VAT registration for a new Lithuanian company: when it is required and when to register voluntarily

A newly founded UAB (private limited company) or MB (small partnership) does not become a VAT payer automatically. Once the company is entered in the Register of Legal Entities, a separate application to register it as a VAT payer has to be filed. Registration is mandatory when the company expects to exceed, in the current calendar year, the threshold of 45 thousand euros of consideration for goods and services supplied in Lithuania. As long as it does not expect to exceed it, registration is not mandatory, but the company may register voluntarily. Two rules most often come as a surprise: where the same person controls several companies, their consideration is added up, and buying certain services from abroad can require registration even below the threshold.

How incorporation itself works and how long it takes is covered in Setting up a UAB in Lithuania: the registration term and whether to travel. This article covers VAT only: when registration is mandatory, when it is voluntary and what to prepare in advance.

The general rule and the small business scheme

Article 71(1) of the Law on Value Added Tax (PVMĮ) sets the general rule: the obligation to register as a VAT payer falls on taxable persons who supply goods or services in Lithuania. A Lithuanian company carrying on any kind of economic activity is a taxable person (Article 2(15) PVMĮ).

There is an exception, which the law calls the small business scheme in Lithuania. A Lithuanian taxable person need not register as a VAT payer or charge VAT if its consideration for goods and services supplied in Lithuania in the previous calendar year did not exceed 45 thousand euros and it does not expect to exceed that threshold in the current calendar year (Article 71(2) PVMĮ).

A newly founded company has no previous year. The law therefore applies only the second condition to it: the scheme applies if it does not expect to exceed the threshold in the current calendar year (Article 71(2) PVMĮ). In practice this means estimating, before incorporation, what the company will realistically earn by the end of the year.

If you have read older advice about the last 12 months, it was based on the wording of the PVMĮ in force until 30 April 2025. At that time the threshold was counted per year, meaning the last 12 months. The threshold is now counted by the previous and the current calendar year (Article 71(2) PVMĮ).

What counts towards the 45 thousand euro threshold

What counts is the consideration for goods supplied and services provided in Lithuania in the course of economic activity (Article 71(2) PVMĮ). Consideration means everything received or receivable, in money or in any other form, in return for the goods and services supplied (Article 2(5) PVMĮ).

The following is not counted (Article 71(22) PVMĮ):

  • consideration for activities for which input VAT could not be deducted if the company were a VAT payer (for example, VAT-exempt activities);
  • consideration for the sale of fixed assets used in the business;
  • advance payments received;
  • consideration for supplies of immovable property by nature and for financial services listed in Article 28 PVMĮ, where such transactions are occasional and the company does not normally engage in them.

There is one more exception. If the company supplies in Lithuania only goods or services for which the buyer must account for VAT under the law, the general obligation to register does not apply to it (Article 71(1) PVMĮ).

What happens once the threshold is exceeded

Once the threshold is exceeded, VAT must be charged from the month in which it was exceeded. VAT must be calculated on all goods and services whose supply caused the threshold to be exceeded (Article 71(2) PVMĮ). In other words, VAT already applies to the transaction that crossed the threshold, not only to later ones.

It also matters that failing to register does not remove the obligation to calculate and pay VAT (Article 71(4) PVMĮ). If you register late, VAT will still have to be calculated for the period when it should have been charged. So if the business plan shows the threshold will be exceeded in the first year, the obligation to register arises at once, and the application must be filed without delay once the company is registered (VMI procedure, points 4.1 and 17.1).

Several companies: when consideration is added up

This rule matters most to anyone setting up a second or third company. Where the same person, alone or together with related persons, controls several legal entities, all the legal entities it controls, and the person itself if it carries on economic activity, must register as VAT payers. This applies if their combined consideration exceeded the 45 thousand euro threshold in both the previous and the current calendar year, even if each one’s consideration on its own is lower (Article 71(7) PVMĮ). For newly founded persons, only the current calendar year’s consideration is counted (Article 71(7) PVMĮ).

The law itself defines who is a controlling person. It is a person who (Article 2(3) PVMĮ):

  • directly or indirectly holds more than 50 per cent of the company’s shares (interests, units) or other rights to a share of distributable profit;
  • itself holds at least 10 per cent and, together with related persons, more than 50 per cent;
  • has the right to elect the majority of the company’s management body members or in fact controls its decisions.

Related persons include, for example, spouses, cohabiting partners, close relatives, a company and its shareholder, and a company and a member of its management body (Article 2(31) PVMĮ). So companies of spouses may be assessed together, even if each spouse owns a separate company.

The rule does not apply if the companies can prove both of the following (Article 71(7) PVMĮ):

  • none of their management bodies or individual members of a management body is the same person;
  • the economic activities they actually carry on are not of the same kind, and they do not act for each other’s benefit or in each other’s interests.

If both companies have the same director, the first condition already fails. The burden of proof lies on the companies themselves, so such a structure is worth assessing before incorporation.

Example. A person holds all the shares in an operating UAB whose consideration exceeds the threshold both last year and this year. The person sets up a second UAB, and both have the same director. The second company will earn little in its first year, but the two companies’ consideration together exceeds the threshold. In that case the law requires the new company to register as a VAT payer too (Article 71(7) PVMĮ). The exception does not apply because the management body is the same.

When registration is needed below the threshold

Article 71¹ PVMĮ provides for other registration cases unrelated to the 45 thousand euro threshold. A new company that is not a VAT payer must register as a VAT payer for the purposes of acquiring services from abroad and supplying services in other Member States if it (Article 71¹(2) PVMĮ):

  • buys services supplied in Lithuania by foreign taxable persons on which the buyer itself must calculate and pay the VAT;
  • being established in Lithuania, supplies services whose place of supply, under criteria essentially equivalent to Article 13(2)(1) PVMĮ (services to another taxable person), is another Member State (except services that are VAT-exempt or zero-rated there).

Separate rules apply to goods acquired from other Member States (Article 71¹(1) PVMĮ). A company that is not a VAT payer must register as soon as it acquires goods from another Member State. The 14 thousand euro threshold applies only to the persons listed in the law, for example a company carrying on only an activity in which input VAT cannot be deducted (Article 71¹(1) PVMĮ). So it is worth checking this before the first purchase from an EU supplier. Failing to register does not remove the obligation to calculate VAT (Article 71¹(6) PVMĮ). The rule on adding up controlled companies also applies to acquisitions of goods (Article 71¹(7) PVMĮ).

Which specific services fall within these cases depends on the type of service and the supplier. This is worth discussing with your accountant before signing the first contracts with foreign suppliers.

Voluntary registration

You can register without reaching the threshold. A person of Lithuania or of another Member State carrying on, or intending to carry on, economic activity in Lithuania has the right to register as a VAT payer even if its consideration is below 45 thousand euros (Article 72(1) PVMĮ). The law allows registration for those who only intend to carry on activity, so a new company may apply straight after incorporation.

There is one exception: voluntary registration is not possible where the only activity carried on and planned is one in which input VAT could not be deducted (Article 72(1) PVMĮ). That is activity to which non-deductible input VAT is attributed (Article 62(1) PVMĮ), for example VAT-exempt services only.

Why register earlier? Usually for two reasons. First, a VAT payer can deduct input VAT, which matters when a lot is invested at the start. Second, some business clients and partners prefer to deal with a VAT payer. On the other hand, a VAT payer must charge VAT on its sales and file returns. Whether it pays off depends on your clients: if they are mostly private individuals, registration makes your services more expensive for them.

If it later turns out that registration is not needed, a person registered only for the purposes of supplying goods or services has the right to ask to be deregistered, if the obligation to register would not have arisen had it not been a VAT payer (Article 75(1) PVMĮ). The law itself sets the 24-calendar-month ban on deregistration only for those who registered voluntarily because of acquisitions of goods from other Member States, except where the person is being liquidated (Article 75(3) PVMĮ). However, the procedure for registering and deregistering VAT payers, approved by order No. 178 of the Head of the State Tax Inspectorate under the Ministry of Finance of 26 June 2002 (as worded by order No. VA-25 of 31 March 2026; the VMI procedure), applies the period more widely. Under it, a person who registered voluntarily, including one below the mandatory registration threshold, can be deregistered only after 24 calendar months from registration, except where it carries on no economic activity or ends its activity through liquidation or reorganisation (VMI procedure, points 11.5 and 32). So if you choose voluntary registration, expect to remain a VAT payer for at least two years. On deregistration the VAT deduction is adjusted: input VAT deducted on goods and fixed assets that will no longer be used for taxable activity must be paid back (Article 69(1) PVMĮ).

How the application is filed

VAT payers are registered under the procedure set by the Law on Tax Administration and other legal acts, and the application may be filed electronically (Article 76 PVMĮ). A registered company is given a VAT payer code (Article 74 PVMĮ).

In essence the procedure is the same for a newly founded and an existing company: the application is completed and filed electronically through the State Tax Inspectorate’s e-services system (VMI procedure, point 13). A new company has one extra option, described below. The PVMĮ sets no deadline, but the VMI procedure does. Once the obligation to register arises, the application must be filed without delay (VMI procedure, point 17.1). For voluntary registration, the application must be filed at least 3 working days before the day from which you want to become a VAT payer (VMI procedure, point 17.2). Being late is costly, because VAT is charged from the month in which the threshold is exceeded (Article 71(2) PVMĮ).

A new company can state that it wishes to register voluntarily as a VAT payer already while it is being registered in the Register of Legal Entities. A draft application is then created in the State Tax Inspectorate’s e-services system, and the company is told so by e-mail (VMI procedure, point 15). The draft is not yet a decision to register: check it in that system, and charge VAT only from the date stated in the State Tax Inspectorate’s decision (VMI procedure, point 22). Otherwise the application is filed once the company is registered.

If the application lacks data, the tax administrator first checks the information it already holds and, if that is not enough, contacts the company or sends a notice asking for additional data (VMI procedure, point 19). The tax administrator refuses registration if the company does not file the additional data within the period stated in the notice, or if the data filed do not prove that the planned VAT-taxable activity is real and ongoing (VMI procedure, points 25.2 and 25.3). Registration is also refused if no person keeping the books or type of activity is given, or if the company lacks employees, where it must have them, or other resources needed for the activity (VMI procedure, points 25.11 and 25.12). So answer a notice asking for additional data within the period it sets. Applying an earlier version of the same VMI order No. 178 (then called the Rules), the Supreme Administrative Court of Lithuania has upheld a similar refusal where the company did not file the additional documents it was invited to file and other circumstances showed that the activity was not real (ruling of 11 November 2020 in administrative case No. eA-1955-556/2020). So it is worth having draft contracts, commercial offers and information on employees, the accountant and the business premises ready in advance.

Registered office and VAT registration

In practice the State Tax Inspectorate is suspicious of addresses at which many companies are registered but where no business is actually carried on. An address with an exact premises number where the company actually works is usually suitable. If you register the office at a purchased address, be ready to explain where the business will actually take place. Whose consent is needed to register an office and the risks of a purchased address are covered in Registered office: whose consent you need and the risks of a bought address.

What to prepare before incorporation

  1. Income plan for the first year. Estimate whether, by 31 December, consideration for goods and services in Lithuania may exceed the 45 thousand euro threshold.
  2. Your and related persons’ other companies. List the companies you, your spouse or relatives control, and whether they have the same director.
  3. Foreign suppliers and clients. Check whether you buy services from abroad or supply them to clients in other EU countries.
  4. Clients. Decide whether your clients are mostly businesses or private individuals. This determines whether voluntary registration pays off.
  5. Evidence of activity. Prepare information on premises, employees and bookkeeping, as the tax administrator may ask for it.

Calculating and declaring tax is your accountant’s field. When registration is mandatory and how to plan a structure of several companies is worth discussing before signing the incorporation documents.

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Tell us what company you are setting up, what it will do, who its clients will be and whether you or your relatives already own other companies. We will assess whether VAT registration will be mandatory from the first year and prepare the incorporation documents.

Phone +370 5 212 1506, email info@linden.lt

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