Individual Activity in Lithuania: Taxes, Benefits, Termination, and More

Individual activity is one of the most popular business forms in Lithuania, allowing individuals to start their own business without the complex procedures of establishing a company.

However, like any business form, it requires proper accounting, tax management, and an understanding of available benefits.

Individual activity refers to a business model where a person independently engages in commercial, creative, manufacturing, or other economic activities to earn income. It is especially popular among freelancers, consultants, artisans, creators, and small business owners who prefer not to establish a legal entity like a UAB or MB.

Advantages:

• Flexibility: Can be carried out in various fields—from creative work to technical services.
• Simple start: No need for company registration or share capital; activity can begin immediately after obtaining a certificate.
• Tax simplicity: Taxes are paid only on actual income, and expenses can be deducted.

Limitations: The individual bears full responsibility for obligations and cannot share liability as in legal entities.

To operate legally, you must obtain an individual activity certificate from the State Tax Inspectorate (VMI). It’s free and can be requested online via the“Mano VMI” portalor in person.

You’ll need to:

• Choose an activity code (EVRK classification)
• Provide contact details

The certificate grants the right to operate officially, pay taxes, and engage in formal transactions with clients and suppliers.

There are three main taxes:

Tax TypeRateNotes

GPM (Personal Income Tax)

15%

Applied to income minus allowable deductions

PSD (Compulsory Health Insurance)

6.98%

Based on minimum wage or actual income

VSD (Social Security Contributions)

12.52%

Based on net profit

Taxes must be paid periodically. Using accounting software like Rivile ERP helps track payments and deadlines efficiently.

First-year entrepreneurs may qualify for reduced GPM and partial PSD/VSD contributions. Other deductions include:

• Mortgage interest
• Education expenses
• Pension contributions

To close your activity:

1. Submit a termination request via “Mano VMI”
2. Pay all outstanding taxes
3. Submit your final annual income declaration
4. Retain accounting records for at least 10 years

Individual activity in Lithuania involves several key taxes:

• Personal Income Tax (GPM): A fixed rate of 15% is applied to income after deducting allowable expenses.
• Compulsory Health Insurance (PSD): The PSD contribution is 6.98% of the minimum monthly wage (MMA) or based on actual income, depending on the nature of the activity.
• State Social Insurance Contributions (VSD): The VSD rate is 12.52% of the profit amount.

These taxes must be paid periodically. To make it easier to track payment dates and amounts, it is recommended to use specialized accounting software.

• Submit a Termination Request to VMI Notify the State Tax Inspectorate (VMI) no later than the final day of your business activity.
  • The easiest way is through the“Mano VMI” portalby navigating to: Services → Individual Activity by Certificate → Termination of Individual Activity
  • Alternatively, you can submit the request in person at a VMI office (appointment required) or by mail.
• Settle All Tax Obligations Before closing your activity, ensure that all taxes are paid, including:
  • Personal Income Tax (GPM)
  • Compulsory Health Insurance (PSD)
  • Social Security Contributions (VSD)
• Submit Your Final Annual Income Declaration You must file your annual income declaration for the year in which the activity was terminated.
• Retain Accounting Documents All documents related to your business activity must be stored for at least 10 years in case of future audits or inquiries.

If you're starting individual activity for the first time in Lithuania, you may be eligible for tax relief that helps reduce your financial burden during the first year of operation.

This means:

• The personal income tax (GPM) rate can be reduced from the standard 15% to an effective rate of 5%, provided your annual profit does not exceed €20,000.
• Compulsory contributions such as health insurance (PSD) and social insurance (VSD) may also be calculated based on a portion of your income, depending on your actual earnings and applicable thresholds.

This relief is designed to supp

Starting individual activity in Lithuania is relatively simple and inexpensive because:

• There is no need to establish a company or invest share capital.
• The individual activity certificate is free of charge and can be obtained quickly through the“Mano VMI” portalor in person at the State Tax Inspectorate (VMI).

However, you must still:

• Calculate and pay taxes such as GPM, PSD, and VSD based on your income.
• Consider accounting expenses, especially if you choose to hire a professional or use software.

To reduce costs and increase efficiency, it’s recommended to use a business management system like Rivile ERP, which helps:

• Track income and expenses
• Automate tax calculations
• Simplify bookkeeping

Individual activity stands out from other business structures in Lithuania—such as a Small Partnership (MB) or a Private Limited Liability Company (UAB)—in several key ways:

Simplicity and Responsibility

• No need to establish a company: You can start immediately after registering with the State Tax Inspectorate (VMI).
• Full personal responsibility: Unlike UAB or MB, where liability is limited to company assets, individuals in this form are personally liable for all business obligations.

Accounting and Administration

• Simplified accounting: Individual activity requires basic income-expense tracking, which is easier than corporate bookkeeping.
• However, to ensure accuracy and avoid mistakes, it's recommended to use accounting software like Rivile ERP.

• Do I need to pay PSD if I’m employed and have individual activity? Yes, but it may be reduced or based only on primary income.
• How much does individual activity cost? The certificate is free, but taxes (GPM, PSD, VSD) apply based on income.
• When is GPM due? By May 1 each year, via the VMI system.
• When must I register for VAT? If your income exceeds €45,000 in the past 12 months.
• Can I do my own accounting? Yes, but using software like Rivile ERP is recommended to avoid errors.

You can manage accounting yourself or use tools like:

• Rivile ERP – for accounting and tax automation
• Rivile MSCAN – for warehouse management
• Rivile MGAMA – for HR and document management