Tax Benefits for Real Estate Investors in Lithuania

Published on January 17, 2026 and written by Cyril Jarnias

Lithuania has established itself in recent years as one of Central Europe’s most transparent real estate markets: decent rental yields, a relatively stable market, and a clear legal framework. But what particularly attracts investors are the numerous tax levers that allow for optimizing a property’s profitability, whether you are an individual, a local company, or a foreign investor.

This article provides a comprehensive overview of the tax advantages for a real estate investor in Lithuania, based exclusively on data recalled in the research report.

An Overall Investor-Friendly Tax Framework

The first strength of the Lithuanian system lies in its relative simplicity. Essentially, rental income and real estate capital gains are integrated into personal income tax or corporate income tax with a flat rate of 15%. There is no separate capital gains tax, no wealth tax, and most higher rates do not target real estate.

Base Tax Rates

To fully understand the advantages, one must first know the general framework applied to real estate-related income.

Type of taxpayer / income	Main base rate	Key remarks
Individual – rental income (outside special regime)	15%	Flat tax on rental income
Individual – real estate capital gains	15%	Integrated into taxable income, no separate tax
Company – rental income and capital gains	15% (16% from 2025/2026)	Standard corporate income tax rate
Individual activity (small business)	5%	Reduced rate for certain independent activities
Dividends received by an individual	15%	Flat rate
Standard VAT	21%	Normal rate on goods and services
Tourist accommodation VAT (hotel, etc.)	9% (12% planned)	Advantage for hotel investment
Withholding tax on rent to foreign entities	15%	Reducible via tax treaties

The progression of personal income tax (20% and 32%) in practice only affects very high incomes, primarily salaries. Rental income and capital gains remain, except in extreme cases, in the 15% bracket. For a pure investor, this means a clear tax burden from the start, with no surprises from moving into a higher bracket.

A Market Accessible to Foreigners, Without Mandatory “Golden Visa”

Another key feature: Lithuania largely keeps its doors open to non-resident investors. Foreign individuals can freely purchase apartments and commercial properties. EU/EEA citizens enjoy the same rights as Lithuanians. Non-EU citizens mainly face restrictions on agricultural and forest land, and sometimes on land in sensitive areas (border, dunes, coastline), but these limitations can often be circumvented via a Lithuanian company.

Rental Income Taxation: A 15% Flat Tax and an Arsenal of Deductions

For an investor renting out a property, the challenge is twofold: limiting tax on rental cash flow while enhancing the asset’s long-term value. Lithuania offers an attractive regime on this point, with a reasonable base rate and a very wide range of deductible expenses.

Two Paths for Individuals: Classic Flat Tax or Activity License

An individual renting out a dwelling has two methods for taxing rental income:

– either they simply declare the rent and pay 15% personal income tax;

– or they opt for a specific “rental of dwelling to individuals” activity license, which results in a municipal lump-sum tax.

Under this license regime, each rented property requires a separate license, and rental revenue is capped at €45,000 per year. Any excess reverts to the 15% flat tax as classic property income.

This system provides some flexibility: for a small portfolio of residential properties, the activity license can result in a very low effective tax rate, especially in municipalities with reduced rates. For higher rental income, the standard 15% regime generally becomes more relevant.

Generous Deductions for Rental-Related Expenses

One of the main attractions of the Lithuanian system is the great latitude allowed for deducting expenses related to the rented property. The principle is simple: all expenses “necessary for generating rental income” are deductible, provided they are justified.

Individual owners and certain self-employed individuals can choose between two methods:

– deduct actual expenses, based on invoices and supporting documents;

– or apply a standard lump-sum deduction of 30% of rental income, without having to produce documentation.

In practice, the more a property requires maintenance, repairs, or management, the more interesting deducting actual expenses becomes. Conversely, for a recent apartment with low maintenance costs, the 30% allowance can significantly simplify administrative life.

Generally accepted expenses include:

For companies, the principle is identical: all expenses “ordinary and necessary” for obtaining taxable income are deductible, subject to general limits (for example, on interest, with caps linked to the debt-to-equity ratio and EBITDA).

Favorable Treatment of Depreciation

Lithuania allows tax depreciation for rented real estate, which can significantly reduce taxable income year after year. For residential buildings, the standard depreciation rate is 4% per year on the residual value; for commercial buildings (stores, warehouses, factories), it rises to 7%.

Two points are particularly interesting for the investor:

In addition, it is possible to depreciate over 10 years, on a straight-line basis, the costs of major renovation or modernization that extend the property’s useful life or significantly improve its characteristics (insulation, heating system, expansion, etc.). These costs are then added to the depreciable base.

Furniture and equipment follow a more flexible regime:

Type of movable asset	Tax treatment	Advantage for the investor
Furniture / equipment ≤ €1,200 or useful life < 3 years	Immediate 100% deduction	Quick recovery of the investment
Furniture / equipment > €1,200 and useful life > 3 years	Depreciation (max 25%/year)	Spreading out the expense, smoothing taxable income

For furnished rentals, a standard monthly deduction can also be used: €40 per month for a studio, €60 for a multi-room dwelling, covering part of small domestic expenses. It can be combined with other expenses (common charges, etc.).

Loss Treatment: Implicit Protection

If, in a given year, rental-related expenses and depreciation exceed collected rent, the resulting loss can be offset against other capital income of the same nature or carried forward, depending on the case. In the absence of similar income, a tax credit mechanism allows recovering part of the tax paid on salaries, up to 30%.

This aspect plays an important role for investors in the scaling-up phase, who incur heavy renovation expenses before rents stabilize.

Real Estate Capital Gains: Holding Period Exemptions and Primary Residence Protection

In the area of capital gains, Lithuania stands out with a system that is both simple and generous. There is no separate “capital gains tax”: gains are integrated into taxable income and taxed at the standard rate of 15%, but multiple exemptions allow avoiding taxation in many cases.

A Major Advantage: Full Exemption After Long-Term Holding

Currently, the basic rule provides that the capital gain realized on the sale of a property held for at least 10 years is fully tax-exempt. This period is assessed from the acquisition date at the time of disposal.

In practice, this means a patient investor can rebalance their real estate portfolio without capital gains tax, provided they respect this holding period. The research report indicates that a reform will reduce this period to 5 years from 2026, making the scheme even more attractive.

Enhanced Protection for the Primary Residence in Lithuania and the EEA

For individuals, two major mechanisms secure the sale of the primary residence:

– if the property (house or apartment, including land) is located in the European Economic Area and has been occupied as a primary residence for at least 2 years, the capital gain is fully exempt;

– if the occupation period is less than 2 years, the exemption is still granted if the sale proceeds are reinvested within one year in the purchase of a new primary residence.

These provisions also apply when the property is located in another EEA country, making Lithuania interesting for mobile intra-European taxpayers.

Beyond the primary residence, some reliefs are provided for the disposal of shares or units, but their interest is more significant for structures via real estate companies or funds.

Reducing the Taxable Base Through Costs and Improvements

When the exemption does not apply (for example, sale of a rental property before 10 years, or a secondary residence), the taxable capital gain is calculated in the classic way: sale price minus acquisition cost, adjusted for all purchase, disposal, and improvement expenses.

– real estate brokerage fees;

– lawyer or consultant fees;

– duties and taxes paid upon purchase;

– major renovation expenses that have been capitalized (and possibly depreciated);

– for securities, commissions paid to the bank or broker for purchasing the securities.

This approach allows significantly reducing the taxable capital gain, or even neutralizing it in cases of heavy renovations or a less bullish market.

Non-Taxable Thresholds and Treatment of Small Capital Gains

The Lithuanian system also includes thresholds dedicated to capital income:

Type of gain / capital income	Non-taxable threshold
Capital gain on share disposal (in certain cases)	€500 per year
Interest income (platforms like InRento, etc.)	€500 per year (for residents)
Capital gain on sale of certain unregistered movable assets	Approx. €2,317

These amounts do not eliminate tax for large portfolios, but simplify life for modest-sized investors and avoid taxing occasional small-scale operations.

VAT, Transfer Duties, and Transaction Costs: A Manageable Environment

The net profitability of an investment depends not only on tax on rental income and capital gains; indirect taxes and transaction costs can also weigh heavily. Lithuania is positioned here in a rather low to medium range compared to the EU.

VAT: Limited Impact on Residential Rentals

The general rule is simple: the rental of dwellings is exempt from VAT. This means a residential landlord does not charge VAT on rent and does not need to register solely for this activity, except in special cases (tourist accommodation, specific facilities, etc.).

A recent element of Lithuanian law works in favor of investors who transform or complete buildings: an unfinished building used for more than 24 months can be reclassified as an “old building,” making its sale exempt from VAT. It is sufficient to demonstrate effective use (residence declaration, utility bills, ads, photos, etc.). In some cases, this reclassification allows avoiding the 21% VAT on resale.

Transfer Duties and Ancillary Fees: A Reasonable Burden

During an acquisition, the investor must account for several elements: real estate transfer tax, notary, lawyer, real estate agent. According to compiled studies, the total cost of a round trip (purchase + resale) ranges between 2.65% and 5.95% of the property price, which is fairly moderate by European standards.

Transaction cost item	Indicative range
Real estate transfer tax	0.20% to 1.50%
Notary fees	≈ 0.33% to 0.45% of price
Legal fees (lawyer, advice)	≈ 1%
Agency commission (usually borne by seller)	1% to 3%
Estimated total round trip	2.65% to 5.95%

The fact that the agency commission is in principle borne by the seller reduces the bill for the buyer. The possibility of conducting the transaction remotely via power of attorney further simplifies operations for non-residents.

Holding Taxation: Modulable Real Estate and Land Taxes

Owning a property in Lithuania entails annual taxation, but it remains relatively moderate and, above all, highly modulable at the municipal level. Properties of average or modest value may even be fully exempt.

Real Estate Tax on Built Properties

Lithuania levies an annual real estate tax (Real Estate Tax, RET) whose rate varies depending on the nature, location, and value of the property. For individuals, the tax only applies above a certain threshold.

Currently:

– residential properties of individuals are taxed from a value of €150,000 per person;

– rates are progressive: 0.5% between €150,000 and €300,000, 1% between €300,000 and €500,000, 2% above €500,000;

– families with at least three children benefit from a higher threshold around €200,000 to €220,000.

For legal entities (companies), the real estate tax applies more broadly, with rates set by municipalities within an overall range of 0.5% to 3% of the taxable value. Commercial properties are often taxed more heavily than dwellings, while some municipalities grant allowances or exemptions to encourage specific activities (e.g., renovation or brownfield redevelopment projects).

From 2026, several significant developments will further refine this framework:

– explicit distinction between primary residence and other non-commercial properties;

– obligation for municipalities to set an exemption amount of at least €450,000 for the primary residence (above that, rates between 0.1% and 1%);

– a 0.2% surtax on commercial properties for a national defense fund;

– possibility to heavily tax (1% to 5%) abandoned or poorly maintained buildings;

– property revaluation every 3 years (instead of 5 previously), bringing the taxable value closer to market value.

Land Tax on Plots

Landowners, including non-residents, pay an annual land tax. The rate ranges from 0.01% to 4% of the taxable value set by the administration, and each municipality can grant incentives or set specific rates, for example to encourage faster development of certain lands.

Some categories are exempt (public roads, forests, etc.), and the tax can be reduced, or even brought down to almost zero, for projects aligned with local development strategy.

Note that in free economic zones (Free Economic Zones, FEZ), there is simply no real estate tax, and a 50% reduction may apply to land lease tax. This is one of the most powerful levers offered to institutional investors or industrial developers.

Investing Via a Company: Possible Optimizations and Preferential Regimes

For investors wishing to structure their operations through a company – whether a simple holding company, a development vehicle, or a fund – Lithuania deploys a whole series of additional advantages.

Corporate Income Tax Rates and Reduced Regimes

The standard corporate income tax rate is 15% (16% as of 2025), applied to both rental income and capital gains. But several regimes offer substantial reductions:

These regimes are particularly interesting for industrial, logistics, or large-scale development projects, less so for a simple buy-to-let apartment. But they illustrate the country’s desire to concentrate tax advantages on structures that create jobs and added value.

Real Estate Funds and Specialized Investment Vehicles

A particularly attractive area concerns entities of the “Specialised Collective Investment Undertakings” (SCIU) type, which include real estate investment funds. These structures are, in principle, exempt from corporate income tax on their investment income: rents, capital gains, dividends received, etc.

Investment Deductions and R&D

Even if these schemes primarily target industrial or technological activities, some may interest real estate players, especially when they incorporate innovative components (high-energy-performance buildings, smart systems, data centers, etc.):

– possibility to deduct up to 100% of the acquisition cost of certain long-term assets (equipment, installations, software, intellectual property rights) in addition to depreciation, within the framework of qualified investment projects, with a possible carryforward of up to 4 years;

– triple deduction (300%) of R&D expenses related to the activity;

– accelerated depreciation for assets used in R&D;

– reduced rate (6% to 7%) on profits from the commercial exploitation of certain intangible assets (protected software, patentable inventions).

For an operator developing, for example, “smart” logistics parks or office buildings incorporating proprietary digital solutions, these mechanisms can help reduce the overall tax bill.

Specific Tax Benefits for Foreign Investors

Non-residents investing in Lithuania benefit from several additional advantages: capped and often treaty-reduced withholding taxes, free repatriation of income, and a dense network of double taxation agreements.

Withholding Taxes on Rent and Capital Gains

When a foreign entity receives rent or realizes a capital gain on the sale of a property in Lithuania without having a permanent establishment there, a withholding tax of 15% generally applies (16% from 2025 for certain categories). This rate is, however, frequently reduced or even eliminated by bilateral tax treaties.

The treaties largely follow OECD and UN models:

Some countries benefit from particularly favorable conditions. For example, for non-resident investors using a real estate crowdfunding platform, the withholding tax can be reduced to 0% for residents of the United Arab Emirates, Cyprus, or Latvia, and to 10% for a large number of European and non-European countries, upon proof of tax residence.

Network of Double Taxation Agreements

Lithuania has double taxation agreements with more than 50 countries, including virtually all major EU states, but also the United Kingdom, the United States, Canada, Switzerland, Russia, China, India, Turkey, etc. These treaties allow:

Most treaties adopt the classic rule: tax paid in the source country (here Lithuania) is creditable against tax due in the investor’s country of residence, up to the limit of the latter. For Lithuanian residents receiving income from abroad, the same mechanisms work in reverse.

Real Estate Inheritance Transmission: Lenient Taxation for Close Relatives

Another significant advantage, often overlooked at the time of purchase, concerns the taxation applicable to inheritances and gifts. Lithuania has opted for a system relatively favorable to intra-family transfers.

Inheritance: Exemption for Close Relatives and Reduced Taxable Base

The inheritance tax in Lithuania is based on a specific law and applies to assets located in the country, whether movable or immovable. For non-residents, it targets Lithuanian real estate and certain movable assets registered in Lithuania.

Several mechanisms significantly lighten the burden:

Notaries calculate the tax due themselves and ensure it is paid before issuing the certificate of inheritance. Municipalities may also grant deferrals or remissions depending on circumstances.

Gifts: Exemption Between Close Relatives

Real estate gifts are, in principle, subject to a gift tax. However, gifts between close relatives (particularly within the immediate family) are exempt. For other beneficiaries, a rate of 15% may apply above a certain value threshold (€2,500).

In practice, this allows organizing early transfers within the family at very low tax cost.

Market Environment and Net Profitability: Cumulative Effects of Taxation

Gross yields in the Lithuanian market hover around 4% to 7% depending on cities and segments, with an estimated net yield between 3% and 6% after expenses. These figures already account for standard operating costs. Taxation, when optimized, further improves the equation.

For a typical rental investment in an urban apartment:

The result, for an investor who correctly structures their cash flows and keeps their accounting, is an overall taxation often lighter than in many Western European countries, despite a headline tax rate of 15% that might seem comparable.

Conclusion: A Tax Ecosystem Designed to Attract Real Estate Capital

All the described measures converge towards the same goal: making real estate investment in Lithuania attractive and predictable. Moderate and stable tax rates on rent and capital gains, holding period exemptions, legal protection of the primary residence, absence of wealth tax, real estate tax concentrated on higher-value properties, generous depreciation possibilities, lenient inheritance taxation, double taxation agreements with a wide range of countries: all these elements structure a pro-investment environment.

For a foreign investor, the main difficulty is not the tax pressure – relatively modest – but the need to navigate this set of rules and thresholds well, as well as to meet documentation requirements (expense justifications, proof of residence, withholding tax reduction application forms, etc.). In this context, recourse to local specialists (tax advisors, lawyers, management companies) allows fully leveraging the advantages offered by the Lithuanian system.

In summary, Lithuania combines an attractive tax regime, openness to foreign capital, and clear regulation. For real estate investors seeking a European market balanced between yield, risk, and taxation, it now constitutes a destination to be considered very seriously.