Income declaration for investors – what is important to know?

Every year in Lithuania, an annual income declaration is filled out, meaning all residents must declare their income and assets. This can be done through the State Tax Inspectorate (VMI) Electronic Declaration System (EDS) no later than May. When declaring income and assets, it is important to indicate not only the income received from employment or individual activities but also income from the sale of securities, interest from fixed or cumulative deposits, and investment income. To make the declaration process clearer and simpler, this article explains what investment income is, how income declaration works for investors, and what everyone should know.

What is Considered Investment Income?

Investment income refers to income derived from investments, where the owned assets help increase capital by being rented out or sold when their value rises. To make it simpler, let's use a straightforward example. Imagine you choose real estate for investment. You own your own home and purchase a second property, for example, an apartment. This property will legally be considered an investment asset, which can generate income by being rented out or sold when its price increases (more about what constitutes investment assets can be found in the article "Investment Property: Everything You Need to Know"). If you rent out the apartment and receive a stable monthly income, this will be considered investment income. Investment income can be generated not only by investing in real estate, stocks, bonds, and other securities but also, for example, by investing in real estate development projects on various lending and investment platforms.

When Do You Need to Pay Income Tax on Investment Income?

The Income Tax Law stipulates that residents of the Republic of Lithuania must pay personal income tax (PIT) on investment income when earnings exceed the 500-euro threshold. Income up to 500 euros from rent or sale is not taxed. If the amount is higher, a 15% PIT rate will apply to the taxable portion, i.e., the part exceeding 500 euros. For example, if you earn a profit of 600 euros, you will pay 15% PIT on 100 euros (600 euros profit - 500 euros tax-exempt portion). IMPORTANT! If you are married, the investment income will be split in half, so if your earnings reach 1000 euros, you will not need to pay PIT, as both partners would share the amount, meaning each would have a profit of 500 euros, which is tax-exempt. If you earn 1200 euros, both spouses would pay 15% PIT on the earned 100 euros (1200 profit, split between spouses = 600 euros each; from the 600 euros per person profit, the tax-exempt portion of 500 euros is subtracted, leaving 100 euros of taxable income).

No PIT Applied:
- When the total profit from the sale or other types of investment income does not exceed 500 euros.

15% PIT Rate:
- The taxable amount exceeding the 500-euro threshold.
- Dividends, regardless of the income amount, are taxed at a 15% PIT rate.

20% PIT Rate:
- When the total income from rent, interest, deposits, securities, or sale of investments, combined with other income (e.g., salary), exceeds 120 average monthly wages (VDU).

Forms and Documents Related to Investment Income

Declaring income for investors is a somewhat more complex process, as it involves declaring not only income from employment or self-employment but also investment income: interest, dividends, and other capital gains. Remember that individual residents investing in securities and other financial instruments are not considered to be engaged in individual activities, so this cannot be attributed to self-employment when declaring income. For declaring income from securities, the GPM311 form is required. Note that if the amount received from investments does not exceed the tax-exempt amount of 500 euros, it does not need to be declared.

Where to Declare Investment Income?

Tax declarations, including investment declarations, are carried out in the State Tax Inspectorate (VMI) Electronic Declaration System (EDS). Asset declarations are made annually until May. In this system, you can submit and/or review tax declarations and many other declaration forms without leaving home. This is indeed a convenient and quick way. You can log in to EDS through a bank, the State Enterprise Registry Center, credit unions, or Electronic Government Gateways. Failure to declare on time may result in debt, followed by money being deducted from accounts.

How to Declare Investment Income?

Every year before the income declaration, all tax-withholding and third parties provide the State Tax Inspectorate with all information about a particular resident's income: salary, sold securities, etc. All this information is uploaded into preliminary income declarations. However, some information is only known to the resident, so the data always needs to be checked. Instructions on how to declare income can be found in the Electronic Declaration System (EDS) itself. The EDS has an income declaration guide that will direct you step by step.

Upon opening the income declaration window, you will first be asked to verify your data. First, you will need to indicate your status for the declaration period, i.e., whether you lived in Lithuania or were abroad.

The next window will reflect all the data received from other sources (employers, etc.). First, we recommend checking them carefully: sometimes, incorrect information is provided, or the wrong income type code is assigned.

If you are employed, the data provided here will likely be correct, and you will only need to confirm it.

Those engaged in individual activities must attach the Resident's Individual Activity Income and Expenditure Ledger if they do not use the VMI's remote accounting services subsystem, known as the Virtual Accountant (iAPS). If using iAPS, the data should be transferred automatically, and you will only need to verify and confirm them.

The third step is income from assets, i.e., from stocks, funds, cryptocurrency, or other financial instruments. At this stage, you declare the sold financial instruments, for example, stocks: you need to answer the question, "Did you receive income from renting, selling, or otherwise transferring ownership of assets in Lithuania and/or foreign countries?". Asset declaration is necessary if you sold certain financial instruments, such as stocks, and received more than 500 euros for them.

The fourth step is interest declaration. Here you should see preliminary data submitted by other parties, which you should check carefully and confirm. The 500-euro exemption also applies to interest, so if it does not exceed 500 euros, no taxes will be applied. The interest declaration code is 55.

Next, by selecting the "Other income" field, you will reach the dividend declaration. Here you will also need to enter the relevant data. The dividend declaration code is 26.

In the "Other income" field, you can also declare cryptocurrency income.

Next, you will reach the field for expenses reducing income. Here you can indicate information about investment insurance and contributions to the third pillar pension fund, taxes, and other expenses.

Once all sections are filled out, the declaration will be automatically generated.

Do You Need to Declare Investment Income Received from Foreign Companies?

Are you wondering if and how to declare assets received from foreign companies? The answer is yes, you do. In the annual income declaration, you must always indicate all income received in Lithuania and foreign countries during the declaration year, except for non-declarable tax-exempt income. Income must be declared by May of the following year. This can be done the same way as declaring income received in Lithuania. The only difference is that you should answer "in another country" to the question of where the income was earned.