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Approved cap on employer-funded Health insurance: what does it mean for your company?
27-06-2025 | Expert opinionYesterday, the Lithuanian Parliament approved a tax reform package introducing a €350 annual non-taxable limit for employer-funded health insurance contributions per employee. Any amount exceeding this threshold will, as of January 1, 2026, be treated as employee income and will be subject to personal income tax (PIT) and social insurance contributions. In addition, starting next year, a 10% levy will be applied to non-life insurance policies, with proceeds directed to the Defense Fund.
If the President does not veto these amendments, what changes should companies prepare for?
Example:
If a company purchases a health insurance package worth €600 for an employee, €250 of that amount will be considered taxable income, resulting in approximately €105 in taxes.
Additionally, the 10% levy on non-life insurance would amount to €60.
In total, the cost of a €600 insurance package could rise to ~€765.
(All figures are indicative.)
Why act now?
- Budget planning for 2026
Most companies renew or sign insurance contracts at the beginning of the year. It's important to account for the additional costs when preparing your 2026 budget. - Employee expectations
Reducing the employer-funded contribution to €350 may significantly narrow the scope of covered services.
The average annual premium in Lithuania currently stands at approximately €600.
Will a reduced package still meet your employees' expectations? - Competitiveness in the labor market
Health insurance remains the most popular non-monetary benefit in Lithuania, with over 200,000 employees currently insured.
These changes could impact your ability to attract and retain talent, so it's worth evaluating how your benefit offering compares to the market.
What to do before the 2026 changes take effect:
- Review your 2025 insurance contracts with your insurance partner
- Conduct cost modeling and scenario planning for 2026
- Assess employee expectations – consider running a survey
- Discuss possible changes to your insurance package with your provider
- Align budget implications with leadership and finance teams
- Prepare an internal communication plan for Q4 2025
In summary, the upcoming tax changes related to health insurance will directly affect company budgets, employee benefit structures, and staff expectations.
If you would like support in evaluating potential scenarios, preparing your budget, or reviewing your employee benefits strategy, contact IVP Partners specialists – we’ll help you explore solutions tailored to your company’s needs.