Comparative tax summary
This comparative tax summary will provide you with a brief insight into the tax rates in the Baltic States. In countries with small economies, a competitive tax regime is of utmost importance to attract foreign investments and ensure economic growth. For the past 20 years, Estonia has been well known for its corporate income tax system, under which retained earnings are effectively tax-exempt and corporate taxpayers are subject to tax on distributed profits, including hidden profit distributions. In 2017, Latvia decided to follow Estonia’s example and introduced a similar corporate income tax regime. These reforms helped Latvia move to second place behind Estonia in the International Tax Competitiveness Index Rankings.
Although Lithuania has maintained a classical corporate income tax regime, there are a few ways for corporate taxpayers to reduce their corporate income tax, for example, by applying investment projects and R&D incentives, or to eliminate it in certain cases by applying exemptions, such as those for capital gains from the sale of shares (subject to applicable conditions). However, the profits of corporate taxpayers in Lithuania are taxed twice, first when profits are made by the companies and second when profits are distributed to the shareholders as dividends. Nevertheless, Lithuania still ranks fifth in the 2025 International Tax Competitiveness Index rankings and places third for corporate income tax.
We believe that this tax summary will help to identify a potentially suitable jurisdiction in which to set up business operations or a particular line of business operations and to compare the differences between the three countries.
This tax summary is based on the laws valid as of 1 January 2026. This summary should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult an adviser concerning your situation and any specific questions you might have.
