Advantages of Establishing a Company in Lithuania
Lithuania is the largest, as well as the most populous, state among the Baltic countries. It is located on the Baltic Sea coast, a member of the Schengen Treaty and a member of the World Trade Organization. In recent years, Lithuania has made significant progress by attracting foreign capital to the economy of the country, mostly at the expense of cheap labour, a stable developing economy, low inflation, etc. Opening a company in Lithuania gives the possibility not only to experience the economic stability of the country, but also to enter the European market without restrictions on the export of goods in the EU.
As more and more promising entrepreneurial projects make their way into Lithuania, local authorities are working to ensure even possibilities for national and international players. That creates an environment which supports new initiatives and encourages collaborative growth – an environment of fast-growing international companies and start-ups that we see in Lithuania today. Attracting investment to Lithuania is one of the most important strategic goals of the State. To implement it, Lithuania constantly improves its image and its attractiveness among investors not only within the country, but also in relations with foreign States or individuals residing in foreign States.
Lower bar on immigration requirements
According to Lithuanian law, investing in a business in Lithuania is a valid reason for foreign nationals to immigrate and reside in the country. This decision was taken to encourage investment in business and has already attracted many foreigners who come to live here on the basis of legal activity. Foreigners have the right to join the management of the already established legal entity in Lithuania (to become shareholders of the enterprise) or to establish a new legal entity.
Simple establishment process
Equal opportunities also translate into new digitization projects and advanced, well-protected platforms that make it possible to submit the necessary paperwork on a remote basis.
Whereas some business owners may still choose to create a business by physically going to a state institution and filing the paperwork in person, there is another, significantly more efficient way to do it. To simplify the procedure and make it more accessible, Lithuania is offering a very convenient and reliable digital registration platform. Establishing a business online is significantly cheaper, takes only 3-4 business days (otherwise it may take up to 8 business days), and requires only an electronic signature for identity verification and legal commitment.
- Establishing a company in Lithuania grants access to an advantageous tax system.
- Lithuanian companies have a high reputation on the market as they are not offshore companies. This advantage makes it possible to be a reliable business partner, but also comes with certain tax benefits.
- All enterprises registered in Lithuania and having accounts with local banks do not have exchange control. This allows free movement of funds.
- Lithuanian companies have the right to receive a VAT number and to use VAT reverse order when working with partners from the EU.
- Opening a company in Lithuania gives the right to obtain a Residence Permit, which in turn allows free movement in Schengen countries and unlimited number of days of residence in Lithuania.
There are four main legal forms of companies in Lithuania, namely:
- Open Limited Company (AB), equivalent to a joint-stock company (JSC).
- A Closed Limited Liability Company (UAB), analogous to a Limited Liability Company (LTD).
- Full Partnership (TUB) or Limited Partnership (UB).
- Branch or representation.
The most common form among local and foreign citizens in Lithuania is the Closed Limited Liability Company (UAB).
Information about Lithuania
Lithuania is the most suitable country in the Baltic region to establish a business abroad, as it has a stable economy, a dynamically developing financial sector and low income tax rates.
To open a company in Lithuania means to expand your horizons and bring your business to a new level that meets international standards. The Republic of Lithuania ranks second in Europe in terms of investment attractiveness index and 11th in the world in terms of ease of starting a business, and has also risen to the 13th position in the ranking of the freest economies. The labor market is estimated at 1.5 million specialists.
The decision to register a company on the territory of the Republic of Lithuania is relevant for the formation of a transit point and further access to the European market, which includes 27 states, allowing you to multiply the number of potential customers and conduct your business more efficiently. An entrepreneur can also open a branch in any EU country.
The Republic of Lithuania is an attractive jurisdiction for obtaining a leave to remain in the expanses of Europe, as a result of which you will be able to move freely in the Schengen area without having to apply for a visa.
Lithuania’s tax system is loyal. It has some of the lowest tax rates in the entire European Union. Only 5% of the profit is paid if the annual income is up to 300,000 euros, and the number of staff does not exceed 10 people. The VAT rate is 21%. In addition, an entrepreneur can use legal methods of tax exemption and gets the opportunity to avoid double taxation, since special agreements have been concluded with a large number of countries.
There is almost no currency control in Lithuania. The official currency is the euro. At the same time, payments can be made in any currency that is freely convertible.
Official documents are kept in Lithuanian and English.
TOP 14 reasons to open a company in Lithuania:
- A stable market economy
- Entering the European market (27 participating countries) and increasing the number of customers
- Opening a representative office in any European state
- A low income tax rate — 5% and 15%
- Protection from double taxation
- VAT refund when trading on the European market
- No currency control
- The right to temporary residence in Lithuania
- The ability to move freely in the Schengen area without prior visa processing
- Trade within the European Union without customs barriers
- Business credit on preferential terms
- Registration in your name or company of motor transport
- Relatively low maintenance costs of a company
- Ease of communication and the spread of the English language
The registration of a company in Lithuania is accompanied by the provision of a legal address and the entry of details in the state register of the country.
Company registration forms in Lithuania
Starting your business, you initially need to decide on the legal form for the company. The most common forms of company registration in Lithuania are closed joint stock company, small company and individual enterprise. As evidenced by statistics, opening of a joint-stock company is considered to be the most convenient option.
More than 90% of all companies of the Republic of Lithuania are registered in the form of a closed joint stock company (Uzdaroji Akcine Bendrove, abbreviated UAB). The founder can be an individual or a legal entity (up to 250 shareholders), there are no restrictions on citizenship.
The management bodies are a general meeting of shareholders, a supervisory board and the head, which can be an individual, including a non-resident. Instead of a sole head, a collegial body can manage the company.
According to the legislation of the Republic of Lithuania, the authorized capital of a closed joint-stock company must be at least 2,900 euros. By the time the company is registered, you need to pay 25%, the remaining amount shall be paid within a year after the opening of the company. The authorized capital shall be formed by transferring funds from any bank, including a foreign account, as well as by depositing cash to the company’s savings account.
The main advantage of CJSC is limited liability to creditors. Shareholders and owners are not liable for their obligations with their personal property.
If a company employs 50 or more people, the company’s asset is estimated at 720,000 euros or more, and the company’s settlement accounts are above 1,400,000 euros, a mandatory audit is required.
Legal forms that are less common:
Open Joint Stock Company (AB)
It can put shares up for public sale, and the number of shareholders is unlimited. The Company is headed by a Board of Directors consisting of 3 or more people. The General director is responsible for the current work, transactions, and fulfillment of obligations. The minimum amount of the statutory contribution is 45,500 euros, and you need to deposit 25% at the time of registration. Shares can be sold to any person, the consent of the shareholders’ meeting is not required.
Full Economic Partnership (TUB)
A company is opened on the basis of a contract by partners, the number of which ranges from 2 to 20. They bear unlimited liability for debts.
Limited Partnership (KUB)
A company is opened by partners (2-20 people) who bear different liabilities — unlimited liability or liability within the agreed amount.
Small Society (MB)
This legal form has appeared recently and is not too widespread yet. The amount of contributions is not established by law, and it is determined by the members of the society themselves, which can be from 1 to 10. The liability of the participants is limited and does cover personal property.
A company is owned by a single owner. There are no requirements for the amount of the authorized fund. However, the owner bears full personal financial liability for the results of the activity.
Documents required for company registration in Lithuania
A full-fledged company in Lithuania is a structure that has been registered with the tax authority, is listed in the state register and has a bank account opened with a local bank.
Documents for company registration with your presence:
- Copies of the passport with personal data and residence permit
- Home address
- Company name
- Type of activity
Documents for company registration without your presence:
- Copies of the passport with personal data and residence permit
- Home address
- Company name
- Type of activity
- Power of attorney for company registration
During the opening of the company in Lithuania, an extract on the deposit to the fixed capital account will also be required.
After registering a company with the Lithuanian state authorities, you will receive a full package of documents.
To engage in certain types of activities, a license is required, which is valid throughout the EU. The following are subject to licensing in Lithuania: restaurant and gambling business, tourism, investment activity, alcohol and antiques trade, construction, pharmaceuticals.
Contact our specialists for detailed advice regarding the choice of the company registration form, licensing of the company’s activities.
The procedure for registering a company in Lithuania
The conditions for registering a new company in the territory of the Republic of Lithuania are the same for residents and non-residents. According to the legislation of the country, a resident of any state can open a company without restrictions.
A step-by-step process of registering a company in Lithuania:
- Selection of a unique company name. First of all, you need to decide on the name of your company. If this is a sole proprietor, then you can use your surname with initials. In case of registration of a legal entity, any word written in Latin letters will do. It must comply with the rules of the Lithuanian language. This is monitored by the State Commission for the Lithuanian Language. As a result, the applicant is granted permission to use a specific name.
- Opening a bank account. At the next stage, you need to open a savings account with the Bank of Lithuania for the contribution of the authorized capital. It is absolutely necessary to obtain a certificate of deposit of a sum of money, as it is subsequently required to attach it to the application for registration of a company in Lithuania.
- Choosing a legal address. The presence of a registration office in the Republic of Lithuania is mandatory. Official documents will be sent to this address. Correspondence is considered received by a company if the sender specifies the office address.
- Preparation of constituent documentation. All necessary documents shall be drawn up in Lithuanian. Only a verified translator in Lithuania can be engaged in translation. If a foreign company acts as the founder, all the statutory documentation should be translated into Lithuanian. A charter, a constituent agreement, and the minutes of the first shareholders’ meeting shall be prepared as constituent documents. If the founder is one person, then an act and a decision on opening an enterprise in Lithuania are drawn up instead of a constituent agreement and minutes. All documents shall be notarized.
- Payment of the authorized capital. After the preparation of the constituent documents, the authorized capital should be paid in the amount of 25%. The rest should be paid by a enterprise in Lithuania within 12 months after its opening. It is allowed to make a contribution in the form of movable or immovable property. In addition, it is necessary to obtain a certificate of the Lithuanian brokerage service on the acquisition of shares by the investor. A certificate of the presence of securities, a report on the establishment of a company, and a conclusion of the state auditor on the first financial report are also issued.
- Registration of the company in the register of legal entities. After preparing the necessary documents, an application for company registration shall be filled in. If there are no complaints from the state body, information about it shall be entered in the register of enterprises. Then the director of the organization shall be appointed.
- Registration with the Social Insurance Fund and the tax inspectorate. The company registration procedure ends with registration with the tax service and the Social Insurance Fund. This must be done within 5 working days from the date of receipt of the documents on adding the company to the register of legal entities.
- Re-registration of a savings account into a settlement account. Before registering a company in Lithuania, an accumulative bank account is opened, to which the authorized capital is deposited. However, immediately after the completion of the procedure for opening a new company, it shall be reissued into a settlement account in the personal presence of the head.
Buying a ready-made company in Lithuania
Acquisition of a ready-made registered company will be the fastest approach to opening a company in Lithuania. You can easily avoid bureaucracy, immediately engage in the implementation of your activities and making a profit.
Also, the purchase of a company with an existing name will be of interest to customers already operating in their country who want to enter the EU market and create a company with a similar name.
The process of re-registration of the company to a new owner is associated with updating the data in the Register Center. Despite the fact that the procedure will take some time, you can start working and doing business after a couple of days, after the purchase of the company is made.
All ready-made companies are guaranteed to come with pre-registration, a clean balance sheet and a minimum authorized capital of 1,000 euros. Thus, the client does not incur additional costs.
Together with the current company and the constituent documents, the new owner receives a legal address for 1 year.
Foreign companies registered in Lithuania are payers of taxes on all income. Cash receipts from doing business within the country and outside the Republic of Lithuania are taken into account. If a double taxation treaty has been concluded between the states, exemption from basic taxes is possible.
Lithuania’s tax system is very flexible, the rates are among the lowest in Europe:
- Corporate income tax is 15% (the rate is reduced to 5% if the annual turnover does not exceed 300,000 euros and the number of employees is less than 10 people; small companies can apply to receive a preferential rate of 0%);
- VAT is 21% (preferential rate of 9% for the transportation of passengers, printed publications, 5% for the sale of equipment for the disabled, and 0% for domestic and international transport);
- Income tax is 15% (can be reduced to 5%);
- Dividend tax is 15%.
According to Lithuanian legislation, a company shall remit 31.18% for social insurance, and employees shall pay another 9%.
An agreement on avoidance of double taxation has been signed with 53 countries. Also, special economic zones have been created in Lithuania, where taxes are practically not levied in the first years after the opening of a Lithuanian company, for example, in the first 6 years companies do not pay corporate income tax.
A company in the Republic of Lithuania can be registered remotely without the presence of the founder. A power of attorney and information for legal documents will be required from your side. Please contact our specialists for additional advice!
Accounting reporting in Lithuania is mandatory. A balance shall be handed over annually. You need to submit a report on accrued and paid wages monthly.
The director may entrust the organization of the company’s accounting to a full-time accountant or outsource it to a third-party company that will compile reports based on data on the company’s activities.
Leave to remain in Lithuania
Doing business in the Republic of Lithuania by a foreign citizen allows you to obtain a temporary leave to remain in compliance with a number of basic requirements:
- The foreigner is a shareholder or runs a company, owns at least 1/3 of the authorized capital;
- The company exists 6 months before the time when the application for a leave to remain was submitted;
- The employees of the company are citizens of Lithuania.
Contact Company in Lithuania UAB and get a price offer for opening a company in Lithuania.