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Business Environment at a Glance

Source: Doing Business 2015, World Bank

  • 3 days start up time for new businesses / Centre of Registers, 2014
  • Tax treaties with 50 major markets: USA, China, Russia etc. / LR Ministry of Finances, 2014
  • 1st in the EU for use of eGovernment solutions / European Commission, 2013
  • 0% tax rates for 6 years in special Economic zones and 50% profit tax deduction afterwards / LR Ministry of Economy, 2014
  • Triple tax deduction for R&D / State Tax Inspectorate, 2014

We’ll give you the safety and support you need to grow your operations

We understand that a strong business needs a strong environment in which to flourish. That’s why over the last few years we have implemented a number of measures that help businesses get up and running quickly and without fuss. And it’s paying off; Lithuania has jumped eight places since 2013 for the ease of starting a business to 11th place globally in the World Bank’s Doing Business Report in only one year. Our government understands the benefits of investment and is more than ready to provide you with the support you need, and our modern dynamic business sector is fully EU compatible. What’s more, with tax treaties with 50 major markets including China, Russia and the USA, our business environment is truly global in its reach.

Doing business in Lithuania couldn’t be easier

Leading e-government solutions in Lithuania

Source: European Commission, 2013

With start-up times of just three days and e-signature company registration, you can be operational in no time, and with Lithuania ranked 1st in the EU for use of eGovernment solutions, you don’t need to waste time and money on needless bureaucracy. What’s more, all our laws are fully EU compliant, giving you the added security of a safe, transparent legal framework.

Once you’re established, you’ll find that there are a number of incentives available to help you grow, and with Corporate Tax four times lower than EU average you’ll be able to optimize your margins.

Lithuania is also home to seven special economic zones which offer lucrative 0% tax breaks on corporate tax, dividends and real estate, as well as world class infrastructure and ancillary services. The Kaunas Free Economic Zone and Klaipeda Free Economic Zone can also offer the added bonus of air and sea links.

What’s more, in Lithuania we also place particular emphasis on creativity and innovation, which is why if your company is focused on innovation and new technologies you can also benefit from triple tax deductions on R&D expenses and up to 50% reduction on taxable profit.

For further business essentials please see the tabs below  ↓

Start up business in Lithuania Start up business
Business law
Employment law in Lithuania Employment law
Business tax in Lithuania Business tax
Overhead costs in Lithuania Overhead costs
Financial incentives in Lithuania Financial incentives
Start up business

First steps of setting up business in Lithuania made easy

 

Procedures Time to complete Associated costs
1. Check and reserve the name of the company (limited liability company) <1 day  approx EUR 16
2. Register at the Company Register, including registration with State Tax Inspectorate (the Lithuanian Revenue Authority) for corporate tax, VAT, and State Social Insurance Fund Board (SODRA) 1 day  approx EUR 57
3. Complete VAT registration 3 days  Free
4. Obtain the official seal of the company 2 days  EUR 9-26

 

Source:

World Bank, Doing Business 2015

 Other useful links:

Centre of Registers

Business law

Most common types of entities for foreign investors:

  • Small partnership
  • Private limited liability company
  • Public limited liability company
  • Individual Enterprise
  • Agricultural societies

Private limited liability companies are considered most common among foreign-based enterprises.

 

Main features of most popular entities
Assessment Criteria Small Partnership (MB) Private limited liability company (UAB) Public liability company (AB) Individual enterprise (IĮ) Agricultural Company (ŽŪB)
Minimum number of participants 1 member 1 shareholder 1 shareholder 1 owner 2 members
Maximum number of participants 10 member 249 shareholder Unlimited Unlimited Unlimited
Minimum ammount of capital None (MB members define contributions) ≥  EUR 2,900 ≥ EUR 43,440 None None
Liability Limited civil liability – shareholders are not held personally liable for MB obligations Limited civil liability – shareholders are not held personally liable for UAB obligations Limited civil liability – shareholders are not held personally liable for AB obligations Unlimited civil liability – should business debts exceed the assets of IĮ the owner is held personally liable Limited civil liability – members are not held personally liable for ŽŪB obligations

 

 

Should setting up your own greenfield investment project be too risky, there are always other options to make business happen in Lithuania:

 

Establishing
a branch
A branch office would be a part of a foreign company with its own independent administration in Lithuania. The branch office shall be managed by a branch manager (filialo vadovas), who would be responsible for all activities of the branch office. The branch manager shall be appointed by the foreign company and would represent the branch office, sign documents and organise the accounting of the branch office. A branch office should be registered in Lithuanian Registry of Legal Entities. The branch office shall keep its own accounts.Contact us or see useful links for further information
Mergers and acquisitions When acquiring an existing business in Lithuania, you can either purchase its shares or its business assets. If the existing business is conducted through a partnership or a branch office, you can only acquire the business assets.Contact us or see useful links for further information
Partnerships The partnerships can be done directly by establishing a joint venture, a limited liability company, a general partnership or a limited partnership; or indirectly by the appointment of a commercial agent or a distributor or by setting up a network of franchisees.Contact us or see useful links for further information

 

Source: 

Law on Companies of the Republic of Lithuania

 

Useful links: 

Lithuanian Registry of Legal Entities

PwC Business Guide to Lithuania 2015 

Employment law

Here are few general laws related to the employment affairs

For more detailed information, please see other useful links or do not hesitate to contact us.

 

Conclusion of
employment contract
  • Employment contract must be in writing; contain conditions of payment; place of work and work description
  • Fixed-term contracts for newly created workplace are allowed, yet they should not exceed 5 years
  • Temporary employment contracts are allowed
Termination of employment contract Without the fault of an employee, employment contract may be terminated for reasons related to qualifications, proffesional competence or behaviour at work. Contract may be terminated for economic or technological reasons as well. Employer must provide a 2 months notice before contract termination.
Work hours, overtime work, remuneration
  • Daily work week consists of 40 hours. A working day or shift is up to 8 hours. A five-day workweek is standart, but it may be extended to 6 days.
  • Overtime cannot exceed 4 hours in two consequent days and 120 hours per year, unless established differently in a collective agreement. Yet maximum of 180 hours per year cannot be exceeded.
  • Pay for overtime and night work must be at least 1.5 times the hourly/monthly wage established for the employee
  • A three-shift working day is allowed by Lithuanian Labour Code
Vacation
  • Minimum annual paid holiday is 28 calendar days for employees but is extended to 35 calendar days for:
    1. employees under age of 18
    2. single parent employees, raising a child under the age of 14 or a disabled child under the age of 18
    3. disabled employees
  • Normally employees are entitled to paid vacation after continuous work of 6 months
Work permits for
non-residents
  • „EU Blue Card“ (all-inclusive residency and work permit) may be issued for highly skilled professionals* from non-EU countries in a period from 15 days** and up to 2,5 months.
  • Non-EU citizens who are skilled professionals*** not holding a university degree may be issued temporary work and residency permits in just slightly above 3 months.
Regulatory authorities Including, but not limited: the Register of Legal entities; State Labour Inspectorate;  LR Migration Department

 

* Highly skilled professionals must hold a university degree, their qualification must be in shortage in the Lithuanian labor market and they must be contracted for no less than twice the average Lithuanian salary.

** 15 day term is applicable when highly skilled professional is contracted for no less than three times the average Lithuanian salary and fast-track processing option is chosen for twice the regular fee.

*** Skilled professionals must hold a certificate of a specific qualification and have at least two years of professional experience. Applicant’s qualification must be in shortage in the Lithuanian labor market and they must be contracted for a salary equivalent to local co-workers. Processing time includes fast-track option when temporary residence permit is issued.

 

Sources and other useful links:

Labour code of the Republic of Lithuania

Law on Companies of the Republic of Lithuania 

Departament of Migration 

Lithuanian labour exchange 

State Labour Inspectorate 

Business tax

Below you will find the major business tax in Lithuania

For a quick and simple comparison to other major European countries please find the document attached

 

Corporate profit tax 0-15%
VAT 21%
Dividends (witholding tax) 0-15%
Personal income tax 15%
Social security tax  9% paid by employee 30.98% paid by employer
Real estate tax 0,3-3%

 

 

Other favourable tax conditions available to foreign companies:
  • Entities can reduce taxable profit up to 50% if they are carrying out an investment project into qualifying assets, if certain conditions are met;
  • Expenses incurred by companies carrying out R&D projects can be deducted three times;
  • 0% withholding tax on interest when the recipient of interest is established in the European Economic Area (EEA) or country with which Lithuania has signed a treaty for the avoidance of double taxation;
  • 0% withholding tax on royalties paid to related parties meeting requirements of the EC Interest and Royalty Directive;
  • 0% percent withholding tax on dividends distributed to a foreign/Lithuanian entity where the recipient has held not less than 10% of voting shares for a continuous period of at least 12 successive months;
  • 0% corporate income tax on dividends received from EEA countries if the dividends were distributed from profits which were subject to corporate income taxation;
  • 0% corporate income tax on capital gains on transfer of shares when a Lithuanian company is transferring the shares of the entity which is registered or otherwise organized in an EEA Member State or in another country, with which Lithuania has concluded a treaty for the avoidance of double taxation, and the transferring company holds over 25 percent of shares in the aforementioned entity for not less than two years (whereas in case of reorganisation – for not less than three years);
  • Advanced Pricing Agreements (APAs) and Binding Rulings available as from 1 January 2012;
  • 0% corporate income tax for six years in free economic zones.

Contact us for more tax related incentives or see useful links for further information

Sources and useful links:

State Tax Inspectorate 

PwC / Paying taxes, 2015 and Business Guide to Lithuania, 2015

Deloitte / Witholding tax rates, 2015 and Lithuania’s tax highlights, 2015

KPMG / Corporate and Indirect Tax Rate Survey 2014

EY/ Worldwide personal tax guide. 2014-2015

Overhead costs

To give you and idea of your potential savings, here are few major cost brackets for your general overhead

 

Monthly rental of office space (EUR m2)

A-Class B-Class
Vilnius 13.0 – 15.6 8.0 – 11.6
Kaunas 9.5 – 13.0 5.2-7.8
Klaipeda 8.7 – 11.6 5.2-7.2

 

 

Monthly rental of warehouse space (EUR m2)

Class A&B / Existing Vacant Built to Suit Projects Lower Quality
Vilnius 3.5 – 5.2 4.6 – 5,5 1.5 – 3.0
Kaunas 3.5 – 4.9 4.6 – 5.0 1.4 – 2.9
Klaipeda 3.4 – 4.7 4.6 – 5.0 1.4 – 2.9

 

 

Utility Costs (EUR, incl. VAT)

Measurement Average rates
Electricity 1 kWh 0.139*
Natural Gas 1 cubic meter 0.41**
Cold Drinking Water 1 cubic meter 1.89***
Hot Drinking Water 1 cubic meter 5.88

*End-user prices for industrial consumers 2015

**„Lietuvos Dujos“ price for users using more than 20,000 cubic meters

*** Average tariff for year 2015

 

Sources and useful links:

Newsec market reports

BNP Paribas market research

Ober-Haus market research 

InReal market reviews

Colliers Baltic Quarterly Report, 2014

Baltic property market report, 2014

National Commission for Energy Control and Prices

Lithuanian distribution network operator

Lithuanian Gas 

Financial incentives

Investments into R&D activities or infrastructure

SMART INVEST LT+

Grants for development of new or significantly improved products, services or processes. You can also get funding for investment into R&D infrastructure, and activities related to process and organizational innovations.

 Support Intensity
 Activity 1  Large Company  Medium Company  Small Company  Effective Collaboration*
 Industrial Research  up to 50 %  up to 60 % up to 70 % + up to 15%
 Experimental development  up to 25 %  up to 35 %  up to 45 %

 

Funding for employees’ training and qualification

HR INVEST LT+ 

Foreign companies can apply for funding as long as they have or are planning to have a base in Lithuania.

Support Intensity
Large Company Medium Company Small Company Micro-Enterprise
up to 50 % up to 60 % up to 70 % up to 70%

 

Other incentives for investment projects are available. Please contact us for more information.

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