Lithuania's 2025 Investment Account Tax Exemption: Key Facts You Need to Know

This article examines the new changes to the income tax law which exempts income held in an investment account and reinvested in an investment account from taxation from 2025 onwards, highlighting the most important things to know and when this tax-free regime will be relevant for income tax returns.

Investment Account and Declaration

Since 2025 Lithuania introduced an "investment account" exemption. The essence of this account is that residents will not be obliged to open a special account. An investment account will be any account declared to the tax authorities, the funds of which will be used by the resident only for investments in financial products - i.e. the resident will only have to declare the account to the tax authorities.

It should be emphasised that at the moment, residents do not need to do anything additional, as if they decide to use an existing or new account for investment purposes, it will have to be declared to the tax authorities as an investment account no earlier than 2026 in the income tax return for 2025.

The 15 % tax on investment tax is payable by the taxpayer. You will only have to pay a minimum of 15 % VAT on the income received through the account when withdrawing the accumulated funds. If the funds withdrawn from the investment account on that day do not exceed the amount of contributions made to the investment account before the withdrawal, then no income tax will be due. This means that only investment returns that are not used for reinvestment but are withdrawn from the investment account, for example in the form of payments or cash, will be subject to income tax.

What are the most important things to know about an investment account?

Let's take a look at some more important facts that are relevant to an investment account.

- Unlimited amount and number of accounts.

The amount of money that can be invested through an investment account is not limited by the income tax law. There is also no limit on the number of investment accounts. Therefore, there will be no limit on the amount of funds that can be invested in an investment account. If a resident declares several accounts as investment accounts, the gains from these accounts would be treated cumulatively.

- Income.

Income received through an investment account will not be considered as income from investments in financial products issued by units in which the resident and/or a person related to him/her owns more than 10% of the shares or other rights in that unit. In addition, financial products received by way of gift or inheritance would be deemed to have been acquired through an investment account, provided that the resident informs the tax authorities and attributes the income from such products to the investment account.

- For other benefits.

The tax treatment of the investment account does not apply the €500 tax deduction that is currently available for realised capital gains, interest, income from crowdfunding and peer-to-peer lending platforms. Of course, residents may not benefit from the new investment account regime. In this case, the existing investment allowance remains in place and investment income up to €500 is tax-free.

In addition, once the investment account enters into force from this year, the current income tax relief on long-term insurance and Tier III pension premiums will be phased out, i.e. the relief will be available for the next 10 years, until the end of 2024, for life insurance or pension savings contracts. For these contracts, the tax rebate of up to €300 will be available for another 10 years, until 2035.

- Period.

The Income Tax Law allows residents to treat financial products acquired through an investment account as having been acquired through an investment account until 31 December 2024, by attributing the cost of acquisition to the account. This option will be available until 31 December 2025, after submitting information on investments in an investment account to the tax authorities in accordance with the procedure laid down by the tax authorities.

- Transfers between accounts.

Transfers of funds from one declared investment account to another investment account by a permanent resident of Lithuania are not taxable. Taxable income includes funds (part thereof) paid out from an investment account, in accordance with the rule of Article 12-1 of the Law on GPT. Funds shall be deemed to have been withdrawn from an investment account if the amount of the payment made from the investment account or the funds withdrawn were not used for the acquisition of financial products referred to in paragraph 1 of this Article, for the transfer of funds to another investment account, or for the payment of expenses directly related to the acquisition and transfer of financial products and the management of investment accounts. It should also be noted that specific rules have been adopted. The procedure for declaring an investment account is regulated by the Order of the Head of the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania No VA-107 of 19 December 2024 "On the Approval of the Rules on the Declaration of an Account Held by a Permanent Resident of Lithuania as an Investment Account and on the Submission to the Tax Administrator of the Information Necessary for the Calculation of the Income Tax on Income Received from the Income Received through the Investment Account". Paragraph 19.1.3 of these rules stipulates that transfers of funds from one declared investment account to another investment account by a permanent resident of Lithuania shall not be considered as a withdrawal from the investment account and shall not be declared.

In addition, let's recall the bank accounts held

As a reminder, residents are obliged to notify the Lithuanian tax authorities of the opening of an account with a credit, payment and electronic money institution abroad, as well as of its closure. The notification form and information on how to submit the notification can be found on the VMI website. Lithuanian residents are required to submit the notification when the total annual turnover (receipts) of an account held with the same institution during a calendar year equals or exceeds EUR 15 000. Such notification must be made by 1 May of the following calendar year.

Of course, Lithuanian residents who have an account with the same institution where the total annual turnover (receipts) in the calendar year is less than EUR 15 000 and do not need to submit such a notification will still have to submit information on the opened and closed accounts to the tax administration in accordance with the established procedure if the tax administration so requests, for example, in the course of a tax inspection of that resident.

In addition, legal persons are also obliged to notify the Lithuanian tax authorities of the opening and closure of an account with a credit, payment and electronic money institution abroad. Legal persons are obliged to inform the tax administration no later than within 5 working days from the date of opening or closing the account.