VAT Guide for Freelancers in Lithuania

Value added tax (VAT) in Lithuania is based on the European Union’s VAT system and is levied on the purchase of almost all goods and services in the country. According to the EU, VAT is to be charged to the consumers and paid to the government where the product is consumed. So, regardless of where you’re supplying or distributing your services from, you must comply with Lithuanian VAT if you're working as a freelancer in Lithuania.

Value added tax (VAT) in Lithuania:

1. The standard government-issued VAT rate in Lithuania is 21%, although some goods and services qualify for reduced rates of 9%, 5%, and 0%.
2. If you are a freelancer in Lithuania, whose annual sale of goods and services exceeds €45,000, you must register for VAT.
3. The Lithuanian State Tax Inspectorate administers VAT in Lithuania, and you can check their website for updated information about VAT laws.

If you're a solopreneur looking to learn more about the VAT system in Lithuania, keep scrolling! 

What are the VAT rates in Lithuania?

A freelancer conducting their business in Lithuania should charge one of four different VAT rates levied by the Lithuanian government, depending on the type of goods or services they provide:

• The Standard Rate of 21% - You should charge the standard rate unless the items or services you offer are in the reduced rate or zero-rate category.
• The Reduced Rate of 9% - Applies to products and services such as books, heating power for residential buildings and hot water systems, accommodation services, passenger transports, catering services by restaurants, entrance fees for artistic and cultural events, performance services by actors, musicians, etc.
• The Reduced Rate of 5% - Applies to products like medicines, medical aid equipment, technical aids for disabled people, newspapers, magazines, electronic information documents, etc.
• The Zero Rate - When items are zero-rated, they are still VAT-taxable, but the rate of VAT you must charge your consumers is 0%. This rate applies to COVID-19 vaccines, supply of goods exported outside Lithuania, goods and services for aircraft and vessels, international transport, etc. Although there are no charges on zero rates, you should record sales of goods and services and create a report based on your returns.
  
  

Services in the public sector (health care, education and training services, postal services, cultural and social service by non-profit organizations, etc.), political parties’ services, insurance, lotteries, and gambling are exempt from VAT.

When should you register for VAT?

The Value added tax (VAT) threshold for freelancers in Lithuania is €45,000; therefore, if your annual turnover exceeds €45,000, you are liable to register for VAT. However, even if you don’t exceed that threshold, but the taxable value of goods you acquired from other EU member states in the last year exceeds €14,000, you must register for VAT. Likewise, if the estimated taxable amount of such goods in the upcoming year is likely to exceed €14,000, you must register for VAT. 

It is helpful to note that this threshold doesn’t apply to foreign freelancers. If you are a foreign freelancer carrying out business in Lithuania, you must register for VAT as soon as you commence your economic activities.

VAT thresholds are subject to change by the Lithuanian government, so it is beneficial to check in for Lithuanian VAT updates regularly. 

In addition to the eligibility criteria mentioned above, some other scenarios determine when you should register for VAT as well. 

How often should you report VAT?

After registering, you are usually required to report VAT monthly in Lithuania; however, if your annual turnover is less than €58,000, you can request to report VAT twice per year instead. If your annual turnover for the previous year did not exceed €300,000, you could request to report VAT quarterly.

How to register for VAT in Lithuania

As a taxable freelancer in Lithuania, you must prepare the following for submission:

• Documents containing information about your annual revenue, taxable financial transactions, and bank account information. 
• Documents should be in Lithuanian, or a signed translation in Lithuanian must be attached separately.
• Original signed application to apply for VAT;
• A power of attorney for your fiscal representative (if you are a non-EU citizen). 
  
  

Note that you only require a fiscal representative if you are an expat freelancer and a non-EU resident.

The registration process is complete once you submit the documents mentioned above using the form (FR0388) via the State Tax Inspectorate’s website. The decision usually takes up to three working days. Once registered, you are liable to pay VAT to the State Tax Inspectorate of Lithuania.

Alternatively, you can use Mini One-Stop Shop (MOSS) to register for VAT. If you conduct business in multiple EU countries, VAT MOSS services help you combine all your records and pay a collective VAT amount in one country only. If you are already registered for MOSS services in another EU country, you do not need to register for VAT again in Lithuania. 

Lastly, you can hire an accountant (or agency) to handle your VAT returns and dealings with the tax office. Xolo can help you register for VAT as a freelancer in Lithuania and take care of all the necessary paperwork on your behalf. With Xolo Go, you use a slice of our company as a legal framework to invoice your clients, regardless of if they're across town or an ocean.

Financial Obligations of VAT Registered Freelancers in Lithuania

Registering for VAT is only the first step. From the day of your registration's effective date, you must:

• Charge the correct VAT rate
• Pay any VAT owed to the Tax Department of Lithuania every quarter
• File VAT returns
• Maintain VAT records and a VAT account.
  
  

Furthermore, every VAT-registered individual is required to:

• Keep track of all purchases and transactions,
• Keep a running total of their VAT account, and
• Make sure their VAT invoices are accurate.
  
  

Unfortunately, if you have already sent out goods and services without issuing a VAT invoice, you cannot claim VAT on records of those items. Hence, as a freelancer, you must keep records of the following:

• Printed copies of the sent and received invoices
• Agreements on sell-billing
• The self-billing vendors' names, addresses, and VAT numbers
• Notes (debit/credit)
• Records of imports and exports.
• Records of bank statements, check stubs, cash books, till rolls, and paying-in slips in addition to your VAT account.
  
  

Freelancers using the Mini One-Stop Shop (MOSS) service must preserve their VAT records for six to ten years and ensure they are readable, complete, and stored physically or electronically.

Information overload? Xolo can help you future-proof your documents by automatically generating, storing, and maintaining them electronically in our servers for as long as you need them.

How Xolo Can Help?

The tax registration process can be tricky at times, but we hope this guide has helped clear your doubts about Lithuania Value added tax (VAT) regulations! If you’re still confused about the different schemes and numbers and paperwork, Xolo offers a range of solutions that handle all the hassle while you focus on your core competencies. 

• Xolo Leap is the easiest and most effective way to create your own company through Estonian e-Residency! Reduce time spent on mundane business administration and focus on what you do best!
  
• We offer different tiers of service depending on the solopreneur’s, or as we call them, Xolopreneur's, individual needs.
• Once you get your business set up, you can run it from anywhere in the world! So whether you’re looking to gain access to the EU market or a digital nomad - this is the place for you! 
• With Xolo Go, you can easily freelance and invoice your clients, even without a registered company or LLC. 
• Signing up takes only 10 minutes, and once you do, taxation, corporate compliance, and all the tricky VAT calculations are all automatically taken care of in the background!
• We charge a flat rate of 5% from every withdrawal to your personal bank account. No surprise fees, no contracts, and no BS.
  

Simply put, we do the hefty work for you so that you can enjoy the freedom of freelancing. So connect with us immediately, and we’ll help you get your one-person business up and running in Lithuania in no time!