Salary taxes in 2026: GPM, Sodra and NPD explained simply

Lithuanian salary taxes in 2026 consist of three main parts: personal income tax (GPM), Sodra social-security contributions (VSD and PSD) and the tax-exempt amount (NPD), which reduces the taxable base. In short: roughly 19.5% of an employee's gross salary goes to Sodra and 20% GPM applies to the taxable portion, while the NPD partly restores the net amount. Below we break it all down step by step with a worked example.

Gross salary is not what lands in your bank account, and it is not what you cost your employer either — these are three different numbers, and it pays to understand all three.

Gross, net and the true cost of a workplace

Whether you are an employee or a business owner, three terms matter:

• Gross (accrued) salary — the figure written in the employment contract. Employee taxes are calculated from it.
• Net (take-home) salary — what remains after GPM and Sodra contributions are deducted. This is the amount that reaches the bank account.
• Cost of the workplace — gross plus the employer's Sodra contribution. These are the employer's real costs per employee.

So the same number branches into three perspectives. If you employ people, budget by the cost of the workplace, not by gross.

GPM 2026: progressive rates of 20% / 25% / 32%

In 2026, personal income tax on employment income is progressive — the higher the annual income, the higher the rate on the portion that exceeds each threshold. Under the rules of the State Tax Inspectorate (VMI), three tiers apply:

• 20% — on the annual income portion up to 36 VDU (average wages);
• 25% — on the portion from 36 VDU up to 60 VDU;
• 32% — on the portion above 60 VDU.

It is important to understand that the higher rate applies only to the exceeding portion, not to the whole salary. For most employees whose pay stays below the upper thresholds, the effective rate is 20%. The VDU figure is updated annually, so the exact euro thresholds shift — always verify the current VDU and GPM rules on the VMI website.

Why progression is a niche topic for small business

Most SMB employees earn below the 36 VDU annual threshold, so the 25% and 32% tiers affect a relatively small group — usually managers, IT specialists or high-earning salespeople. But if you pay annual bonuses, they can push an employee into a higher tier that month, which is worth keeping in mind.

Employee Sodra contributions: VSD 12.52% + PSD 6.98%

Social-security contributions are deducted from the employee's gross salary. In 2026 the standard rates (per Sodra's published information) are:

• VSD (state social insurance) — 12.52%;
• PSD (compulsory health insurance) — 6.98%;
• Total — 19.5% of gross.

These are deducted automatically and remitted by the employer. Current rates are published by Sodra.

Second-pillar pension saving

Some employees also save for a pension in the second pillar. In that case an additional saving percentage (an illustrative 3%, transitioning higher) is deducted from gross, so the net is lower but the money goes into a personal pension account. When calculating a salary it matters whether the employee saves, because it changes the final take-home figure. If you use the salary calculator, you can toggle pension saving separately and see a more precise result.

Employer Sodra contribution and the cost of the workplace

On top of the employee's contributions, the employer pays its own Sodra contribution — typically around 1.77% (it depends on the accident-insurance group, which ranges roughly 0.14–1.4%, plus the general component). So the real cost of a workplace is higher than gross.

A practical rule: if the contract states a gross of EUR 2,000, the cost of the workplace is about EUR 2,035, while the employee receives roughly EUR 1,290–1,320 in hand (depending on NPD). The same "EUR 2,000" means three different numbers for three parties.

The NPD 2026 formula and when it reaches zero

The tax-exempt amount (NPD) is the part of gross on which no GPM is charged. The larger the NPD, the larger the net. In 2026 a decreasing NPD formula applies in the standard case:

NPD = 747 − 0.49 × (DU − MMA)

where DU is the monthly gross salary and MMA is the minimum monthly wage. The logic:

• Those earning the MMA or less get the maximum NPD (about EUR 747).
• As pay rises, the NPD gradually shrinks.
• At about EUR 2,677 gross, the NPD reaches zero — the whole salary is subject to GPM.

People with disabilities receive fixed, higher NPDs. All of these figures (747, the MMA, the 0.49 coefficient) are set by law and may be adjusted, so check the current amounts with VMI before calculating.

Worked example: gross to net, step by step

Let us take a gross of EUR 2,000 (illustrative example, 2026):

1. NPD = 747 − 0.49 × (2,000 − MMA). In 2026 the MMA is EUR 1,153, so NPD ≈ 747 − 0.49 × 847 ≈ EUR 332.
2. Taxable base for GPM = 2,000 − 332 = EUR 1,668.
3. GPM (20%) = 0.20 × 1,668 ≈ EUR 334.
4. Sodra (19.5%) = 0.195 × 2,000 = EUR 390.
5. Net = 2,000 − 334 − 390 ≈ EUR 1,276.
6. Cost of the workplace = 2,000 + ~EUR 35 (employer Sodra) ≈ EUR 2,035.

So from "EUR 2,000" in the contract, the employee receives about EUR 1,276, while the employer spends about EUR 2,035. The gap between net and workplace cost — about EUR 759 — is the share going to the state.

| Item | Amount (illustrative) | | --- | --- | | Gross | EUR 2,000 | | NPD | ~EUR 332 | | GPM (20%) | ~EUR 334 | | Sodra (19.5%) | EUR 390 | | Net take-home | ~EUR 1,276 | | Cost of the workplace | ~EUR 2,035 |

A reminder: these figures are illustrative (2026) and shown for orientation. The exact MMA, VDU and NPD coefficients, plus any pension saving, will affect the result.

Employment vs. individual activity

Business owners often ask whether it is cheaper to hire under an employment contract or to work with someone running an individual activity (IDV). These are different tax regimes:

• Employment — the employer deducts GPM and Sodra, provides holidays and sick-pay guarantees, and handles tax administration. The employee gets stability and social guarantees.
• Individual activity — the person declares their own income, pays GPM (with reliefs) and Sodra contributions on taxable profit. It is flexible but offers fewer guarantees, and the relationship must be genuinely independent, not disguised employment.

Important: artificially "moving" an employee to individual activity purely to save tax is risky — VMI can treat it as disguised employment. Base the decision on the real nature of the work, not just on the tax number.

Common mistakes when calculating salary

• Applying the NPD twice. If an employee works in more than one place, the NPD should be applied only at one. Applying it again at a second job creates an over- or underpayment at year end.
• Forgetting employer Sodra when budgeting. When estimating "what an employee costs", people often take gross instead of the cost of the workplace, which distorts the budget.
• A bonus pushing into a higher GPM tier. A large one-off bonus can raise the effective GPM rate that month.
• Using last year's rates. The MMA, VDU and NPD coefficients change annually — it is easy to slip up using old numbers.

Most of these mistakes are avoided when payroll calculations and reports run automatically rather than by hand in a spreadsheet.

How to verify it and where to find official information

If you would rather not calculate by hand, the fastest route is the salary calculator, which turns gross into net and shows GPM, Sodra contributions and the cost of the workplace instantly. If you run payroll for several people or plan a budget, it is handy for comparing scenarios. More practical business tools are gathered in the tools section.

The most authoritative sources to verify current rates:

• VMI — GPM rates, NPD rules, annual declaration information;
• Sodra — VSD, PSD and employer contribution rates;
• Registrų centras — for company data or when setting up a business.

Tax rates and thresholds change every year, so before making financial decisions always check the latest amounts in the primary sources or consult an accountant.

Need help estimating workplace costs or automating payroll and tax bookkeeping in your business? Start with the free salary calculator, and if you would like the calculations and reports to run automatically, book a consultation — we will help you put together a clear plan.