Company registration in Lithuania

Lithuania is one of the Baltic countries that open diverse opportunities for starting and doing business both locally and worldwide. The state is a member of the EU and OECD. It has implemented all relevant European standards for doing business. Still, many businessmen find handling business in this jurisdiction more comfortable than in other European states for many reasons attributed to Lithuania.

Advantages of the Jurisdiction

Company formation in Lithuania is associated with the subsequent benefits any foreign entrepreneur may potentially enjoy:

• stable political and economic environment
• beneficial geographical position
• equal opportunities for local residents and foreign businessmen
• ease of founding legal persons with an opportunity for arranging all registration actions remotely
• clear and transparent legal regulation
• sufficient security and confidentiality
• one of the lowest tax rates in the EU and favorable taxation in general
• availability of incentives in certain sectors of the economy

There are also lots of other specific benefits attributed to each concrete area of business arrangement. Prifinance lawyers will be glad to consult you in detail on this matter taking into account the specific of doing your concrete business.

Principal Forms of Legal and Business Presence

If you want to buy a company in Lithuania, create a new one, or formalize entrepreneurial presence in any other manner, these variations are available for this purpose:

• Private Limited Company – an enterprise that is considered to be one of the most convenient and popular among local and foreign businessmen due to the flexibility of its establishing and operation. This legal entity should have at least one founder (shareholder) and the maximum number of participants is limited to 250. The minimum value of statutory capital of this type of legal person shall be at least EUR 2,500. No members are liable in excess of the amounts of funds contributed to the enterprise. The requirements for reporting are simple and easy to fulfill in this case.
• Public Limited Company – a legal entity suitable for medium and large enterprises who intend to carry out external financing. At least one shareholder is required to establish this legal person. The minimum amount of statutory capital for this entity is EUR 40,000. The financial obligation of each shareowner does not exceed the amount of shares in possession of such a shareholder. A more complex management structure is required in this case – a board of directors. Also, stricter requirements are applied to accounting and reporting.
• General Partnership – a variation of a joint operation in the area of entrepreneurship where all partners (2-20) bear the unrestricted liability for the outcomes of joint transactions. This business arrangement is based on the agreement where partners describe their rights and duties with regard to joint doing business. It should be noted that in the case of potential failures even the personal property of partners may be called.
• Limited Partnership – a variation of joint entrepreneurship that can be carried out by (i) two general partners who are entirely obliged for all partnership's debts, and (ii) at least one partner who is not responsible for the obligations of the partnership in excess of the value contributed. The total number of members shall not be higher than 20. Partnership-related duties and rights are governed by the respective agreement.
• Branch – an opportunity for a foreign enterprise to carry out the same types of business-related activities as in the country of its origin. This option is suitable for those foreign entrepreneurs who intend to test local business opportunities before making more valuable investments in the country. The liability for the outcomes of the operation of a branch always bears a foreign parent company.
• Representative office – an option for handling market investigation and promotional activities by a foreign legal person without an opportunity to carry out any type of operations in Lithuania. The formalization of a representative office is required in the state prior to the commencement of its activities. Paying respective fees is obligatory also.

Registration Requirements and Steps

If a businessman wants to open a company in Lithuania, the following approximate stages of entity formation should be passed:

1. Defining business opportunities and types of economic activities subject to conduct via a local enterprise. Drawing up a business plan.
2. Gathering details about founders, beneficiaries, and future managers. Among all other details, it is necessary to collect passport and residence details for individuals and incorporation details for legal entities.
3. Formulating a commercial name for an enterprise, checking, and reserving it.
4. Searching for and arranging an official address of registration for a legal entity.
5. Drafting and formalizing registration and chartered documents.
6. Forming chartered capital for the future entity and paying all related incorporation fees.
7. Submitting the completed set of required documents to the registrar.
8. Getting the confirmation of incorporation when the application is approved.
9. Submitting the application for tax and employment-related registration.
10. Searching for a bank and arranging opening a corporate account there.
11. Submitting applications and assigning licenses for carrying out some economic transactions, like banking or financial.

Each registration procedure varies due to the concrete aspects of a business case. Prifinance lawyers will be glad to discuss with you in detail an approximate procedure that should be completed in your case, develop and realize the incorporation plan, formalize all required documents, and negotiate with authorized state bodies.

Legal and Regulatory Aspects

Lithuania has ensured a flexible and favorable legal environment for doing business and provides equal opportunities for entrepreneurship both to local residents and foreign businessmen. The legislation is made according to the most common European business standards. A foreign businessman doesn't need any local partner to start doing business in Lithuania – a local legal entity may be 100% owned by a foreigner.

Principal state authorities foreign entrepreneurs will be likely to deal with are the State Enterprise Centre of Registers and the Bank of Lithuania. The most important legal that shall be applied to legal entities in Lithuania are the Law on Companies, the Law on Partnership, and the Law on Financial Institutions.

Tax System of Lithuania

If you want to found a company in Lithuania, this incorporation decision should be assessed along with the subsequent tax aspects:

• Corporate income tax (CIT) rate – 15%
• Personal income tax (PIT) rate – 32%
• Value-added tax rate – 21%
• Withholding tax rates (applicable to foreigners) – (i) dividends – (a) standard – 15% (b) 0% – if a parent company holds at least 10% of shares during 12 consecutive months at minimum (ii) interest – (a) standard – 10% (b) 0% – if a recipient is from the EEA or from a country that has a tax treaty with Lithuania (b) 0% – on the interest for the government securities issued for international financial markets, accrued, and paid on deposits as well as on subordinated loans that comply with the criteria stipulated by the Bank of Lithuania (iii) royalties – 10%
• Capital gains tax rates – (i) corporate – the same as the ordinary CIT rate (ii) personal – 20%

If you want to obtain a more detailed assessment about paying taxes in Lithuania, contact Prifinance lawyers to arrange an approximate calculation of the taxes due and obtain other tax-related consultations you may be interested in.

How Prifinance Specialists May Help You

Prifinace lawyers provide comprehensive support from the point of taking a decision to register a company in Lithuanian and further during its next operation, namely:

• develop a plan of registration
• collect all required information
• prepare applications and documents for incorporation
• negotiate incorporation-related details with local advisors and state authorities
• complete the process of formation
• open corporate bank accounts
• support the company’s operation further during the interaction with business partners, customers, and state authorities

We offer prompt company registration and bank account opening services in Lithuania and worldwide. New registration and ready-made options. Provide extensive details for more precise consultations and suggestions that can be effective for your future project.