European Foundation
for the Improvement of
Living and Working Conditions

The tripartite EU agency providing knowledge to assist
in the development of better social, employment and
work-related policies

EU PolicyWatch

Database of national-level policy measures

Eurofound's EU PolicyWatch collates information on the responses of government and social partners to the COVID-19 crisis, the war in Ukraine, rising inflation, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.

Factsheet for measure LT-2020-27/918 Updated – measures in Lithuania

Increase of the tax-exempt amount of income for workers earning below the annual minimum wage

Neapmokestinamojo pajamų dydžio padidinimas

Country Lithuania , applies nationwide
Time period Open ended, started on 01 July 2020
Context COVID-19
Type Legislations or other statutory regulations
Category Income protection beyond short-time work
– Extensions of income support to workers not covered by any kind of protection scheme
Author Inga Blaziene (Lithuanian Social Research Centre) and Eurofound
Measure added 03 July 2020 (updated 20 June 2022)

Background information

On 1 July 2020, the Law amending Article 20 of the Law of the Republic of Lithuania on Personal Income Tax (PIT) (No IX-1007) was enacted, providing that a monthly tax-exempt amount of income (TEAI), which applies to income derived from employment relationships or relations in their essence corresponding to employment relationships, shall be increased by €50, i.e. from €350 to €400. The aim is to mitigate the negative economic and social effects of the state of emergency and quarantine on the low-paid and to boost the economy.

Content of measure

The Law stipulates that the maximum annual TEAI shall be €4,800 (€400 per month) in Lithuania, if the person’s annual income does not exceed the minimum monthly wage (MMW). Prior to the entry into force of the Law, the annual TEAI in Lithuania was €4,200 (€350 per month). For persons whose monthly income related to employment relationships or relations in their essence corresponding to employment relationships exceeds the MMW effective on 1 January of the current calendar year, the applicable monthly TEAI shall be calculated according to a special formula.

The set up TEAI will apply from 1 January 2020 upon filing tax returns for the tax year 2020 and upon calculation of the PIT.

The Law enters into force on 1 July 2020 and is valid until 31 December 2020. Previously, the increase of the TEAI to €400 was planned in Lithuania as of 2021.

Updates

The following updates to this measure have been made after it came into effect.

01 June 2022

On 17 May 2022, the Law amending Article 20 of the Law of the Republic of Lithuania on Personal Income Tax (PIT) (No IX-1007) was enacted, providing that a monthly tax-exempt amount of income, which applies to income derived from employment relationships or relations in their essence corresponding to employment relationships, shall be increased by €80, i.e. from €460 to €540. The law will come into effect on 1 June 2022.

01 January 2022

On 25 November 2021, the Law amending Article 20 of the Law of the Republic of Lithuania on Personal Income Tax (PIT) (No IX-1007) was enacted, providing that a monthly tax-exempt amount of income, which applies to income derived from employment relationships or relations in their essence corresponding to employment relationships, shall be increased by €60, i.e. from €400 to €460. The law will come into effect on 1 January 2022.

Use of measure

According to the estimates of the Ministry of Finance, the implementation of the measure will require allocations from the state budget in the amount of €84 million.

Target groups

Workers Businesses Citizens
Employees in standard employment
Workers in non-standard forms of employment
Does not apply to businesses Does not apply to citizens

Actors and funding

Actors Funding
National government
Social partners jointly
Company / Companies
National funds

Social partners

Social partners' role in designing the measure and form of involvement:

Trade unions Employers' organisations
Role Consulted Consulted
Form Direct consultation outside a formal body Direct consultation outside a formal body

Social partners' role in the implementation, monitoring and assessment phase:

  • No involvement
  • Main level of involvement: Peak or cross-sectoral level

Involvement

Social partners (SPs) were actively involved in the process of adoption of this measure. In order to prevent abuses by employers, the President of Lithuania proposed to sign a Memorandum committing employers not to reduce wages/salaries for employees that would increase with an increase in the TEAI. However, not all of trade unions (TUs) supported this idea and, e.g. the Lithuanian Trade Union Confederation (LTUC), refused to sign the Memorandum seeing no real benefits from it. According to the LTUC, it would agree to sign a collective or national agreement which sets out specific obligations of employers. Yet, the trade union Solidarumas will sign the document and believes employers will abide by the agreement. The Memorandum was also signed by the associations Infobalt and Investors’ Forum, the Lithuanian Employers' Confederation, the Confederation of Industrialists, and the Association of Lithuanian Chambers of Commerce, Industry and Crafts.

Views and reactions

Social partners welcomed the measure, but trade unions questioned its effectiveness. Trade unions expressed distrust in employers - in their view, there is no guarantee that employers will not reduce wages/salaries that would increase with the increase in the TEAI. According to the unions, such negative practices have already existed in Lithuania in earlier periods.

Sources

  • 24 May 2020: Some TUs not to sign the Memorandum on non-reduction of salaries (Dalis profsąjungų nepasirašys memorandumo dėl atlyginimų nemažinimo) (www.15min.lt)
  • 23 June 2020: Law amending Article 20 of the Law of the Republic of Lithuania on Personal Income Tax (LR gyventojų pajamų mokesčio įstatymo No IX-1007 20 straipsnio pakeitimo įstatymas) (www.e-tar.lt)
  • 25 November 2021: Law amending Article 20 of the Law of the Republic of Lithuania on Personal Income Tax No XIV-713 (LR gyventojų pajamų mokesčio įstatymo Nr. IX-1007 20 straipsnio pakeitimo įstatymas Nr. XIV-713) (www.e-tar.lt)
  • 17 May 2022: Law amending Article 20 of the Law of the Republic of Lithuania on Personal Income Tax No XIV-1098 (LR gyventojų pajamų mokesčio įstatymo Nr. IX-1007 20 straipsnio pakeitimo įstatymas Nr XIV-1098 (e-seimas.lrs.lt)

Citation

Eurofound (2020), Increase of the tax-exempt amount of income for workers earning below the annual minimum wage, measure LT-2020-27/918 (measures in Lithuania), EU PolicyWatch, Dublin, https://static.eurofound.europa.eu/covid19db/cases/LT-2020-27_918.html

Share

Eurofound publications based on EU PolicyWatch

19 May 2022

 

Working life in the COVID-19 pandemic 2021

This publication consists of individual country reports on working life during 2021 for 28 countries (the 27 EU Member States and Norway).

Publication

24 June 2020

 

COVID-19: Policy responses across Europe

This report aims to present an overview of both large-scale government measures and collective agreements that impact on large groups of workers.

16 June 2022

 

COVID-19 in the workplace: Employer's responsibility to ensure a safe workplace

Throughout 2021, the second year of the COVID-19 pandemic, specific occupational health and safety rules were reintroduced due to increases in infection rates.

Article

16 June 2022

 

Back to work after COVID-19: Testing, vaccines and green certificates

In the second pandemic year 2021, access to one's place of work was increasingly dependent on providing proof of either having been tested, vaccinated or recovered from COVID-19 in several countries.

Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process.