Sodra Tax Changes for MB Members and Sole Proprietors from July 1, 2026

Starting July 1, 2026, fundamental changes to the Law on State Social Insurance (VSD) will come into effect in Lithuania. These amendments will directly impact members of Small Partnerships (MB), owners of Individual Enterprises (IĮ), and members of full and limited partnerships. Business owners will need to carefully review their fund withdrawal strategies in light of these updates.

The primary change is a significant increase in the VSD contribution base. Previously, funds withdrawn for personal needs (declared under code 02) benefited from a reduced VSD tax base of 50%. As of July 1, 2026, this base will increase to 90%. For context, the minimum monthly wage (MMA) in Lithuania for 2026 is set at €1,153, while the average national wage (VDU) is €2,312.15. The VSD contribution rate remains at 13.83% (or 16.83% if you participate in Tier II pension accumulation), alongside a 6.98% Compulsory Health Insurance (PSD) rate.

While the increased base nominally raises the tax burden on withdrawn amounts, it brings a notable advantage for your pension accrual. To accumulate one full year of pension record, VSD contributions must be paid on an amount equivalent to at least 12 MMA per year. Under the previous 50% rule, a business owner had to withdraw 24 MMA to reach this threshold. With the new 90% base, you only need to withdraw approximately 13.333 MMA, as 90% of this amount fulfills the required 12 MMA annual base. This makes accruing a full year of pension record much more attainable.

Given the upcoming VSD base increase, it is highly recommended to explore alternative methods for withdrawing company funds. One viable option is providing management services under a civil service contract (CPS). This income is subject to a progressive Personal Income Tax (GPM) of 15–32%, but is exempt from Sodra contributions (provided the individual is insured elsewhere).

Another standard alternative is the distribution of dividends. Dividends are subject to a flat 15% GPM and do not incur Sodra contributions. However, before distributing dividends, the company's profits must be subjected to Corporate Income Tax, which in 2026 is either the standard 17% or a reduced rate of 7%.

We encourage business owners to proactively assess these impending tax changes. Consulting with your accounting professionals will help you formulate the most tax-efficient withdrawal strategy that aligns with your personal needs and business objectives.