Investments in Lithuania

Investments in LithuaniaTo start investing in Lithuania, you will first need to open a securities account. Once you have done this, according to your investment objectives, you will already be able to choose from a wide range of funds available for investment.

Over the last year, investments focusing more on innovations, such as investments in ICT equipment (Information and Communication Technologies), including intellectual property products, have been particularly popular in Lithuania. In the first case, there was a growth of 24%, and in the second—an average of 6.6% per annum. Overall, each of these types of investments amounts to 10% of total investments; Investments in construction is still for the largest share, but its share has fallen from 70% to 50%. The growth rate has also been relatively stable, reaching 8% p.a. since 2017.

Invest safely—recognize risky investment proposals

If you have occasionally received an offer to invest extremely profitably and without any risk, first check whether the institution offering such investments has the necessary licenses and permits. All licensed financial market players that can operate in Lithuania are published on the website of the Bank of Lithuania.

What are these investment platforms, and how do they work?

In particular, it should be noted that in many foreign countries, activities of investment platforms are still not clearly and fully defined and monitored. Fortunately, the situation is just the opposite in Lithuania. At the end of 2016, a law on crowdfunding was adopted in Lithuania, which regulated and defined the activities of crowdfunding platform operators. Also, Lithuania has a law on consumer credit that establishes duties and responsibilities of peer-to-peer lending platform operators. Thus, Lithuania is one of the few countries in the world where activity of investment platforms is fully defined and regulated. Simply put, all existing investment platforms in Lithuania are regulated and controlled by the Bank of Lithuania.

Main types of investment platforms

So, when looking for where to invest, you will need to discuss the main types of investment platforms. When assessing investment platforms operating in Lithuania and neighbouring countries, it can be noted that many of them try to specialise in a particular chosen sector. For example, various peer-to-peer lending platforms offer an opportunity to invest in consumer loans to people, while crowdfunding platforms allow you to invest in real estate development or other business financing projects.

Basically, all investment platforms in Lithuania and abroad operate in one of the following sectors:

  • Financing of consumer loans
  • Financing of real estate development
  • Financing of business loans

You can invest in consumer loans on the following investment platforms: Loan Club, Twino, Mintos, FinBee, Lenndy, or Savy.

Financing of business loans

If there is an interest in investing in a business, you can do so on investment platforms that fund business loans. Business loans are usually applied to small companies looking for finances for new business projects, business development or simply in case of lack of money for working capital. There are also urgent cases when it is necessary to repair suddenly broken critical machinery or when the company had a great opportunity to purchase some necessary raw materials at a price much lower than the market one.

On investment platforms, you can invest in loans of various sizes from 1000 to 500,000 euros. For lower value loans, the personal guarantee of the business owner is usually sufficient, and loans of more value are sought to be secured with collateral. In terms of returns, investing in business loans can be considered an intermediate option between consumer loans and asset-backed loans.
You can finance business loans on the following investment platforms: HeavyFinance, Debitum Network, Flender, or Crowdestor.

Financing the development of real estate projects

Real estate investment is one of the most popular investment methods in Lithuania. But surely not every person can afford to buy some property and, for example, rent it.

You can invest in real estate on the following investment platforms: EstateGuru, Nord Street, Profitus, EvoEstate, or Rendity.

Why invest through investment platforms?

Various online investment platforms in Lithuania have started to develop quite recently and are rapidly gaining popularity among investors. This is no coincidence, as investing online on these platforms has quite a few advantages:

  • Investing is easy. When investing on platforms, you don’t need to be an investment expert, have an interest in the financial markets every day or anything like that. Investment platforms require much less expertise than securities trading, so it’s great for newbie investors to get to know what investing is all about.
  • It’s easy to allocate investments. Investment breakdown is one of the main and most effective means of reducing investment risks. The possibility of investing small amounts makes it very easy to divide even a small investment portfolio, thereby, reducing the risks.
  • Guarantees of investment platforms. Most investment platforms offer investors what is known as a loan repayment guarantee. This guarantee works very simply—if the loan you have invested in is not repaid within a set number of days, the investment platform agrees to repurchase that loan from you.
  • Good return on investment. The average annual return you can expect to get on various investment platforms ranges from 10 to 12 percent. Thus, with its returns, investing on platforms can successfully compete with investing in stocks as well.

Income declaration in 2022: what do investors need to know?

The resulting return on investment is subject to the personal income tax of up to 15 per cent.

“The investment return is subject to a reduction of 500 euros, which means that you only have to pay the income tax on the amount exceeding this benefit. Also, only realised profits are taxed, meaning that you only have to pay taxes if you sell investment instruments. You don’t have to pay for their incremental value on your account.”

After starting to invest, residents must complete and submit the resident income tax return to the tax office every year in spring.

Will I have to pay personal income tax (GPM) if I sell stocks, bonds, fund units or other financial assets?

Yes, but not on the total amount of sales. In the Republic of Lithuania, only the investor’s income is taxed at the rate of 15% of the personal income tax (GPM) (the rate may be 20% if the earnings exceed in the amount of 120 average wages). In addition, there is a non-taxable amount of 500 euros of income from the transfer of securities in Lithuania.

For example, if in 2021 you sold financial assets for 3000 euros, which you had purchased earlier for 2000 euros, your earnings would amount to 1000 euros. After applying the non-taxable amount of €500, you will only have to pay the income tax from €500.

Must I pay the income tax if the investment makes a profit, but it is not distributed?

No, the income tax shall only be paid after financial instruments are transferred and only from the investor’s earnings, to which the amount of EUR 500 income from transfer of the securities applies. So, it is not taxable.

What are advantages for foreigners?

Lithuanian and foreign investors are guaranteed equal operating conditions in accordance with investment rights and other laws. The rights and lawful interests of investors are protected by the laws of the Republic of Lithuania.

The investor can manage, use and dispose of the object of investment in the Republic of Lithuania in accordance with the laws and other regulatory of the Republic of Lithuania.

The investor can convert the profit (income) belonging to him, having paid taxes as prescribed by the laws of the Republic of Lithuania, into foreign currency and/or transfer it abroad without restrictions.

The foreign investor can make a monetary contribution to the formed capital of an entity, both in foreign and Lithuanian national currency.

Investment disputes are also resolved taking into account the international treaties. The foreign investor (investors) can apply directly to the International Centre for Settlement of Investment Disputes in cases of investment disputes.

The foreign investor is paid on demand in any foreign currency for which the London Interbank Borrowing Rate (LIBOR) is published. The amount of payment shall be recalculated according to the official euro to foreign currency exchange rate that is published by the European Central Bank on the day of evaluation, In cases when the euro to foreign currency reference ratio is not published by the European Central Bank—according to the euro to foreign currency reference ratio published by the Bank of Lithuania.

If you are interested in investing in Lithuanian companies or securities, please contact an expert of the Company in Lithuania UAB and get detailed advice.