How to deal with accounting for freelancers living in Lithuania?

Do you live in Lithuania, work as a freelancer, and are registered as a tax payer? You will need to handle the accounting of your freelance job. Fortunately it is very simple. The information below only works if you are registered under the form "Individuali veikla pagal pažymą". How to register this way, you can read in in this article.

Please note that the text below is not a legal advice. The author of this article is not responsible for the information provided in this article and not responsible for any consequences, which may arise from using the information of this article. The information provided below is based on personal experience (at least 5 years of freelance job as a permanent resident in Lithuania), and is provided as the best knowledge of the author. The text below may be corrected at any time. The information may not be valid in future as the legislation may change. The information provided below may not necessarily guarantee the lowest possible tax exposure. In case of any questions or doubt, please call Tax Inspection Office (VMI) number 1882. You will be warned that the conversation is being recorded. Afterwards press "9" for the English menu.

You can do your accouting on a computer or to make entries on a paper sheet with a pen. However, you are required to save these accouting documents for 10 years, so make sure you will never lose them on your computer (or physical copies).

When you start your accounting, you must choose, which type of accouting you will use.

• "Pinigų" (Money) type. You will need to make entries to your accouting journal every time you get money from your freelance job (or you spend money for supplies for your freelance job). I suggest you choosing this one, it is more simple.
  
• "Kaupimo" (Accumulation) type. You will need to make entries to your accounting journal every time you send an invoice to your client, or somebody sends you invoice, it does not matter whether money are paid or not.
  

You will need to indicate the type of accouting next year when you pay taxes, but you have to choose now.

Also you need to choose between 2 types of registering expenses:

•  You will not register your expenses, and when you pay taxes, it will be assumed that 30% of your income are expenses (I suggest choosing this one – less paperwork, less accounting).
• You will register all your expenses, required for your freelance job (for example: buying a computer, software, paying for electricity, internet etc.). You will need to keep all receipts, bills as a proof of your expenses.
  

You will need to indicate your type of registering expenses next year when you pay taxes, but you have to choose now.

So let's say you chose "Pinigų" (Money) type of accounting, and you chose not to register expenses (the 1st option in both cases).

The most simple way of doing accounting is to download the DOCX file from here.

Delete all text above the main title. Write your first name, last name, your SSN or National Identification number; in the second line put your address of residence. In the third line put the title of your Individual activity (in this article, in step 16, you had to put the title in the your individual activity, in the field "Pavadinimas*". If you did not fill this field, leave the third line empty). For example, the top 3 lines of the accouting document should look like this:

Save your accounting document on your computer. Also you can print the empty document, and write the required credentials  and accounting entries with a pen.

Below is the accounting field. The principles of accounting may be better understood according to the further examples (if choices are made according to the above information of this article).

1. Imagine you created a content management system (CMS) for your client for 500 EUR. You created an invoice and sent to him (note: your signature is not required on the invoice).

• The date of the invoice: June 7th, 2020. The invoice number: 213546.
  
• You got payment to your bank account on 7th September, 2020.

 Your accounting entry would look like this:

• In field 2 you enter the date when you received your payment.
• In field 3 "sąskaita faktūra nr." means "Invoice No." The date of the invoice and its number is added.
• In field 4 you enter the services or goods you supplied, which are mentioned of the invoice.
• In field 5 you enter the amount of the invoice.
  

Fields 6, 7, 8 are left blank since you chose not to register expenses in the beginning.

Keep your invoice 213546 together with this accounting document.

You can add an entry no later than the last day of next month when you receive payment.

Keep this file and your invoice 213546 for at least 10 years (either physical or electronic form).

2. Imagine you created a content management system (CMS) for your client for 500 EUR. You do not use invoices.

• You got payment to your bank account on 7th September, 2020.

 Your accounting entry would look like this:

• In field 2 you enter the date when you received your payment.
• In field 3 "pavedimas" means "Bank Transfer" The date of the transfer and its number is added.
• In field 4 you enter the bank transfer reference.
  
• In field 5 you enter the amount you received.

Fields 6, 7, 8 are left blank since you chose not to register expenses in the begining.

Keep your statement of the bank transfer 864534 together with this accounting document.

You can add an entry no later than the last day of next month when you receive payment.

Keep this file and your statement of the bank transfer for at least 10 years (either physical or electronic form).

 

Keep adding these entries until the last day of the year. On the first day of new year, download the new accounting file again from here. Write your credentials, and continue doing everthing the same as mentioned in this article.

Congratulations, now you do your accounting according to the laws of Lithuania!