Sole Proprietorship in Lithuania: 2025 Guide for Digital Nomads

Feeling boxed in by high taxes and endless paperwork? If you’re a digital nomad or entrepreneur searching for a smarter, more flexible way to operate in Europe, Lithuania’s approach to sole proprietorship in 2025 deserves your attention. Let’s break down exactly how the Individuali veikla pagal pažymą (Individual Activity Certificate) works, what it costs, and how you can leverage it for maximum freedom and efficiency.

Understanding Lithuania’s Sole Proprietorship Status: Individuali veikla pagal pažymą

Lithuania offers a streamlined path for individuals to operate as sole proprietors under the status known as Individuali veikla pagal pažymą. This isn’t just a bureaucratic label—it’s a practical tool for freelancers, small traders, and service providers who want to invoice clients without the hassle of forming a separate legal entity.

Key Features at a Glance

How to Register: Pro Tips for a Smooth Start

Setting up your Lithuanian sole proprietorship is refreshingly straightforward. Here’s how to get started:

1. Go Online: Head to the State Tax Inspectorate (VMI) website.
2. Complete the Application: Fill out the digital form for Individuali veikla pagal pažymą. You’ll need basic personal details and a description of your planned activity.
3. Receive Your Certificate: Approval is typically instant or within a few days. You can start invoicing clients immediately.

Pro Tip: Registration is free and can be completed entirely online—no need for notaries or in-person visits.

Taxation: Optimize Your Burden in 2025

Taxes are inevitable, but Lithuania’s system offers flexibility for the savvy entrepreneur. Here’s how the numbers break down for 2025:

• Personal Income Tax (GPM): 15% on taxable profit. You can deduct either actual business expenses or take a standard 30% deduction—whichever is more advantageous.
• Social Security (Sodra): Choose between 6.98% (minimal coverage) or 13.83% (full coverage) based on your risk tolerance and future plans.
• Compulsory Health Insurance (PSD): 6.98% of your declared income.
• VAT: Only required if your annual turnover exceeds €45,000 (approx. $48,500).

Case Example: Freelance Developer in Vilnius

Suppose you earn €40,000 (approx. $43,200) in 2025. By opting for the 30% standard expense deduction, your taxable profit drops to €28,000 (approx. $30,240). You’ll pay:

• GPM: €4,200 (approx. $4,536)
• Sodra (minimal): €1,954 (approx. $2,112)
• PSD: €1,954 (approx. $2,112)

Pro Tip: If your actual expenses are higher than 30%, keep detailed records and deduct the real amount to further reduce your tax base.

Checklist: Staying Compliant and Efficient

1. Register online and keep your Individual Activity Certificate handy.
2. Track all income and expenses—digital tools can automate this.
3. Review your expense deduction options annually.
4. Monitor your turnover to avoid unexpected VAT obligations.
5. File your annual tax return on time to avoid penalties.

Pro Tip: Lithuania’s system is designed for flexibility, but the state still expects timely filings. Set calendar reminders for all deadlines.

Summary: Why Lithuania’s Sole Proprietorship Status Stands Out in 2025

Lithuania’s Individuali veikla pagal pažymą offers a rare blend of simplicity, low barriers, and tax optimization potential. Registration is fast, costs are transparent, and you retain full control over your business activity—without the drag of excessive state interference. For digital nomads and entrepreneurs seeking a pragmatic European base, this status is a compelling option in 2025.

For more details and official guidance, consult these resources:

• State Tax Inspectorate (VMI): Individual Activity Certificate
• Sodra: Social Security for Sole Proprietors
• Versli Lietuva: Starting a Business
• Go Vilnius: Business Start Guide