💸 Income & Tax
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Freelancer – a person who is self-employed and not necessarily committed to a particular employer long-term.
📎 Asociacija Aktyvus Jaunimas is a non-profit organisation. Which means that operates for social causes rather than profit. In order to employ more people AY chose an option to hire people as freelancers, but adapting the working environment to match the regular work contract employment.
“Asociacija Aktyvus Jaunimas” provides:
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- ● paid vacation time
- ● service contract
- ● tax compensation.
Main difference – salary is paid by the invoice you write out every month. When you acquire the individual activity certificate you gain the ability to write our invoices that are paid for the services you provide.
📅 Salary is paid not later than the 10th of every month for the previous month, e.g. salary earned during January is paid in February.
💰 Finance Sheet has to be filled in by the 2nd of the current month for the previous month. Read more about the Finance sheet here.
☎️ Finance team will contact you, if the finance sheet is filled in fully, with the details that your invoice should contain. Read more about the Invoices here.
Salary over/under payment:
AY is rarely able to pay your exact salary every month, it is paid according to the available amounts from your monthly finance numbers. There isn’t always a lot of room for flexibility since we have to match your balance to the budget lines.
That is why finance sheets were invented – to track the possible under or over payment. The balance sheet is a tool that not only us, but you should use as well. The balance cell is the one we use to determine your current salary every month because its’ formula is:
What you have earned in AY every-month + taxes – what AY has paid you = Balance
Sometimes in projects we have to spend big amounts of money quick – so we pay you in advance. If you do not agree with our request to pay
you a couple of salaries to the future – you can always deny it.If we overpaid you – you will receive a lower salary next month, but that does not mean that in total we paid you less, it all evens out over time. We paid a few months in advance and you do not know how much or when you will receive the next payment? You can always check that by writing your earned salary for upcoming months and check how the balance changes or ask us – we will help you!
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🌴 Vacation
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Paid vacation time:
According to law as with people who work with the work contract AY provides their employees with 20 paid vacation days a year. That comes to 1.67 days a month (20 days / 12 months).
Every worker accumulates 1.67 days if working full time, 0.835 days if working half time. These days have to be marked in your finance sheet page “Free Days”, column “D”.
Exception – rate has to be adjusted if you have taken unpaid time off. Read more about it below.
Unpaid vacation time:
You are allowed to take unpaid vacation time – this means that during those days salary will not be paid (unlike with paid vacation time).
Paid vacation time means that even when you are not at work – you still get your salary for the days away. For unpaid vacation – you will be paid less that month and accumulate less paid vacation time.
After you have taken this type of time off:
Adjust your salary:
= SALARY ⁄ WORK DAYS THAT MONTH × (WORK DAYS THAT MONTH – UNPAID VACATION DAYS TAKEN)
Adjust your accumulated paid vacation time:
= 1. 67 / WORK DAYS THAT MONTH × (WORK DAYS THAT MONTH – UNPAID VACATION DAYS TAKEN)
✏️ Finance Sheet
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👋 Every new worker in AY get’s a finance sheet, which is created by the Finance Team. Finance team is informed by the HR and is responsible for arranging a call with the new member.
🧐 During the meeting with the Finance Team worker is introduced to the finance sheet, how it functions and what to do with it.
❗️ Every freelance worker in AY is responsible for filling in their own finance before the 2nd of every month, 12 pm for the previous month.
🐾 Four steps to take at the beginning of every month:
Salary of the previous month
Payment of the previous month
Number of vacation days taken
Number of vacation days earnedIf one of those steps are missed – salary will not be paid.
Newbies should not worry about it too much. Finance team understands that finance sheets can be complicated – for the first few months we will consult you and fix anything that might be missing until we feel you got the hang of it!
How to fill in your finance sheet ⤵️
🧾 Invoices
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Freelancer’s write out invoices and get paid the amount stated in them for their services. In Asociacija Aktyvus Jaunimas salaries are paid by invoices too. You write an invoice, we pay you by it.
How to know what invoice to write out?
Finance team will write you every month with the name of the project, activity and amount you are being paid.
⤵️ Here are some templates for you to choose from:
There is an English and Lithuanian version of the invoice template. If you are getting paid from Kompetenta Unga and not Asociacija Aktyvus Jaunimas – there is a template with KU’s details provided.
p.s. you do not have to use them, can choose anything from the internet you like. As long as the company’s and your detail’s are provided correctly.
All invoices must be sent in PDF format!
🤒 Sick Days
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It is important to know the difference between PSD and VSD taxes. Payment of the PSD tax ensures free access to healthcare when needed. However, access to sickness benefits is linked to other contributions – VSD tax.
Why paying PSD tax is important?
All persons permanently residing in Lithuania are required to pay PSD tax. This is needed to access free healthcare, medicines, medical aids and other services.
The PSD contribution rate is 6.98% of the MMA. This year, the amount is €50.95. It must be paid monthly, by the end of the current month.
Why you should pay VSD contributions?
Paying VSD tax builds up your social insurance record.
Paying social security contributions ensures social guarantees – access to sickness, maternity, paternity, parental and childcare benefits and pensions. Benefit levels depend directly on the contributions paid.
Self-employed people can pay VSD tax once a year, after declaring their income to the Tax Inspectorate, or monthly. The latter method ensures that you can receive sickness benefits as soon as you fall ill.
What should you do if you want to pay VSD every month?
If you want to receive sickness benefit, you must also submit an SAV report. Why? Simply because without the SAV report, the person’s contributions will not be visible in the SODRA system, so naturally the benefits will not be paid either. If the contributions are based on the MMA, the amount of the benefit will be calculated on the basis of the contributions paid and averaged over the last 3 months. According to the law, the sickness benefit cannot be less than 15 per cent of the national average monthly wage. The minimum benefit is estimated at around €6 per day. Of course, when you submit your annual income tax return, your benefits will be recalculated and any shortfall will be made up. There is no need to apply for this – it will be done automatically after the return.
So you can pay your social security contributions in advance. And it is worth it if you want to make sure that you will be able to get the benefit if you fall ill.
It is important to remember that you need to submit an SAV report. Otherwise, even if you pay the contributions in advance, you will not be able to get the benefit if you fall ill.
❓ If you still have questions, please contact your nearest SODRA office for all the information you need.
📋 Income Declaration
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Income declaration with individual activity certificate
Income declaration with employment contract
DDL: 2022 May 2nd – check the VMI in advance DDL: 2022 May 2nd – check the VMI in advance Amount: 15% of taxable income Amount: varies, may be progressive (the higher the income, the higher the tax) Self-Employment Tax Calculator When working with employment contract, usually no additional steps are needed – income is registered in SoDra and automatically imported & calculated by VMI Declaration youtube guide (LT only) Declaration youtube guide (LT only) Note:
remember that individual activity when not paying VAT automatically implements principal of accrual accounting (income is taken into account when earned)
(LT.: pinigų apskaitos principas).
If you are a VAT payer, different rules apply, you can consult VMI on this topic if you are a VAT payerNote: check if you do not need to provide additional information while declaring income, some cases might be:
-Receiving rental income / interest
-Labor related income from abroad
–Inheritance of land / real estate
–Selling / buying a car / real estate
🏦 Mortgage / Credit
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An employed person (with an employment contract) can get a mortgage after 6 months of uninterrupted job experience. Financial aid from credit institutions will be calculated in accordance with the average 6 months of your salary after taxes (“neto”).
As a freelancer, you are also entitled to get a mortgage but the requirements are stricter – 2 years of uninterrupted job experience. The bank not only estimates yearly income but also future income prospects. Freelancers need to provide income declarations, invoices, revenue and expenses summary and any other documents related to your income – prepare them in advance and then request a mortgage/credit from lenders.
How to increase chances of getting mortgage/credit:- Paying VSD tax each month (shows stable income)
- Use service agreements with long term clients (another way to show stable/long term income)
- Declare income ant the end of fiscal year
- Declare your assets (house/apartment/land/car, etc.)
- Declare your other passive income sources (such as renting your car/apartment to others)
- Aim for perfect credit history to gain credit institution trust
🧓 Pension
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Pension briefly explained for both freelancers and contract employees
Always track your paid VSD taxes – less than 12 month taxes from minimum wage means the length of service is not full, therefore, the pension amount will be smaller. Also, check pension points in sodra.lt (ONLY RELEVANT FOR FREELANCE EMPLOYEES)
Inform finance team if you are included in additional pension accumulation! We will recalculate your taxes, which means you will receive less salary each month but hey, you will be a rich elder
Note: Depending on platform you’ve chose to save your pension on, usually the fund will invest your savings in ETF’s, bonds and other more risk-averse financial instruments, which means they can be higher/lower when you will become an elder
Additional pension accumulation (2.7%)
The government of Lithuania encourages people by adding 1.2% from their fund, so a total of 3.9% is added to your future wealth;
All savings can be inherited by your family members;
Note: starting from 2023 this additional pension accumulation will be obsolete.
Additional pension accumulation (3%)
The government of Lithuania encourages people by adding 1.5% from their fund, so a total of 4.5% is added to your future wealth;
All savings can be inherited by your family members;
Note: starting from 2023 only this additional pension accumulation will be possible.
🤰 Maternity Leave
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For freelancers
For employment contract employees
NGA (pregnancy and birth vacation)
Length: 126 days. Starts at 30 week of pregnancy, ends 2 months after birth. In the event of birth complications or a multiple child birth, an allowance is paid for an extra 14 calendar days;
Amount: Equal to ~64% of earnings (average of 12 months in the past 24 months);
How to get: pay VSD taxes each month (code: 444); Import document (SAV) to SoDra about your status as a freelancer at the current calendar month and request for maternity leave allowance.Length: 126 days. Starts at 30 week of pregnancy, ends 2 months after birth. In the event of birth complications or a multiple child birth, an allowance is paid for an extra 14 calendar days;
Amount: Equal to 77.58% of earnings (average of 12 months in the past 24 months);
How to get: request to get a maternal allowance in SoDra webpage; request NPD exclusion privilege; ask for employer to provide certificate on your non-taxed income and upload it to SoDra’s documents section.VPA (Child care vacation)
Length: Starts after NGA, end dates may vary – when the child is 1, 2 or 3 years old. Note: when child is 3 years old you cannot get anymore maternity leave allowance from SoDra;
Amount: Equal to ~64% of earnings (average of 12 months in the past 24 months);
A mother/father is required to have fixed work experience for the past 12 months in the period of the past 24 months. 12 month length of service can be tracked via calculating taxes of past 12 months (must be no less than 12 months of VSD taxes of minimum wage);
Important: while on maternal leave you can still work with individual activity certificate, the allowance from SoDra remains the same.Length: Starts after NGA, end dates may vary – when the child is 1, 2 or 3 years old. Note: when child is 3 years old you cannot get anymore maternity leave allowance from SoDra;
Amount: Equal to 77.58% of earnings (average of 12 months in the past 24 months);
A mother/father is required to have fixed work experience for the past 12 months in the period of the past 24 months;
Important: while on maternal leave you cannot work in order to receive the allowance from SoDra.
