2026 tax reform: 5 common mistakes

The five most common mistakes after the 2026 tax reform are these: businesses still calculate with the old rates, miss the EUR 45,000 VAT registration threshold, underestimate the sharply raised self-employed "Sodra" base, wrongly assume the 0% corporate tax applies to everyone, and file their annual returns late. Each one costs real money — overpaid tax, penalties, or a lost relief — and each can be caught in a couple of hours by reviewing your own numbers.

In this article we go through every mistake and show how to spot it before you file. We covered the full picture in our overview of what changes for business from 2026; here we focus on the practical traps. All figures below are indicative (2026) — before you act, verify them on the official VMI and "Sodra" pages or check with an accountant.

The reform doesn't punish those who earn more — it punishes those who didn't check. Carelessness, not turnover, pays the highest price.

Mistake No. 1: you're still using 2025 rates

The most common and quietly expensive mistake is budgeting 2026 with last year's rates. The standard corporate income tax (CIT) rose from 16% to 17%, and the reduced rate for small companies from 6% to 7%. The gap looks symbolic, but across a full year it directly reduces your net profit — and your margin, if you set prices on the old rate.

The value-added tax (VAT) reliefs change too. The standard rate stays at 21%, but from 2026 the reduced rates are reorganised: 12% applies to accommodation, passenger transport, catering and culture, and 5% to books and medicines. If you work in hotels, restaurants, transport or publishing and your price lists and invoice templates still use the old rates, you'll bill clients incorrect amounts.

• Update the CIT line in your budget — use 17%, not 16%; for small companies 7%, not 6%.
• Check every VAT rate in your invoicing system — especially if you sell goods or services in the 12% or 5% relief groups.
• Reprice with the new rate so your margin doesn't shrink.

We break down how the changed rates show up in a company's taxes in our guide to what taxes a UAB pays in 2026.

Mistake No. 2: missing the EUR 45,000 VAT threshold

The second classic mistake is growing without noticing turnover approaching the mandatory threshold. For a Lithuanian business, VAT registration becomes mandatory once income over the last 12 months exceeds EUR 45,000 (unchanged in 2026). Cross it without registering and you'll pay VAT out of your own pocket on sales that already happened.

There are lesser-known cases:

• For a foreign business not established in Lithuania there is no threshold — the obligation arises from the very first taxable transaction.
• Distance selling to consumers in the EU has a separate EUR 10,000 threshold, above which VAT is usually charged in the buyer's country.

That's why turnover must be tracked on a rolling 12-month window, not by calendar year. When exactly the obligation arises and how the threshold is counted, we explain step by step in our article on registering for VAT and the EUR 45,000 threshold.

Mistake No. 3: underestimating the raised self-employed "Sodra" base

The third mistake hits the self-employed hardest. From July 2026 the "Sodra" contribution base for the self-employed rises from 50% to 90% of taxable income. In practice the base on which state social insurance (VSD) and compulsory health insurance (PSD) contributions are calculated nearly doubles — even if income itself hasn't changed.

Keep other reference points in mind:

• The PSD minimum is around 80.48 EUR per month — payable even when the activity temporarily earns nothing.
• Individual-activity personal income tax (PIT) stays graduated: up to EUR 20,000 of profit the effective rate is about 5%, between EUR 20,000 and EUR 42,500 it gradually climbs from 5% to 20%, and above EUR 42,500 a progressive (20/25%) charge applies.
• Expenses can be recognised either as a 30% flat allowance or as actual documented costs.

If individual activity becomes too heavy after this change, it's worth comparing legal forms again — sometimes a UAB or MB is better. Where to start that comparison, we describe in our guide on how to start a business in Lithuania in 2026, and how the "Sodra" and PIT logic works for salaries in our article on salary taxes in 2026.

Mistake No. 4: "the 0% corporate tax applies to everyone"

The fourth mistake is enthusiastically believing the promised 0% corporate tax for new companies applies to everyone. It applies only for the first 1–2 years and only if the company meets all the conditions: fewer than 10 employees, income not exceeding EUR 300,000, and not part of a group of companies. Miss even one condition and the usual small-company 7% or standard 17% rate applies.

Alongside CIT, don't forget dividends: when profit is distributed to shareholders, they pay 15% PIT — a separate tax to factor into your net income.

It's also worth checking your legal form, since the relief is tied to a specific structure:

• UAB share capital is EUR 1,000 (at least 25%, i.e. EUR 250, paid before registration, the rest within 12 months); shareholders may be natural or legal persons, up to 249.
• MB has no share-capital requirement; members must be natural persons only, no more than 10.

An unused or wrongly applied relief is an equally expensive mistake — so confirm the conditions before you even register the company.

Mistake No. 5: filing declarations late

The fifth mistake is simple but costs penalties every year — missed deadlines. Two dates to mark in your calendar straight away:

• Annual financial statements to the Centre of Registers — by June 30 (for companies on the calendar year).
• Annual corporate tax (CIT) return to VMI — by June 15.

The Centre of Registers — www.registrucentras.lt — links filing to your company's visibility and reputation, so being late costs more than just a possible fine. Set reminders at least a month earlier so you have time to reconcile the figures with your accountant.

Example: how 0%, 7% and 17% CIT change the tax

Say three companies each earned the same EUR 30,000 in taxable profit:

• A new small company meeting all conditions (fewer than 10 employees, income up to EUR 300,000, not part of a group) pays 0% in its first year — that's EUR 0 of CIT.
• A small company without the start-up relief pays 7% — that's EUR 2,100.
• A company on the standard rate pays 17% — that's EUR 5,100.

Same profit, yet the tax ranges from EUR 0 to EUR 5,100 purely because of status and conditions. If you then distribute that EUR 30,000 as dividends, add 15% PIT on top.

For individual activity the feel is similar: if taxable income is, say, EUR 20,000, from July 2026 the "Sodra" base is calculated not on half (EUR 10,000) but on 90% (EUR 18,000) — so social contributions rise even though the effective PIT rate at this level is still around 5%. Always confirm the exact contribution amount with "Sodra".

Check your numbers before you file

Before signing any return, run through five points: the rates (17%/7%, 21%/12%/5%), the VAT threshold (EUR 45,000), the self-employed "Sodra" base (90%), the 0% CIT conditions, and the filing deadlines (06-30 and 06-15). How VAT changes your prices with and without tax, our VAT calculator shows in minutes, and always confirm the official rates and deadlines on the VMI and "Sodra" pages.

Disclaimer: all figures mentioned in this article (17%, 7%, 0%, 21%, 12%, 5%, 15%, EUR 45,000, EUR 300,000, 90%, 80.48 EUR, the filing deadlines) are indicative and current for 2026. This is not tax or legal advice. Tax rules change and have individual exceptions, so before making decisions verify the current information on the VMI and "Sodra" pages or consult an accountant.

web1o helps businesses not only build a website but also clearly understand how tax changes affect their prices and processes. If you're unsure whether you've applied the 2026 rates correctly, use our free VAT calculator and book a personal consultation, where we'll review your numbers together.