How to pay international contractors in Lithuania [2025]

With Lithuania’s diverse and talented workforce, it's no wonder so many global companies choose to hire contractors in Lithuania. But when it’s time to pay them, what steps do you need to take to comply with all of Lithuania's dauntingly complex labor and tax laws?

Before you receive your first invoice or enter into any kind of employment contract, read on to learn what you need to know to correctly classify contractors, onboard them, and pay them according to Lithuania's labor and income tax laws. We broke it down step by step.

Step #1: Classify your workers

Classifying Lithuanian workers correctly is crucial. Misclassifying employees as contractors can result in fines, back taxes, and other harsh penalties from official agencies. Fines can range from €868 to €2,896 for each violation on the first instance.

To help employers determine whether a hire meets the criteria for an employee or independent contractor, the following chart can help determine the working relationship and classification of the arrangement:

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Step #2: Determine the best way to pay your contractors

The first thing to do before you can pay contractors in Lithuania is to determine how you'll pay them. With the rise of global employment, workforces, and remote work, employers now have more choices than ever for making international payments to contractors. Here are some options:

• Bank wires. You can open a Lithuanian bank account and use it to deposit funds into Lithuanian contractors' accounts or use your bank to send a global wire transfer to pay a Lithuanian contractor.

• International money orders. This long-standing payment method can be slow—especially because the employer needs to physically purchase the money order, and the contractor needs to physically deposit it upon receipt. Money orders can also come with fees and bad exchange rates.

• Digital wallets or payment platforms. Note that not all digital payment platforms are available in Lithuania (for example, Venmo only works within the US) though some employers use platforms like Wise to transfer money across borders. Remember that exchange rates can change from day to day, making it difficult to predict your outgoings.

• Global payroll services. Typically, contractors aren't included in payroll, since they aren't subject to the same withholdings as employees—instead, they invoice for their services, which goes through accounts payable for many companies. But with Rippling, you can pay Lithuanian contractors and the rest of your global workforce in one system.

Step #3: Use global payroll software to process payments 

As you saw in Step #2, there are multiple ways to pay contractors in Lithuania. But the fastest and simplest way is paying contractors through global payroll software.

With Rippling, you can pay contractors across the world. Here’s a preview of how Rippling’s global payroll system works:

Step #4: Calculate and file your tax forms

All income of a resident of Lithuania sourced in Lithuania and outside Lithuania is subject to tax. Taxes and benefits are paid by the contractor worker, including social security and compulsory health insurance contributions.

The company or legal entity doing the contracting may have tax reporting obligations in Lithuania, depending on the specific circumstances of the arrangement. Contractor workers have to register with the State Tax Inspectorate (VMI) in Lithuania. 

While employers aren't required to withhold and pay taxes for contractors in Lithuania, they may have to file paperwork with the IRS.

Effortlessly manage contractors around the world

Managing your global workforce is a breeze with Rippling. You can pay international contractors in Lithuania and around the world in one system.

FAQs about paying contractors in Lithuania

Do you need to withhold taxes when paying contractors in Lithuania?

No, foreign companies don't have to withhold payroll taxes when paying contractors in Lithuania. Contractors are required to pay all of their own taxes.

Does Lithuanian minimum wage apply to independent contractors in Lithuania?

No, minimum wage laws don't apply to independent contractors in Lithuania.

Do Lithuanian contractors get benefits?

No, independent contractors in Lithuania are not entitled to benefits in the same way as employees. Offering benefits to independent contractors can even increase the risk that the courts will consider the contractors to have been misclassified.

Can you pay contractors in Lithuania in your home currency?

It's best to pay international contractors in their local currency, which is euros in Lithuania. You can pay contractors in Lithuania in another currency if they agree to it in writing.

Many international payment providers, like Rippling, support contractor payments in either euros or your currency.

Can you manually pay contractors in Lithuania?

Yes, and it's common for small business owners to manually process contractor payments in an attempt to cut costs. But this can be time-consuming, especially as your business grows and if you work with multiple contractors in Lithuania and other countries.

It's also important to note that manually processing payments comes with some risks:

• Compliance. Running payroll manually means assuming the risk of human error and omission.

• Security. Manual payroll processing also poses security risks, especially if you use spreadsheets or paper records. Sensitive contractor information can be lost, stolen, or misused.

• Contractor experience. Manual payments are often slow and lack transparency about key payment details. This creates a frustrating experience for contractors trying to understand their earnings.

How do you turn a contractor into an employee in Lithuania?

While hiring independent contractors over full-time employees can come with flexibility and financial benefits, sometimes you do need a full-time employee. The challenge is making sure all the legal requirements are in order when you hire new employees. Lithuania’s labor laws require payroll deductions (income tax) and benefits (parental leave, severance pay, and annual leave). You must also follow Lithuanian and European Union employment law regarding probation periods, public holidays, working days, employer taxes, and social security contributions to SODRA, the state social insurance fund. Most of these requirements don’t apply to contractors.If you don't already have one, you'll need to establish an entity or use an employer of record (EOR) to hire employees in Lithuania. An EOR can help streamline the hiring process.  

Note that the current situation in Ukraine has resulted in changes to some rules in Lithuania and other countries in the region, including Poland, Estonia, Latvia, Belarus, and Finland.