US Expat Taxes for Americans Living in Lithuania – What You Need to Know
It has been estimated that there are several thousand Americans living in Lithuania.
Living in Lithuania is an incredible experience for a number of reasons, including the history, architecture and culture, the countryside, and having the rest of Europe on your doorstep. As an American expatriate living in Lithuania though, what exactly do you need to know regarding filing US expat (and Lithuanian) taxes?
All US citizens and green card holders who earn a minimum of around $10,000 (or just $400 for self-employed individuals) anywhere in the world are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live or their income is generated.
The good news is if you are paying income tax in Lithuania, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.
US taxes – what you need to know
If you earn over US$10,000 (or just $400 of self-employment income), wherever the income originates in the world you have to file IRS form 1040.
While any US taxes due are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended further on request until October 15th.
If you have overseas assets worth over US$200,000 per person, excluding your home if it is owned in your own name, you also have to file form 8938 to declare them.
If you had a total of at least US$10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.
“Resident individuals are obliged to submit the annual income tax return by 1 May of the following year (the tax period is the calendar year). Lithuanian residends are required to report their worldwide income in Lithuania.” – KPMG
If you pay income tax in Lithuania, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS. The main exemptions are the Foreign Earned Income Exclusion, which lets you exclude the first around US$100,000 of foreign earned income from US tax if you can prove that you are a Lithuanian resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Lithuania. These exemptions can be combined if necessary. Remember though that even if you don’t owe any tax to the IRS, if your income is over US$10,000 (or $400 if you’re self-employed) you still have to file a federal return.
The US and Lithuanian governments share taxpayer info, and Lithuanian banks pass on US account holders’ account info to the IRS, so it’s not worth not filing or omitting anything on your return. The penalties for incorrect or incomplete filing for expats are steep to say the least.
If you’re a US citizen, green card holder, or US/Lithuanian dual citizen, and you have been living in Lithuania but you didn’t know you had to file a US tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any penalties. Don’t delay though, in case the IRS comes to you first.
Lithuanian taxes – what you need to know
Lithuanian residents are taxed on their worldwide income at 20% on the first around $100,000 of their income, and 32% on income above the threshold. Non-residents are solely taxed on their income sourced in Lithuania.
Foreigners living in Lithuania are considered a resident for tax purposes if they are domiciled in Lithuania, if their center of personal, economic and social interest is in Lithuania, or if they spend at least 183 days in Lithuania in a tax year or at least 280 days in each of two consecutive tax years.
The Lithuanian tax year is the same as in the US, which is to say the calendar year. If your only source of income is from employment in Lithuania, your income will be taxed at source and you won’t have to file a tax return. Otherwise, tax returns are due by May 1st. The Lithuanian tax authority is called the State Tax Inspectorate.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Lithuania that you contact a US expat tax specialist.