Lithuania will introduce a revised VAT structure from January 1, 2026, adding new reduced rates of 5% and 12% while abolishing certain exemptions to help fund defense initiatives. Notable changes include lower VAT on books, higher rates for transport and cultural services, and a return to the standard 21% VAT for heating and firewood, with compensation measures planned for vulnerable households.
The Lithuanian parliament approves a new VAT structure effective January 2026
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Lithuania
Author: Nikolina Basić
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Fiscal subject related
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Content accuracy validation date:
01.07.2025
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Lithuania’s Seimas has approved changes to the country’s VAT system as part of a broader tax reform package aimed at bolstering defense funding. Beginning January 1, 2026, the country will introduce two new reduced VAT rates—5% and 12%—alongside a significant rollback of existing exemptions.
Passed with 77 votes in favor, 19 against, and 16 abstentions, the amendments to Lithuania’s VAT Law will lower the rate on books and non-periodical publications from the current 9% to 5%. In contrast, VAT on accommodation services, passenger transport, and arts and cultural events will rise to 12%.
However, not all sectors will benefit from the revised structure. District heating, hot water supply, and firewood—currently taxed at the reduced 9% rate—will revert to the standard 21% rate as the exemption is abolished. The minister of finance defended the decision, stating that the exemption was “inappropriate” and did not address any specific social concern.
To ease the impact of this change, the government plans to raise the asset thresholds for heating and utility-related compensation programs, ensuring that vulnerable households continue to receive targeted support.
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