Taxes payable
Tax rules change almost every year, and not every manager keeps up. Here are the main taxes paid by MBs and UABs and what to consider when choosing the legal form. We calculate the exact rates for your case during a consultation.
What every company pays
Regardless of its form, a company deals with four groups of taxes.
- Corporate income tax — on taxable profit; small companies enjoy a reduced rate
- VAT — when turnover exceeds the threshold or on voluntary registration
- Payroll taxes — personal income tax and Sodra contributions for employees
- Owner taxes — on dividends, the manager’s remuneration or funds withdrawn by an MB member
Three things that often surprise
Relief for new businesses
A newly established small company (up to 10 employees, income up to EUR 300,000) whose participants are natural persons may pay no corporate income tax at all in its first year, with a reduced rate thereafter. The condition — the activity is not suspended and the company is not transferred for three years.
Taxes when there is no income
Even without activity, MB members must pay health insurance contributions unless insured on other grounds. A UAB without employees has no such contributions.
VAT thresholds
VAT registration is mandatory when income from activity in Lithuania over 12 months exceeds the set threshold or goods acquired from other EU countries in a year exceed the amount allowed without registration.
How the owner’s taxation differs
The difference is not so much in the rates as in the options: an MB member can choose how to receive income, while a UAB shareholder receives dividends or a salary.
MB member
- Manager’s remuneration under a civil services contract — income tax and health insurance (if the manager is a member)
- Distributed profit — income tax on dividends
- Funds for personal needs — income tax and Sodra contributions
- In the first year of activity or when receiving a pension, part of the contributions need not be paid
UAB shareholder and manager
- The manager works under an employment contract — income tax and full Sodra contributions as an employee
- Dividends — income tax on distributed profit
- A shareholder who does not work in the company pays only on dividends
- Payroll taxes consist of the employee’s and the employer’s parts
Want your case calculated?
Tell us what activity and income you plan — we will compare the MB and UAB options in numbers.
