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ALERT / NOVEMBER 19, 2025
Lithuania introduces tax changes for non-life insurance
4 MIN READ
Lithuania is implementing a new insurance premium tax of 10% on non-life insurance contracts to be paid by insurers and a new annual tax-exempt limit of EUR 350 for employer-paid supplementary health insurance premiums (previously fully tax-exempt), with any excess treated as taxable income for the employee. These changes will take effect from 1 January 2026.
Background
Law No. XV-283 on the Security Contribution introduces the new insurance premium tax. It was adopted on 17 June 2025 and will enter into force on 1 January 2026.
Law No. XV-343 on the Amendment of the Law on Personal Income Tax introduces the new tax-exempt limit for employer-paid supplementary health insurance premiums. It was adopted on 27 June 2025 and will enter into force on 1 January 2026.
Key details
The most relevant details for employers to note include the following:
New insurance premium tax on non-life insurance
Starting from 1 January 2026, insurers will be required to pay a new security contribution (insurance premium tax) on most non-life insurance contracts where the risk is located in Lithuania. This includes employer-sponsored non-life insurance products such as supplementary health and accident insurance, as well as property, liability, and other business-risk policies. The contribution does not apply to non-life civil liability insurance for the use of a vehicle by natural persons and insurance covering crops, plants, and livestock. This tax will be set at 10% of the annual insurance premium. The proceeds will fund the State Defense Fund.
The tax will apply to any new insurance contracts concluded on or after 1 January 2026. It will also apply to existing contracts that are extended or amended on or after 1 January 2026, if the changes to the contract result in a change in the insurance premium. This means that the new tax will apply to the insurer when additional employees are added to existing contracts on or after 1 January 2026.
New tax-exempt limit for employer-paid supplementary health insurance
Currently, employer-paid supplementary health insurance premiums are fully exempt from personal income tax, provided that the total amount (including employer-paid life insurance premiums and pension contributions) does not exceed 25% of the employee’s annual employment-related income.
From 1 January 2026, an annual tax-exempt limit of EUR 350 will apply specifically to employer-paid supplementary health insurance premiums. Any amount exceeding this limit will be subject to personal income tax. For example, if the annual premium per employee is EUR 985, EUR 350 would be non-taxable. The remaining EUR 635 will be taxed as personal income.
Employer action: ACT
To prepare for these legislative changes, employers should:
Update their payroll systems from 1 January 2026 to withhold personal income tax on employer-paid supplementary health insurance premiums exceeding EUR 350.
Anticipate higher insurance premiums and adjust their budgets accordingly. While the new insurance premium tax will be paid by insurers, it will likely increase the cost of non-life insurance premiums.
Review their employee benefit packages to ensure they remain both attractive and cost-effective.
Educate employees about the forthcoming changes and explain how these developments may impact their benefits.
By staying informed and proactive, businesses can navigate these legislative changes and continue to offer valuable benefits to their employees. Please contact your Lockton Consultant if you wish to discuss the changes and its potential impact on your existing employee benefits.
Written in collaboration with:
Kęstutis Statkevičius
Health and Benefits Specialist, GrECo Lithuania
k.statkevicius@greco.services (opens a new window)
Further Information
Law No. XV-283 on the Security Contribution | Seimas (Parliament of Lithuania) (opens a new window)
Security contribution from 2026 | State Tax Inspectorate (opens a new window)
