • Registration. Free, online, through MIGRIS or VMI. You declare your activity (which activity codes apply) and the regime kicks in for tax and SoDra purposes from the registration date.
  • Personal income tax. Lithuania applies a progressive Individuali veikla regime that is more favourable than the general PIT brackets for lower-to-mid income. The 2026 schedule (from the VMI 2026 reform letter R-2727) starts at 5% on the first €20,000 of taxable Individuali veikla profit and scales upward toward 20% between €20,000 and €42,500. Above the €42,500 threshold, the standard general PIT brackets apply.
  • Deductions. You can deduct legitimate business expenses against your Individuali veikla income to reach taxable profit. Standard categories – workspace costs, equipment depreciation, professional services, business travel – apply. There is also a simplified flat-rate deduction option (30% of gross income with no detailed expense reporting) which suits operators with low actual expenses.
  • SoDra social contributions. Individuali veikla operators pay SoDra contributions on declared income at the self-employed rates. The 2026 floor for monthly contributions is set by reference to the Minimum Monthly Wage (MMA, €1,153 in 2026), with an annual cap at €99,422.45. Specific contribution rates – pension, sickness, health (PSD) – are listed on sodra.lt and should be checked against your activity classification before budgeting.
  • VAT. Standard VAT registration applies above the threshold (verify current figure on vmi.lt – there have been recent updates to thresholds across the EU). Below the threshold, you operate VAT-exempt.

The strongest feature of Individuali veikla for typical freelancers is the 5% effective rate on income below €20,000. For someone earning, say, €18,000 in their first year of Lithuanian freelancing, the personal income tax bill alone is around €900 – materially lower than the equivalent in most Western European countries.

Above €20,000, the effective rate climbs progressively. By the time taxable income reaches €42,500, the rate has scaled to the general PIT bracket of 20%.

UAB: when incorporation makes sense

The UAB is Lithuania’s private limited company. It is a separate legal entity, with shareholders, a director (which can be the sole founder), separate accounts, separate tax filings, and the corporate-tax treatment that comes with formal incorporation.

Key 2026 figures:

  • Minimum share capital: €1,000 (with €250 paid up before registration). This is one of the lower minimums in the EU. Older sources still quote €2,500 – that is outdated.
  • Corporate income tax (CIT): 17% standard rate in 2026, with a reduced 7% rate for small companies meeting the qualifying criteria. Startups can qualify for 0% CIT for their first two years – the employee condition that previously restricted this incentive was removed in 2026.
  • Dividend tax: Distributed profits taxed at additional personal level when paid out to shareholders.
  • Administrative weight: Substantially higher than Individuali veikla. Requires annual financial statements, formal accounts, separate VAT and PIT obligations for the company. Most UAB operators use an accountant – budget €100-€300/month depending on transaction volume.

UAB is the right choice when:

  • You expect to retain profits in the business rather than draw them all as personal income (the corporate-tax-on-retained-profits vs personal-tax-on-all-income calculation flips at higher income levels)
  • You have or expect to have employees
  • You want a corporate structure for client-facing reasons (some clients prefer or require contracting with a company rather than an individual)
  • You qualify for the 0% CIT startup window and the business is profitable enough to make it worth the administrative weight
  • You are positioning for investment, M&A, or other structural events that require a corporate entity

It is the wrong choice for a solo freelancer with €30,000-€50,000 of stable annual income from foreign clients. The Individuali veikla regime serves that case more cleanly and at lower administrative cost.

Worked examples

These are simplified illustrations – they exclude regional adjustments, family-status nuances, deduction-mix specifics, and the timing differences between provisional and final tax assessments. Treat as ballpark, not personal advice.

Example 1: Individuali veikla, freelance technical writer, €30,000 annual taxable profit.

  • Income tax: 5% on first €20,000 = €1,000; progressive on next €10,000 (approximately 10-12% effective in this band) = roughly €1,100
  • Subtotal income tax: ~€2,100
  • SoDra contributions: typically 15-19% of declared income depending on chosen pension scheme = roughly €4,500-€5,700
  • VAT: below threshold, no charge
  • Total bill: roughly €6,600-€7,800/year on €30,000 profit = about 22-26% effective rate

Example 2: Individuali veikla, freelance consultant, €60,000 annual taxable profit.

  • Income tax: 5% on first €20,000 = €1,000; progressive on €20k-€42.5k = roughly €3,500; 20% on €42.5k-€60k = €3,500
  • Subtotal income tax: ~€8,000
  • SoDra contributions: capped near the annual cap of €99,422.45 if income progresses; for €60k profit, roughly €9,000-€11,500
  • VAT: above threshold, registers, charges 21% on Lithuanian-taxable invoices, reclaims input VAT (cash-flow not cost)
  • Total bill: roughly €17,000-€19,500/year on €60,000 profit = about 28-33% effective rate

Example 3: UAB with 0% first-2-year CIT, founder draws €40,000 salary, company retains €60,000 for growth.

  • CIT on retained €60,000: €0 (within 0% startup window)
  • Founder’s personal income tax on €40,000 salary: standard PIT progression, roughly 20% effective = €8,000
  • SoDra and PSD on €40,000 salary: roughly €10,000 (employer + employee)
  • VAT on company revenue: standard treatment
  • Total bill on €100,000 profit: roughly €18,000/year, with €60,000 retained for growth = about 18% effective rate during the startup window

The UAB example illustrates why incorporation can be advantageous at higher income levels and during the startup CIT window. Outside that window – years 3+ once the 0% benefit expires – the comparison shifts.

How to pick

The decision logic that fits most operators:

If you expect annual income below ~€20,000 from qualifying activities – Business Licence if your activity is on the eligible list, otherwise Individuali veikla.

If you expect annual income from ~€20,000 to ~€80,000 with most of it drawn as personal income – Individuali veikla. The progressive rates work in your favour at this band, the administrative weight is light, and the structure scales without forcing you to switch later.

If you expect annual income above ~€80,000 and plan to retain significant profits in the business – UAB. The corporate-tax treatment, particularly during the 0% startup window, becomes worth the administrative overhead.

If you are building a team, raising investment, or positioning for any structural event – UAB from day one. Trying to convert from Individuali veikla to UAB partway through a fundraise is more friction than choosing the right structure to start with.

If you are non-EU and just got your Lithuania Startup Visa – you will be incorporating a UAB by definition, because the Startup Visa is tied to founding a Lithuanian innovative startup. The choice does not exist for you. See our Lithuania Startup Visa piece for the full picture.

If you are an EU citizen looking at Lithuania as a freelance base – almost certainly Individuali veikla. It is the cleanest structure for the typical EU-citizen-freelancer-with-foreign-clients case, and the 5% effective rate on the first €20,000 of income makes it one of the more competitive freelance regimes in the EU at that income level.

Practical setup notes

Whichever structure you choose, a few practical points:

  • Get a local accountant. Lithuanian tax administration is in Lithuanian for the most authoritative materials; while English-language guidance exists on VMI’s site, the underlying legal text is in Lithuanian. A local accountant (€50-€200/month for typical freelancer volumes) will save you hours and catch issues your translated-form reading will miss.
  • Register before you start invoicing. All three structures need to be active when you issue your first invoice, not retroactively activated when your first client pays. Plan registration at least a week before your earliest revenue date.
  • Open a Lithuanian bank account or use a Lithuanian-fintech-licensed alternative. Wise, Revolut, or N26 work for some transactions but Lithuanian institutional banking (Swedbank Lithuania, SEB Lithuania, or one of the local fintech banks like Paysera) makes the administrative life materially easier.
  • Track your income against the structural ceilings. Particularly the Business Licence ceiling and the Individuali veikla progressive bands – knowing where you are in the band helps with mid-year decisions about timing, deductions, and whether to switch structures.

All figures in this piece reflect the 2026 position from primary sources cited inline – the VMI 2026 reform letter R-2727, vmi.lt, sodra.lt. Specific thresholds (VAT, Business Licence ceiling) update annually – verify with the State Tax Inspectorate before acting on them. This piece is general information, not tax advice; for your specific case, consult a qualified Lithuanian accountant or tax advisor. Our Lithuania country guide covers the wider relocation context.