Currently there are two types of taxes which are calculated from the salary stated in the employment agreement, i.e. „employee‘s taxes“ and „employer‘s taxes“:
·       „employee‘s taxes“ are taxes which are deducted from the salary indicated in the employment agreement:
o   15% personal income tax (PIT);
o   9% social security contributions;
o   2% transfer to pension funds (calculated only if the employee chooses to transfer).
·       „employer‘s taxes“ are taxes which are calculated on top of the gross salary:
o   30,48%-33,50% social security contributions;
o   0,7% guarantee fund and long-term unemployment fund.

Therefore, the total price of working place consists of the gross salary amount indicated in the employment contract and additionally calculated “employer’s taxes”.

From 2019 it was decided to make most of the taxes to be deducted from the gross salary agreed, i.e. from 2019 the taxes will be:
·       „employee‘s taxes“ are taxes which are deducted from the salary indicated in the employment agreement:
o   20% or 27% PIT;
o   19,50% social security contributions;
o   1,8% - 3% transfer to pension funds (calculated only if the employee chooses to transfer).
·       „employer‘s taxes“ are taxes which are calculated on top of the gross salary:
o   1,47% social security contributions;
o   0,32% guarantee fund and long-term unemployment fund.

In order to ensure that the net salary earned by the employees would not be negatively affected by the changes in tax system, the employers will be obliged to recalculate gross salary of employees. On 1 January 2019 the gross salary would have to be recalculated by multiplying current gross salary by the coefficient of 1,289.

In part I below we present an example, how the salary, its taxes and total costs of working place would look like based on the current legislation and the legislation which comes into force from 1 January 2019.

As well the following changes will be implemented from 1 January 2019:
·       ceilings for social security contributions are introduced (more information in part II);
·       progressive PIT is introduced (more information in part III);
·       nontaxable income amounts are changed (more information in part IV).

I. The example of salary calculation

Below we provide an example, how salary calculation would look like based on the current legislation and the legislation which comes into force from 1 January 2019.

The example is prepared on the assumption, that the employee has not chosen to transfer funds to pension funds and that the employee is not a limited working capacity person.
 

Comparative data of salary, EUR

 

 

2018

2019

Gross salary

More information

1000,00

1289,00

Untaxable income amount

Part IV

80,00

184,05

PIT

Part III

138,00

220,99

Social security contributions (employee‘s)

Part II

90,00

251,35

Net salary

 

772,00

816,66

Social security contributions (employer‘s)

Part II

304,80

18,95

Guarantee fund and long-term unemployment fund

Part II

7,00

4,12

Total costs of working place

 

1311,80

1312,07


As you can see from the table above, the total costs of working place are changing only marginally.

II. Social security contribution

The main changes regarding the social security contribution are:
·       changes in the „employee‘s“ and the „employer‘s“ tax rates;
·       implementation of social security contribution ceilings.

In the table below, we provide comparative information about current social security contribution rates and their changes from 2019.
 

 

Social security contribution (employee‘s)

Transfer to pension funds (voluntary)

Social security contribution (employer‘s)

Guarantee fund and long-term unemployment fund

Ceilings to social insurance contribution (except 6,98% of health insurance)

Till 31.12.2018

9%

2%

30,48% - 33,50%

0,7%

N/A

From 01.01.2019

19,50%

1,8% or 3%

1,47%

0,32%

Part of employment income exceeding 120 average monthly salaries

From 01.01.2020

19,50%

2,1% or 3%

1,47%

0,32%

Part of employment income exceeding 84 average monthly salaries

From 01.01.2021

19,50%

2,4% or 3%

1,47%

0,32%

Part of employment income exceeding 60 average monthly salaries

From 01.01.2022

19,50%

2,7% or 3%

1,47%

0,32%

Part of employment income exceeding 60 average monthly salaries

From 01.01.2023

19,50%

3%

1,47%

0,32%

Part of employment income exceeding 60 average monthly salaries


III. PIT

The main changes related to PIT are:
·       PIT rate change;
·       implementation of progressive 27% PIT.

In the table below, we provide comparative information about current PIT rates and their changes from 2019.

 

Standard PIT

Progressive PIT

When progressive PIT is applied?

Till 2018.12.31

15%

N/A

N/A

From 2019.01.01

20%

27%

Part of employment income exceeding 120 average monthly salaries*

From 2020.01.01

20%

27%

Part of employment income exceeding 84 average monthly salaries*

From 2021.01.01

20%

27%

Part of employment income exceeding 60 average monthly salaries*

*illness, maternity, paternity, parental leave pays and payments from long-term unemployment fund are not included into income from which progressive PIT is calculated.

IV. Nontaxable income amount

From 2019 there are changes of untaxable income amount applicable to the employees of limited working capacity and as well changes in the variable untaxable amount.

In the table below, we provide comparative information about current untaxable income amounts and their changes from 2019.

 

 

Variable monthly nontaxable income amount (MUIA)

(formula)

Nontaxable income amount for limited working capacity employees

0-25%

30-55%

Till 2018.12.31

MUIA=380-0.50*(MEI-MMS)

EUR 450

EUR 390

From 2019.01.01

MUIA=300-0.15*(MEI-MMS)

EUR 353

EUR 308

From 2020.01.01

MUIA=400-0.20*(MEI-MMS)

EUR 453

EUR 408

From 2021.01.01

MUIA=500-0.23*(MEI-MMS)

EUR 553

EUR 508

The following abbreviations are used in formula:
MEI – monthly employment income;
MMS – minimum monthly salary, valid at 1 January of the year.

Till 31 December 2018 relevant institutions should implement additional legislation related to the changes described above. We will inform about the actual legislation implemented in our website.

Please do not hesitate to contact us if you have any questions regarding the legislation changes.

Lina Lapytė
Tax and Legal Manager
Lina.lapyte@leinonen.lt 
+370 618 79158