Lithuania is preparing a special tax. Will this spoil relations with Poland?

Preliminary estimates by the Lithuanian government indicate that such a tax could increase next year's budget revenues by EUR 70 million.

It's mainly about Orlen

Orlen Lietuva is the main company (in the country) engaged in crude oil processing and production of various petroleum products. This is the main potential payer of the tax on extraordinary profits, Prime Minister Mindaugas Sinkevičius said on Thursday on LRT radio, commenting on the ruling coalition's decision to prepare a scheme for taxing extraordinary profits of fuel producing companies.

He added that according to the classification of economic activities in the country, there are about ten enterprises related to the production of fuels, but as he emphasized, "naturally, it is primarily about Orlen."

When asked whether the windfall tax would harm relations with Poland, the Prime Minister said:

I think not. However, if we receive any signals, we will analyze them.

Decision within a few weeks

The chairman of the parliamentary budget and finance committee, Algirdas Sysas, told PAP that technical issues related to the taxation of Orlen Lietuva's extraordinary profits are still under discussion. The decision is expected to be made in the coming weeks, as the Sejm will begin the procedure of approving next year's budget in early December.

It may be a tax approved by a government resolution or by an act of the Sejm. The decision will be made based on the refinery's earnings data and its contract with the government, Sysas said.

Poland did it itself

Finance Minister Taurimas Valys informed journalists on Thursday that he met the Polish Minister of Finance on Monday. As he noted, he "clearly" pointed out that Poland itself decided to tax extraordinary profits and is one of the leaders of the initiative for a broader European solution in this matter.

We cannot ignore this and we certainly retain the opportunity to continue to raise this issue. We agreed that the Polish Minister of Finance would return with a specific vision and proposal, said the head of the Lithuanian Ministry of Finance.

Without money for the modernization of Mažeikiai?

Meanwhile, Algirdas Sysas proposed a compromise: instead of charging the tax, it could be deducted from the support previously promised by the Lithuanian government for the modernization of the Orlen Lietuva refinery. He recalled that the government committed in March 2025 in the protocol of intent to provide Orlen Lietuva EUR 54 million in support for the modernization of the plant.

Why not allocate some of this extraordinary profit to modernization? I hear from the Polish side that they will suspend the modernization, and this is not the best solution - commented Sysas, quoted by BNS.

Minister of Foreign Affairs Kęstutis Budrys appealed on Thursday to take into account the consequences for foreign investments and strategic relations with Poland when working on the tax. He also emphasized the need to consult partners.

We need to evaluate all aspects. It is also about foreign investments and strategic relations with Poland. I remember perfectly the circumstances in which Orlen appeared in Lithuania and took over Mažeikiai. We need to take all this into account and talk to partners so as not to leave this issue without broader consultations, Budrys told journalists in the Sejm on Thursday.

Are we at risk of closing the refinery in Mažeikiai?

At the beginning of November, Orlen's president, Ireneusz Fąfara, announced that the company was analyzing the advisability of additional expenditure to complete the deep oil processing installation in Mažeikiai. He pointed out that the alternative is to resign from the investment and risk the closure of the Lithuanian refinery. According to sources close to the company, USD 600-700 million is missing to complete the work.

Orlen Lietuva, a subsidiary of the Polish concern Orlen, owns the refinery in Mažeikiai and the oil terminal in Butiga. It is the only oil refinery in the Baltic states.