Registration of a company in Lithuania

Registration of a company in Lithuania

If you want to open new opportunities for your business, you need to expand its boundaries and potential customer base. Where else can this be done if not in countries with developed infrastructure, high living standards and transparent taxation?

Of course, the European Union provides the best conditions for business today, but registering a company in Spain or Germany may be connected with certain difficulties and restrictions. We invite you to consider an affordable option with establishing a company in Lithuania – this solution will also provide an opportunity to enter the European market, spending a minimum of money and time.

Benefits of registering a company in Lithuania

Among the Baltic countries, Lithuania is considered to be one of the most profitable options for establishing foreign business. There is a fairly stable economic situation, fair laws, minimal taxation and a developed economy. You can take advantage of one of the many offers for registering a company in the capital of the country, Vilnius, as well as in Kaunas and other localities.

Why should entrepreneurs consider Lithuania as a new region for their business? The point is that today the country is quite open for investment. It takes the 2nd place in the unofficial European ranking, and the 11th place in the world. Among the countries with a free economy, Lithuania takes a fairly high thirteenth place.

When registering a company in the Republic of Lithuania, its founder gets the opportunity to open subsidiaries and branches throughout Europe. Thus, Lithuania becomes kind of a “base” and “headquarters” of your business, from where you can effectively manage trade and financial transactions.

You should not forget that establishing business in Lithuania can be the first step towards your naturalization in the European Union. This will allow you to obtain a temporary residence permit, which gives you an opportunity to travel to the countries that are part of the Schengen area without restrictions and visas .

Entrepreneurs are primarily interested in the Lithuanian tax system, which is distinguished by loyalty and minimum rates. If your annual income is up to €300,000, and the company has up to ten employees, you shall pay about 5% of the profit.

The value added tax is 21%. At the same time, the business owner has the opportunity to reduce interest rates in legal ways. There is a statutory prohibition against double taxation, so you will pay taxes once only.

Calculations can be made both in the official European currency, €, and in any other currency convenient for your business. This is quite convenient due to the fact that Lithuanian legislation is quite loyal to the control of the movement of foreign currency.

As for accounting and company documentation, they must be kept in the official language and English. At the same time we note the fact that a lot of Lithuanian citizens are fluent in Russian, so local entrepreneurs can easily avoid problems with the language barrier.

Why you should register a company in Lithuania

Summing up the above, we note the benefits that you receive when establishing a company in the Republic of Lithuania:

1. Market economy with a constant upward trend;
2. Opportunity to enter the European Union market;
3. Expanding the target audience and increasing the number of reliable partners;
4. Possibility to open subsidiaries and branches in the European countries that are members of the EU and the EEA;
5. The minimum tax rate (only 5 percent of income tax on company profits up to €300,000);
6. Adopted agreements on double taxation with dozens of countries;
7. State refund of value added tax if you trade in the European Union market;
8. Free circulation of any convertible currencies, including euro, dollar, franc, pound and so on;
9. Possibility to obtain a temporary residence permit;
10. Travel throughout Europe without visas;
11. Trade relations in the EU without problems with the customs;
12. Opportunity to obtain a business loan with minimal interest rates;
13. Purchase of vehicles and real estate objects;
14. Minimum expenses for maintaining the company’s activities (rent, salaries, utilities);
15. The absence of a language barrier when communicating with local citizens, many of whom are fluent in Russian.

After registration of a new enterprise in the Republic of Lithuania, you will receive an official legal address. All details of the company will be entered in the state register, the business will receive an official bank account with an authorized capital. A unique seal of the new representative office will also be issued.

Forms of registration of companies in Lithuania

Before you establish a company in the country, you should carefully study the available organizational legal forms of enterprises. Most often entrepreneurs choose such options for their business as:

• Closed Company of Shareholders (similar to our CJSC);
• Small Company (SC);
• Individual Enterprise (similar to PE).

According to statistics, closed companies of shareholders are the most popular. Today over 90% of the companies existing in the country have the registration of a closed company of shareholders. In the state classification, companies of this type are called Uzdaroji Akcine Bendrove or UAB.

Both a private entrepreneur and a legal entity with no more than 250 shareholders have the right to establish a company in the Uzdaroji Akcine Bendrove format. Citizenship does not matter – you can become a business owner with both an EU passport and a Russian or Ukrainian passport, for example.

Such a company shall be managed by a special general meeting of shareholders, who may be members of the supervisory board. An executive director, who may be of any nationality, shall be appointed. If you do not want to personally manage the activities of the company, you can create a collegium – a body that will be entrusted with your duties.

In accordance with the laws of Lithuania, the minimum authorized capital of such companies must be at least €2,9 thousand. At the same time, it is not required to deposit the entire amount to a bank account at once: before you register business, only 25% must be paid, and the remaining amount must be deposited in convenient installments over the next 12 months.

Funds can be transferred to an open bank account both by non-cash input and in cash. You can use any foreign accounts as donors, as well as deposit the required amount in cash in any currency convenient for you.

The main advantage of an enterprise in the Uzdaroji Akcine Bendrove format is the limited liability of founders, directors and owners. They risk only their personal contribution to the authorized capital of the company, which, by the way, will grow every year. Personal funds and property always remain in the ownership of the shareholders.

Please note that your company may be audited by independent audit structures. This happens in cases where the company’s staff includes more than fifty employees, assets amount to more than €720 thousand, and accounts activity in the amount of €1400 thousand is fixed.

Other forms of organizational legal ownership of Lithuanian companies include:

• Open Joint-Stock Company.

An enterprise of this type shall have the right to issue and trade shares publicly on stock exchanges. The number of shareholders shall not be limited. The company shall be managed by the Board of Directors, which includes at least three employees. The activities shall be controlled and managed by the Director General. A minimum amount of €45,5 thousand has been accepted for the authorized capital, and only a quarter of which must be paid for registration. Shares can be sold and bought by anyone without control and restrictions.

• Full Economic Partnership.

An enterprise of this type shall be registered on the basis of a contract signed by partners. The number of founding partners must not exceed twenty persons who shall be liable for any debts of the company.

• Commandite Company.

It is similar to a full economic partnership with the only difference that each partner shall have his or her own liability in the form of a certain amount or an unlimited type.

• Small Company.

It is a quite rare form of a company that has just appeared in Lithuania. The amount of the contribution to the authorized capital shall be determined by the participants of the small company themselves, and the number of them shall not exceed ten people. The founders bear responsibility solely within the limits of the amounts paid – personal property and funds shall be under protection.

• Individual Enterprise.

The company shall be managed by one founder. The authorized capital shall not be required. The owner shall be personally responsible for the results of activity of the enterprise.

Required documents for registration of a Lithuanian company

In order for your business to comply with the Lithuanian law, the company must be registered with the tax authorities, it must obtain a state register number and open an account with a financial institution for authorized capital and any financial transactions.

You can register an enterprise yourself or entrust this function to a trusted person. In the first case, you will need to provide:

• Certified copies of passport pages;
• Certificate of registration and residence;
• Unique name of a company;
• Scope of activity of a newly established company.

If you do not plan to attend the registration in person, then you must also submit a power of attorney for a certain person who has the right to register the company without you in addition to the above documents.

Do not forget to take a certificate confirming the completion of the monetary transaction from the financial institution after depositing the minimum amount to the bank account.

Please note that some areas of activity in the countries of the European Union require mandatory licensing. You will need a license if the future company in Lithuania will work in such areas as:

HoReCa (hotels, restaurants, casinos);

Tourism and travel;

Investments (including real estate);

Sale of alcoholic beverages;

Antique activity;

Industrial, residential or commercial construction;

Medicine and pharmaceuticals.

The specialists of our company are always ready to help if you find it difficult to choose the organizational legal form of a new Lithuanian company. We will answer your questions and advise you if necessary, saving your time and nerves.

Main stages of registration of a company in Lithuania

Regardless of whether you are a citizen of the country or do not yet have a resident status, you have the right to register a new company. The main steps will be as follows:

• Choosing a unique name.

The uniqueness of a name is one of the main requirements for new companies. It is quite simple for an individual entrepreneur, since you can even use your last name as a name of a company. Legal entities must be named in the Latin alphabet, taking into account the rules of the Lithuanian language. Compliance of the name with the requirements shall be checked by a special body that issues its consent to the chosen name.

• Opening a bank account.

The second step is choosing a bank and opening an account where you must deposit the authorized capital in full or under a simplified procedure. It is necessary to obtain a certificate of the transaction from the bank, which will subsequently be required for a package of documents for registration of a company.

• Selection of a legal address.

You must have a business office where employees will work and where all documents shall be kept. This will be the legal address of the company where correspondence will be sent. In some cases, the legal address may be the home address of one of the founders of the company.

• Collection of documents.

The documentation required for registration shall be mandatory translated and legalized in the Lithuanian language with an apostille. For companies whose founder is a non-resident of the country, all documents must be translated into Lithuanian. The articles of association, agreement between the founders, minutes of the general meeting of shareholders shall necessarily be prepared at this stage. All documents shall be notarized.

• Transfer of funds to the account of the authorized capital.

The minimum amount of the first deposit to a bank account is 25 percent. The remaining amount shall be paid off in parts during the first year of the company’s operation in the country. Contribution can be made by non-cash input and in cash, as well as an existing car or real estate object can be used as pledge assets. The value of movable and immovable property must be determined by an independent appraiser.

• Entering the company into the register of legal entities.

Next, an application of the prescribed form for registration of an enterprise shall be drawn up. All your previous actions shall be checked by the relevant services, after that, if the decision is favorable, the company shall be entered into the state register.

• Registration by social insurance authorities and in tax structures.

Further, it will be necessary to register the enterprise with social insurance funds and tax structures. As soon as the companies are entered into the state register, you will have five business days to settle relations with insurers and tax authorities.

• Operations with a bank account.

Initially, you open an accumulative bank account to deposit the authorized capital. Further, it must be re-registered at the bank as an operative account. This will require the personal presence of the founder or owner.

To simplify the crossing of the Lithuanian border and business activities, the best option is to apply for a business visa. Such a document shall be issued by the consulate or embassy of Lithuania.

Purchase of a ready-made Lithuanian company

The quickest and easiest way to establish your own Lithuanian business is to purchase an existing company that has registration and all the necessary documents. This allows you to avoid bureaucratic costs and start conducting business in Europe almost immediately.

You have the opportunity to choose a company with a name consonant with your form of activity or promoted products. This simplifies the promotion of the brand, goods and services in Europe, as your products are already familiar to a certain target audience.

After purchasing a company, you will need to re-register it and update the data in the state register. This takes some time, but the new owner has the right to carry out his activities without waiting for confirmation from the register. You can start your  business within 2-3 days after its purchase.

The benefits for new owners of existing companies are obvious: you save your time and money. You do not have to collect documents, register the company and draw up the balance. The bank account already has €2.5 thousand, which can become a part of your authorized capital.

In addition to all the necessary documents, you will receive a legal address valid for 12 months, as well as a corporate seal of the company. There is also a ready-made operative account. All questions will be promptly resolved by the specialists of our company, who will advise and help you make the right choice.

Taxes in Lithuania

For owners of foreign companies with Lithuanian registration, special taxation rules are provided. They pay taxes on all profits of a company. This refers to income in Lithuania itself and abroad.

However, the Republic of Lithuania has a number of agreements concluded with dozens of countries regarding double taxation. Thus, you get the opportunity to seriously minimize tax payments and basic expenses.

We note that the Lithuanian taxation system is flexible, and its interest rates are minimal compared to those in other countries of the EU. What is included in taxes:

1. Income tax.

The maximum rate is 15 percent and drops to five if the annual profit does not exceed €300,000 and the staff is less than ten people. Some companies do not have to pay this type of tax at all.

1. Value Added Tax.

The maximum rate is 21 percent, which drops to 9 percent for passenger transportation and print media, to five percent – for companies selling products for disabled people, and zero percent – for companies trading with EU countries.

1. Profits tax.

It can be from five to fifteen percent, depending on the profitability of business.

1. Tax on dividends

The rate is 15%, which can also be revised under certain conditions.

You should pay attention to the fact that a company shall make mandatory social insurance payments in the amount of 31.18%. Each full-time employee shall pay 9% of their income.

In the Republic of Lithuania there are economic zones with comfortable conditions for business. If you establish your company here, some taxes will be minimal or even completely eliminated during the first few years.

Your personal presence is not necessary to register business in the country, all issues can be resolved remotely. To do this, you need to issue a power of attorney for the person who will be involved in registering your business and collecting documentation.

Accounting in Lithuania

Accounting is a mandatory condition for any type of enterprise in the Republic of Lithuania. Reporting must be correct and regular with an annual balance sheet. Every month it is necessary to report on salaries (accruals and payments).

You can hire a local accountant who is familiar with all the features of Lithuanian reporting, as well as outsourcing companies to maintain accounting. It all depends on your needs, the availability of the required number of people in the state and other factors.

Residence permit in Lithuania

If a non-resident of the country wants to establish and register his or her company to enter the European market, this gives him or her a number of new opportunities not only for business. The main advantage is the opportunity to obtain a temporary residence permit in the Republic of Lithuania.

To do this, the non-resident must meet certain requirements. Among them are:

• A non-resident owns shares or manages business;
• A non-resident is the owner of 33% of the authorized capital;
• Business has been successfully operating and paying taxes in the country for at least six months.

In addition, it is important that a certain number of local Lithuanian citizens would be the part of your company’s staff.