Lithuania – 2026 Tax Comparison (MB vs UAB company types)

If you’re considering Lithuania for a SCO (single-person company / solo founder setup), this quick guide gives you a clear, numbers-based look at how two popular structures – UAB vs MB – compare from a tax and practicality perspective.

Using a simple scenario (€150,000 annual income, with €20,000 taken as earned income and the balance paid as dividends), we walk through the key differences in PIT, PSD/VSD social contributions, dividend tax, and corporate income tax, plus the real-world admin flexibility that can matter just as much as the headline rate. It’s a friendly, straight-shooting overview to help founders and operators get a feel for why Lithuania is often seen as an attractive base for an SCO – without getting lost in the weeds.

Assumptions applied

• UAB: earned income taxed as employment income; social security includes compulsory health insurance contributions (PSD) and social security contributions (VSD) on the full salary.
• MB: earned income taxed at 15% PIT; compulsory health insurance contributions (PSD) apply in the amount of € 1 256.4; social security contributions (VSD) is not included for MB in this scenario.
• Dividends: taxed at 15% in both structures; dividends are not subject to compulsory health insurance (PSD) / social security contributions (VSD).
• CIT: 0% for the first two tax periods; 7% thereafter.
• In an MB (small partnership), profit distributions can be withdrawn more flexibly, and there is no requirement to wait until the annual financial statements are approved. In contrast, in a UAB (private limited liability company), dividend distribution is more restrictive, as dividends may only be paid after the approval of annual financial statements. As a result, dividends in a UAB are typically distributed once per year.

Table 1 – First two years (0% CIT)

	UAB	MB
Annual income	€ 150 000	€ 150 000
Earned income	€ 20 000	€ 20 000
Personal income tax (PIT) on earned income	€ 4 000	€ 3 000
Compulsory health insurance contributions (PSD) / social security contributions (VSD) on earned income	€ 3 900	€ 1 256.4
Corporate income tax	€ 0	€ 0
Dividends paid	€ 130 000	€ 130 000
Dividend tax (15%)	€ 19 500	€ 19 500
Total tax	€ 27 400	€ 23 756.4

Table 2 – After two years (7% CIT)

	UAB	MB
Annual income	€ 150 000	€ 150 000
Earned income	€ 20 000	€ 20 000
PIT on earned income	€ 4 000	€ 3 000
Compulsory health insurance contributions (PSD) / social security contributions (VSD) on earned income	€ 3 900	€ 1 256.4
Corporate income tax (7%)	€ 9 100	€ 9 100
Dividends paid (after CIT)	€ 120 900	€ 120 900
Dividend tax (15%)	€ 18 135	€ 18 135
Total tax	€ 35 135	€ 31 491.4

In Lithuania, the principles governing tax-deductible expenses are the same for both UAB and MB, as they are established by the Corporate Income Tax Law. Expenses may be recognized as deductible only where they are incurred for the purpose of earning income or obtaining economic benefit, are economically justified, and are supported by proper accounting documents. The obligation to substantiate the business purpose and necessity of each expense rests with the company and its director or other authorized manager. Expenditures such as travel, training, vehicles, communication services, and office-related costs are deductible; any personal or mixed-use element must be excluded or proportionally allocated.

Recommendation

Under the stated assumptions, the MB structure is more tax-efficient than the UAB structure in both analysed periods. This difference arises primarily from the taxation of owner remuneration: income received by an MB member is taxed at a 15% rate and, in this scenario, is subject only to compulsory health insurance contributions (PSD), without social security contributions (VSD), whereas remuneration paid in a UAB is subject to personal income tax on employment income as well as both compulsory health insurance contributions (PSD) and social security contributions (VSD).

Corporate income tax and dividend taxation apply in the same manner to the remaining profit in both legal forms. Accordingly, where the objective is to minimise the overall tax burden under these assumptions or simplify the accounting and administrative burden, the MB structure constitutes the more favourable option.

It should also be noted that in both types of the company allowable tax deductions may be applied, which may further reduce the total tax burden.

However, it should be noted that only natural persons may be members of an MB, and this legal form does not issue shares. In contrast, a UAB is a widely recognized corporate form with share capital, and its shares may be acquired by legal entities. Naturally, the legal form of a company may be changed if needed.