Company Registration in Lithuania

The four ways are as follows:

• The purchase of a ready-made company
• Visitor registration for companies
• A power of attorney can be used to open a company
• Registration of branches

In the World Bank Report “Doing Business, 2020,” Lithuania ranks 11th in terms of ease of doing business.

UABs are the most common form of business presence in Lithuania.

UAB refers to a closed joint-stock company in Lithuanian. There are several ways to dispose of UAB’s statutory capital, including selling it, donating shares, and passing them down through the generations. It is required that UAB have a minimum of one owner (natural or legal person) and one director (natural person) who can sign on behalf of the company.

Benefits include:

• It is the 11th easiest country in the world to do business in
• In comparison with other EU countries, the cost of registering a company is low
• Lithuanian companies pay a 5% income tax
• Re-registration of an entirely remote company

A foreign investor can register a company in Lithuania in four ways:

1. The public society (AB) (which is similar to the public company)

In Lithuania, forming a public limited company is a good option for large companies.

Capitalization

A public limited liability company must have a minimum statutory capital of 40,000 euros. Forming and paying the authorized capital in full to the account of the company is necessary. Capital shares can be sold publicly or privately.

Founding member

Founders or shareholders of a public limited company can be natural or legal persons. In the Republic of Lithuania, the founder’s residency is not restricted.

An obligation

As a company and its shareholders, all assets are limited liability.

Governing body

Public limited companies are governed by boards of directors, which include at least three supervisory board members. At a general meeting, shareholders approve a board of directors.

2. Private company (UAB)

Business activities in Lithuania are mainly conducted by private limited liability companies.

Capitalization

It is necessary to have 2,500 euros of statutory capital to establish a private limited liability company. In order to receive payment, the company must open a bank account in its name and set up a full payment account. Capital consists of shares that are neither sold publicly nor privately.

Founding member

A private limited company can be founded by one or more natural or legal persons. Company founders can be Lithuanians or non-Lithuanians.

Obligation

Shareholders and the company are limited in their liability. It is possible for shareholders to be held liable up to a certain amount.

Governing body

In a private limited company, a board or supervisory board is not required. Shareholders make decisions at a general meeting.

Performing audits

It is mandatory for companies with a turnover exceeding 1.4 million euros to undergo an annual audit.

3. Partnership (TUB) or Limited Partnership (KUB)

It is possible to classify Lithuanian partnerships into two categories. There are fundamental differences between the responsibilities.

Obligation

In order for a full partnership to carry unlimited obligations, there must be at least one general partner with unlimited responsibility, which means limited liability partners are liable only up to their contributions.

All partners of a limited partnership or a full partnership must sign their agreement before a notary in the Republic of Lithuania.

4. Branch or representation of a foreign company

It is possible for foreign companies to open representative offices and branches in the Republic of Lithuania. A foreign company may have a representative or subsidiary. Companies from abroad must have a physical presence in Lithuania through their branches or representatives.

Branches and representations abroad are divisions of foreign companies, but are not legal entities in their own right.

In addition to having their registered office, legal entities have branches to perform their functions. A branch may carry out commercial activities within the limits established by its parent company.

As a subunit of a parent company, a representation represents and protects its interests. As a result of the mission’s prohibition of commercial activities,

It is the responsibility of foreign companies to fulfill all the obligations of their subsidiaries and establishments.

There must be one Register of Legal Entities for all business entities.

When it comes to starting a business, you need to decide on its legal form. Lithuanian companies are primarily closed joint-stock companies, small companies, and individual enterprises. Based on the statistics, opening a JSC is considered to be the most convenient option.

A closed joint-stock company (Uzdaroji Akcine Bendrove, abbreviated UAB), which accounts for more than 90% of all companies in Lithuania, is the most common type of business structure. There are no citizenship restrictions on the founder (up to 250 shareholders).

In addition to the general meeting of shareholders, the supervisory board can include a non-resident as the head. An organization can be managed by a collegiate body instead of a single manager.

Legislation in Lithuania requires closed joint-stock companies to have a minimum statutory capital of 2,900 euros. 25% of the registration fee must be paid at the time of registration. The remaining 25% must be paid within a year of opening the company. In addition to paying cash into the enterprise’s savings account, funds can be transferred from any bank, including international accounts.

Creditors are limited in liability with UAB. Personal property is not the responsibility of shareholders or owners.

A mandatory audit is required if the company employs more than 50 people, its assets amount to 720,000 Euros, and its settlement accounts charge 1,400,000 Euros.

Creating a Lithuanian company can expand horizons, allow you to enter the European market at a low cost, and increase your potential customer base. It is strategically important that the Lithuanian company conducts trade between Russia, Ukraine, Belarus, and other countries in the Commonwealth of Independent States and the European Union.

Due to its stable economy, dynamic financial sector, and low profit tax rates, Lithuania is the best place to start a business abroad in the Baltic region. When you open a business in Lithuania, you expand your horizons and grow your business to a level that meets international standards. As well as ranking second in Europe and 11 in the world on ease of opening a business, the Republic of Lithuania has also risen 13 places in the ranking of the freest economies. A total of 1.5 million professionals are estimated to be employed on the labor market.

In order to establish a transit point and access the European market, which includes 27 States, it is important to register a company on the territory of the Republic of Lithuania, as this enables you to multiply your potential clients and conduct your business more efficiently. Furthermore, entrepreneurs can open branches throughout the European Union.

• Profit taxes range from 5% to 15%
• Customs-free trade (within the EU)
• Taxes are not doubled
• Lithuanian companies are entitled to receive GNH upon opening
• Exchange controls are not in place
• Invoices for VAT codes must be returned and accounted for
• It takes no more than five days to complete the registration process

A residence permit in Lithuania allows you to move freely in the Schengen area without a visa, making it an attractive jurisdiction for obtaining a residence permit in Europe.

It is a loyal tax system in Lithuania. It has some of the lowest rates throughout the European Union. A company with an annual income of about EUR 289,620 and no more than ten employees pays only 5% of its profits. There is a 21% VAT rate. As a result of special agreements with a number of countries, entrepreneurs can also use legal ways to avoid double taxation.

In Lithuania, the fastest way to establish a business is to purchase a ready-made company. You can start your business right away, avoid bureaucracy, and make money right away.

Additionally, customers already operating in their home country can own the existing name of the company and enter the European Union market by forming a company with the same name.

When a company is converted to a new owner, the Register Centre must be updated. After purchasing a business, it is possible to start and operate a business within a couple of days after the acquisition has been completed.

A 15 percent income tax is imposed on enterprises in Lithuania, as well as a 15 percent source-of-income tax. Under certain conditions, small businesses may qualify for a reduced profit tax rate of 0% or 5%. There is a 21% VAT rate on the total amount.

1. Corporate tax

In Lithuania, the standard corporate income tax rate is 15%; however, if you have fewer than ten employees and less than 300,000 euros in gross income, you may qualify for a 0-5% reduction. Lithuanian tax residents are generally taxed on their income earned from local and international activities. By subtracting deductible expenditures from taxable income, the taxable income for a tax period is calculated.

2. Dividends

It is taxed at 15 per cent on dividends distributed by one resident company to another resident company, unless the parent is at least 10 per cent owner of the recipient. In that case, dividends are tax-free. In addition, foreign nationals registered in the EEA are exempt from corporate income tax or its equivalent on dividends received from companies whose profits are already subject to such taxation.

3. VAT

Lithuania’s standard VAT rate is 21%, while lower rates are 9% and 5%. Books, information publications, periodicals, housing, and regular passenger transportation are subject to 9 percent VAT, while equipment for the disabled, pharmaceuticals and medical devices for those eligible for compensation under the Health Insurance Law are subject to a reduced rate of 5 percent. VAT registration is required when the total volume of goods and/or services offered in the ordinary course of business exceeds €45,000 over a 12-month period.

Registration is governed by the following legal acts (MB):

• Code of Civil Procedure of the Republic of Lithuania (LRCK)
• Small Business Law of the Republic of Lithuania (LRMBĮ)

A small business can receive funding from the following sources:

Although it is not required to have an authorized capital in a Small business, members of the business must pay contributions (whose size and terms will be determined at a Meeting of Members), and the profits of a Small business will be divided proportionally, based on the amount each member has contributed.

Small businesses transfer property to their members as part of their contribution. With the exception of works and services, contributions may take the form of money or other property. Transferred property becomes the property of the small business.

Step 1 – Name

For the name of the business, the following requirements must be met:

• Novelty
• Authenticity
• Public order and morality are not at odds with each other

Names of businesses must follow Lithuanian language norms.

Neither the name nor the trademark can be the same as a general term that doesn’t differ (such as wood, jewelry, etc.).

A 6-month reservation period is available for the business name in the Register of Legal Entities. The benefit of this is that no one else will be able to register an identical name during this period, and you can also be sure that the name is appropriate.

Step 2 – Preparation of constituent documents (constituent agreement/act)

In the case of two founders, a constituent agreement must be concluded. A constituent act is required if there is only one founder.

The number of founders in a small business cannot exceed ten, and they must be individuals.

It shall be specified as follows:

• Entrepreneurs who founded a small business
• The name of the company
• Business headquarters
• A legal form for small businesses (MB)
• In the event of a single management body for the business, the head would be
• Including the size, the conditions, and the terms of the contribution of each member to the business
• A person authorized by the business to act on its behalf
• A business’s terms and conditions for concluding transactions
• Expenses associated with the establishment of a business must be reimbursed
• Constitutive agreement date

Step 3 – The Charter

Business charters serve as the foundation for the business’s operation.

All founders or their authorized representatives must sign the charter of the business being established.

Step 4 – Small Business Bodies

Only for Members’ Meetings:

In this case, the Meeting of Members is also the governing body that makes all decisions related to the activities of the business, and one of the members of the business is chosen by the representative of the business, who, in principle, performs the functions of a manager.

The meeting of members and the head of the governing body:

Small businesses may have a head as one of their members. Services shall be provided with a contract signed by the head.Heads act on behalf of businesses and have the authority to make independent decisions. Meetings of members of a small business resolve their main issues (for example, changing the charter, relocating the office, or electing a leader), and the head performs other duties outlined in the charter.

Step 5 – Notary

Documents must be notarized after they have been prepared.

Step 6 – Register of Legal entities

The Notary transfers the documents of the business to the founder or his or her authorized representative. Documents must be submitted to the Register by this person.

A certificate of registration and a copy of the confirmed charter are issued by the Register of Legal Entities.

About 3 days are needed for registration.

The UAB Handbook on establishing a limited liability company

Regulations governing Registration (UAB) include:

• LRCK (Lithuanian Civil Code);
• It is subject to the Law on Joint-Stock Companies of the Republic of Lithuania (LRABĮ).

Step 1 – Name

The business name must meet the following requirements:

• Novelty
• Authenticity
• Ensures that public order and good morals are not violated.

There must be compliance with Lithuanian language norms in the name of the business.

Step 2 – Preparation of constituent documents (constituent agreement/act)

Constituent agreements must be concluded between two founders. A constituent act would be necessary if there was only one founder.

It shall be specified as follows:

• Initiators
• The company’s name and location
• Reps for the company are those who have the right to do so
• Capitalization

Step 3 – Deposit of the authorized capital/payment of shares

An account of the company can be opened with a bank after signing the constituent agreement / act.

Within 12 months from the date of its certification, the shares must be paid in full based on the constituent agreement/act.

There must be a minimum of 1,000 euros in authorized capital.

Step 4 – Charter

In order to conduct its operations, the company’s charter is the most important document.

Each founder or their authorized representative must sign the charter of the business being established.

In order to be recorded in the Register, the Charter must be submitted within 6 months of the date it was signed by all founders.

Step 5 – Founding Meeting (optional)

A Founding Meeting must be convened before the company can be registered. The Founding meeting of UAB may not be convened if the company’s management bodies selected by the general meeting of shareholders are specified in the constituent agreement/act, taking into account the charter.

Step 6 – Notary

Documents must be notarized after they have been prepared.

Charters and legal documents are verified by the Notary.

Step 7 – Register of Legal Entities

As soon as the company’s documents have been verified, the Notary transfers them to the founder or the person authorized by him or her to represent the company. It is the responsibility of this person to submit documents to the Register.

In addition to registering the business and issuing a certificate of registration, the Register of Legal Entities also issues a copy of the confirmed charter.

From the time documents are submitted, the registration period must not exceed three working days.

The association is defined as a public legal entity with limited civil liability with its own name, whose purpose is to coordinate the activities of the members of the association, to represent the interests of the members, and to satisfy other public interests on behalf of the association. Associations may call themselves «associations», «public organizations», «associations», «confederations», «unions», «societies», «clubs» or others, but they are all subject to the same Associations Act.

According to the law, public institutions are non-profit legal entities with limited civil liability, which are formed with the aim of serving the public interest by providing educational, educational, scientific, cultural, medical, environmental, medical, sports, social or legal assistance, as well as other services useful for society as a whole.

An identification of the area and type of activity should be provided in the objectives of public legal entities. For this reason, it is crucial to pay special attention to the legality of the activities of a legal entity when establishing an association or public institution for operational purposes, including commercial ones: receiving and using support, paying funds, transferring property, etc. Economic and commercial activities are permissible for state institutions and associations, provided they are not prohibited by law and are inextricably linked to their operational goals.