Finance Guide for Expats Moving to Lithuania
Lithuania’s Financial System Explained for Expats
For anyone living in Lithuania, understanding how the country’s financial system works is crucial for everything, from day-to-day expenses to taxation. This guide covers everything: banks, currency, credit, taxation, and investment.
Banks in Lithuania
Lithuania has a well-developed banking system, with both local and international banks offering a range of services to expats. Major banks like SEB, Swedbank, and Luminor provide comprehensive options for everyday banking, savings, and loans, with online banking services available in English for added convenience. Additionally, Lithuania’s growing fintech sector includes digital banking platforms like Revolut and Paysera, which offer easy account setup and low-cost international transfers, making them popular among expats. Opening a bank account in Lithuania is generally straightforward.
Opening a Lithuanian Bank Account: Opening a bank account in Lithuania with traditional banks like SEB, Swedbank, or Luminor is a straightforward process for expats. Typically, you'll need to provide a valid passport or ID, proof of residence, and in some cases, proof of employment or a study contract. Most branches offer services in English, making the process easier for non-Lithuanian speakers. Once the documents are submitted, the account is usually opened within a few days, with online banking and mobile apps available for managing your finances conveniently.
Opening an account with digital banks like Revolut in Lithuania is even quicker and easier, as the entire process is done online via the bank’s mobile app. Expats simply need to download the app, provide basic personal information, and upload a valid ID for verification. Crucially, there’s no need for proof of residence, and accounts are typically approved within minutes.
ATM Network: Lithuania has an extensive and reliable ATM network, with machines widely available in cities, towns, and even smaller rural areas. Major banks like SEB, Swedbank, and Luminor operate most ATMs, and many machines offer services in English.
Currency in Lithuania and Exchange Rates for Expats
Lithuania adopted the euro (€) as its official currency in 2015, making it easy for expats to manage finances if they're familiar with other Eurozone countries. The euro is available in denominations of 1, 2, 5, 10, 20, and 50 cents, as well as €1 and €2 coins. Banknotes come in larger denominations of €5, €10, €20, €50, €100, €200, and €500. The use of contactless payments and card transactions is widespread, however, minimizing the need for cash in most everyday situations.
Like with any currency, exchange rates fluctuate. Lithuania’s own financial institutions and currency exchange services generally offer competitive rates, but digital platforms like Revolut or Wise, as well as exchange services in other Eurozone countries, may well provide lower fees and better rates for international transfers.
Building Credit History in Lithuania
Building credit history in Lithuania is essential for expats planning to stay long-term, as it can affect your ability to secure loans, mortgages, or even rental agreements.
Understanding the Lithuanian Credit System: The Lithuanian credit system is overseen by the Bank of Lithuania, which regulates financial institutions and ensures the stability of the country's financial system. Credit histories are managed by credit bureaus like Creditinfo Lietuva, which track individuals' credit records and provide reports to lenders. The Lithuanian credit system is broadly similar to that of many other countries.
Strategies to Build Credit History in Lithuania: Of course, starting with a basic bank account and a credit card from a local bank is always a good first step.
Making regular, on-time payments on credit cards or small personal loans can help establish a positive credit record. You should also ensure you pay utility bills and rent on time, as these are often reported to credit bureaus.
Over time, demonstrating responsible financial management, such as maintaining low credit card balances and avoiding missed payments, will help build a strong credit history, which is crucial for accessing larger loans or mortgages in the future.
Taxation for Expats in Lithuania
First of all remember this is a guide and you should always obtain professional advice from a tax specialist.
Understanding the taxation system in Mexico is crucial for expats to ensure compliance and optimize their financial planning. This section provides an overview of the key aspects of the Mexican tax system, including residency status, income tax, and double taxation treaties.
Resident vs. Non-Resident Taxes in Lithuania
The Lithuanian tax system distinguishes between residents and non-residents for tax purposes. This tax residency status impacts whether individuals are subject to taxation on their global income.
Residents: Individuals who spend at least 183 days in Lithuania within one tax year; or 280 days over two consecutive years (with at least 90 days in one year). Some others, either with vital interests in Lithuania (i.e. family or economic ties) or who are sent to work abroad by Lithuanian-based companies, may also be considered tax residents.
Non-Residents: Individuals who do not meet the residency criteria are taxed only on their Lithuanian-sourced income, rather than their global income.
Mexico has a flat rate income tax system, with most people paying 20% on their earnings and a higher rate of 32% for those earning over EUR 114,162 per calendar year.
However, expats working in Lithuania may also be subject to social security contributions, which , under employment agreements, range from 1.45% to 3.43%. Exceptions exist within the legislation for foreign employees seconded to Lithuania from countries with the European Economic Area (EEA) & Switzerland, as well as employees temporarily seconded to Lithuania from other countries. PWC’s in-depth guide gives more detail information.
Lithuania has double taxation treaties with several countries to prevent expats from being taxed twice on the same income. These treaties typically allow for tax credits or exemptions on foreign-sourced income. It’s essential to understand the provisions of the relevant treaty between Lithuania and your home country. PwC have a really good guide to foreign tax relief in Lithuania.
Value-Added Tax in Lithuania
Mexico imposes a Value-Added Tax (VAT) on the sale of goods and services, generally at a rate of 21%. Expats should be aware that this tax is included in the price of most goods and services they purchase.
The Lithuanian Tax Year
The Lithuanian tax year follows the calendar year, running from January 1st to December 31st. This structure aligns with many other countries, making it somewhat familiar for expats used to similar tax periods.
Adhering to key tax deadlines is essential to avoid penalties and ensure timely compliance.
Annual Tax Return Due Date: The annual income tax return for individuals is due by May 1st of the following year. For instance, for the 2024 tax year, the return must be filed by May 1st, 2025.
However, tax non-residents receiving Lithuanian income are obligated to file tax returns on a monthly basis.
Before filing taxes in Lithuania, individuals—especially expats—must ensure they are registered with the State Tax Inspectorate (VMI), the country's tax authority. Tax residents should also confirm their tax residency status and gather necessary documents, such as income statements from employers, proof of any tax-deductible expenses, and relevant certificates for any applicable double taxation agreements. Many expats use tax consultants or accounting services to ensure compliance with local tax regulations and to streamline the tax filing process.
Investing in Lithuanian as an Expat
First of all remember this is a guide and you should always obtain professional advice from a qualified investment specialist.
Lithuania offers a diverse range of investment opportunities for expats looking to grow their wealth. Understanding the local market, regulations, and investment options is crucial for making informed decisions.
Stocks: Expats in Lithuania can invest in stocks through local brokerage firms or international platforms, with banks like SEB and Swedbank offering investment services. The Lithuanian stock market is part of the NASDAQ Baltic exchange, giving investors access to local and regional stocks, while international platforms allow for broader global investments.
Mutual Funds: Investing in mutual funds in Lithuania is relatively accessible, with a variety of funds available through local banks, as well as international investment platforms. Expats should ensure they understand the tax implications of investment gains, as Lithuania taxes capital gains from investments at a rate of 15%, though tax treaties may help mitigate double taxation.
Bonds: Expats in Lithuania can invest in government or corporate bonds, with government bonds considered a low-risk option and corporate bonds offering potentially higher returns. Both can be accessed through local banks or investment platforms.
Real Estate: Lithuanian real estate is an attractive option for expats, with a relatively affordable market, no restrictions on property ownership for EU citizens, and growing demand in cities like Vilnius and Kaunas, making it a potentially profitable long-term investment. Find out more about housing in Lithuania here.
Expats looking at investment options in Lithuania should be aware of the added tax implications that this activity may have. Be sure to consult a professional.
Planning for Retirement in Lithuania
Lithuania offers a lower cost of living compared to many Western countries, making it an attractive destination for retirees. If you’re planning on retiring in Lithunia, find out what health insurance you may need here.
The Lithuanian Pension System: Lithuania's pension system consists of three pillars - a state pension funded by social security contributions, optional private pension funds, and additional voluntary pension schemes. Expats working in Lithuania contribute to the state system through mandatory social security payments, and they may also choose to invest in private pension funds for additional retirement savings. The system is designed to provide a basic level of security, with private funds offering more personalized retirement options.
Receiving Foreign Pensions: Expats can receive their pensions from their home countries while living in Lithuania, but should be aware that the taxation of pensions depends on their tax residency status and any applicable double taxation treaties. Many countries have agreements with Lithuania to avoid taxing the same pension income twice, but it's essential to check specific regulations and ensure proper reporting to Lithuanian tax authorities. Consulting with a tax advisor can help navigate the process smoothly.
