Rental Income Tax in 2026: GPM, Individual Activity, or a Business Certificate?

Once you rent out a flat, the question comes up sooner or later: how do you tax the income correctly? On 1 January 2026 a personal income tax (GPM) reform took effect that fundamentally changed how rental income is taxed — so the old "just pay 15%" advice is now wrong. This guide explains the three options and the exact 2026 figures.

Important: the amounts below are for 2026 (1 VDU — the average monthly wage benchmark — = €2,312.15/month). Always confirm the exact thresholds, municipal business-certificate fees, and declaration deadlines with the State Tax Inspectorate (VMI) or an accountant — taxes change every year. Source links are at the end.

Three ways to tax rental income

1. GPM on property rental

The simplest path: you declare the rental income in your annual income declaration and pay income tax on it. But from 2026 this is no longer a flat 15%:

• the first 12 VDU per year (€27,745.80) of non-employment income is taxed at 15%;
• the excess is summed with all your annual income (salary, etc.) and taxed progressively: 20% up to 36 VDU (€83,237.40), 25% from 36 to 60 VDU (€138,729), 32% above 60 VDU.

This is a major change: until 2025 the 15% rate applied up to 120 VDU (about €253,000), so most landlords effectively paid only 15%. The upside remains — minimal admin, no need to register an activity. The downside — you can't deduct expenses (repairs, utilities, depreciation).

2. Registered individual activity

By registering individual activity, you can deduct expenses from income — either the real ones (with documents) or recognize 30% of income as deductible. In 2026, income up to €42,500 is taxed at 20% with an income-tax credit, so the effective rate is lower:

• taxable income up to €20,000 — an effective 5%;
• from €20,000 to €42,500 — the rate rises gradually from 5% to 20%;
• above €42,500 — the credit no longer applies and the whole amount joins the general progressive scale.

The price for this is more accounting: an income–expense ledger, contributions (usually social security), documents. It pays off when income and real costs are significant.

3. Business certificate for residential rental

A business certificate (activity code 051) is a fixed municipal fee, paid in advance, regardless of how much you earned. From 2026 it allows income up to €50,000 per year (previously €45,000).

Two key advantages and limits:

• No social-security (VSD/PSD) contributions — per "Sodra," a residential-rental business certificate is exempt from them. This is the key difference from ordinary individual activity.
• Individuals and residential rental only. If the tenant is a legal entity, the business certificate doesn't apply (GPM applies instead).
• A separate certificate per property, and the fixed fee is set by each municipality and changes yearly — check your municipality's decision.

What changed in 2026

• The 15% "ceiling" for rent dropped from 120 VDU to 12 VDU — landlords with higher income now pay more.
• Income (with exceptions) is summed into one annual base and taxed progressively (20/25/32%).
• The business-certificate income cap rose €45,000 → €50,000.

What you must do either way

1. Declare the income in your annual income declaration (via VMI EDS). Confirm the exact deadline with VMI — not declaring leads to fines.
2. Keep evidence — contracts, invoices, payment history.
3. Separate rent from utilities — utilities reimbursed by the tenant have their own tax logic; a clear bill makes declaring easier.

How Rivio helps

Whichever option you choose, declaring requires tidy income history. Rivio keeps every issued invoice, payment, and utility allocation in one place, and through the kontus.lt integration the data flows into accounting without manual retyping. Your first flat — free.

Sources: VMI — taxation of residential property rental income · VMI — GPM changes from 2026 · Ministry of Finance — tax law changes adopted by the Seimas · Sodra — business certificate. Verified in 2026.