Lithuania provides a straightforward pathway for individuals seeking to operate business activities under their own name. This article presents the availability and primary conditions of the sole proprietorship status—locally known as Individuali veikla pagal pažymą (Individual Activity Certificate)—for 2025, including registration procedures, taxation, and practical considerations based on official guidance.
Overview: Sole Proprietorship Availability in Lithuania
An Individual Activity Certificate (Individuali veikla pagal pažymą) enables Lithuanian residents to conduct business on their own behalf without establishing a separate legal entity. This structure is widely recognized and routinely utilized by freelancers, consultants, small retailers, and independent service providers.
Registration and Formalities
Registration for the Individual Activity Certificate is accessible to Lithuanian citizens and residents. The process is concise and entirely digital, handled via the State Tax Inspectorate (VMI) website. Applicants do not need to form a company or deposit initial capital. Once registered, the individual may invoice clients directly, simplifying day-to-day business operations.
Key Taxation Rules for Individual Activity Certificate Holders (2025)
The tax system for this status is comparatively simple, with transparent rules for personal income tax, social security, and health insurance. Summary details for 2025 are included in the table below.
| Contribution/Tax | Rate (%) | Description |
|---|---|---|
| Personal Income Tax (GPM) | 15% | Applied to taxable profit (income minus allowable expenses, or 30% standard deduction) |
| Social Security (Sodra) | 6.98% or 13.83% | Rate depends on selected coverage and benefits |
| Compulsory Health Insurance (PSD) | 6.98% | All holders are required to contribute |
| VAT Registration Threshold | €45,000 (EUR) | Mandatory VAT registration if annual turnover exceeds threshold |
Allowed Deductions and Expense Rules
Taxable profit is calculated as total income less allowable business expenses. Alternatively, individuals may elect a standardized expense deduction of 30% of total income, streamlining the tax base calculation for those with fewer direct costs. This approach can be advantageous for specific service occupations and freelancers.
Eligibility and Typical Use Cases
The Individual Activity Certificate is primarily available for Lithuanian residents who wish to conduct ongoing business activity on an individual basis. This status is frequently used across a wide range of professions, including IT consultants, independent contractors, small-scale traders, and creative professionals. Non-residents may face additional requirements or restrictions, which should be verified directly with the VMI.
Industry Practice and Administrative Considerations
In practice, the Individual Activity Certificate is designed for flexibility and accessibility. It is best suited for those who do not require a separate legal entity or additional corporate protection but seek a legitimate way to invoice clients and comply with Lithuanian tax regulations. The streamlined registration process and digital administration provide convenience, especially as tax filings and payments can be managed through the VMI and Sodra online systems.
Pro Tips for Individual Activity Certificate Holders in Lithuania
- Consider using the 30% standardized deduction if direct business expenses are low—it can apply significant simplicity to annual tax filings while still maximizing post-tax income.
- Monitor turnover carefully: crossing the €45,000 (EUR) annual threshold triggers mandatory VAT registration, meaning more compliance requirements but also potential credit for input VAT.
- Decide between the basic (6.98%) and enhanced (13.83%) Sodra social security rates based on personal needs for retirement and benefits coverage. The higher rate provides greater pension and insurance benefits.
- All registration and filing can be handled digitally via the VMI portal, making compliance efficient for domestic and traveling professionals alike.
- Always retain documentation for every expense, even if using the standard 30% deduction, as the VMI may request supporting materials during random audits.
Official Sources
In summary, Lithuania’s Individual Activity Certificate structure continues to provide a streamlined alternative for sole proprietors and freelancers in 2025. With straightforward online registration, clear tax obligations, and reasonable compliance, this solution remains practical for those seeking direct business activity under their own name. Key considerations include income thresholds that affect VAT status, selectable social coverage rates, and the choice of expense deduction methods, all of which are crucial for cost-effective business management.