Lithuania is located on the Baltic Sea. It is one of the Baltic states and a European Union member. In recent years, Lithuania has made great strides in attracting foreign investment and providing a business-friendly environment. Setting up a company in Lithuania offers access to the large EU market, talent pool, and numerous tax advantages. It will give an overview of company registration in Lithuania.
Why Register a Company in Lithuania?
Lithuania offers an attractive EU destination for entrepreneurs to establish a business. The online registration takes just 3-4 business days. Access to the EU market enables easy exporting across the region. Low 5% corporate tax rates give small companies a competitive advantage. No currency controls allow free capital flow. Residence permits are available for non-EU shareholders.
The straightforward registration, tax incentives, and residency rights make Lithuania beneficial compared to other EU countries. Minimal bureaucracy, lower labor costs, and connectivity provide convenience and advantages. Fast registration, low rates of profit taxes, and residency benefits make Lithuania an appealing location to base an EU business.
Types of Companies in Lithuania
There are several options when choosing a business structure in Lithuania:
Private Limited Company (UAB)
- The UAB is the most common legal form used by over 90% of companies in Lithuania.
- Owners’ liability is capped at their capital investment. The debts and liabilities of a firm do not affect personal assets.
- The minimum share capital is only 1,000 EUR, making establishing an easy and inexpensive management structure flexible – shareholders can be directors or appoint a board.
- It is appropriate for startups, small and medium-sized businesses, and subsidiary firms.
- Audit required only if turnover exceeds €700k or assets over €350k.
Public Limited Company (AB)
- A Public Limited Company (AB) is better suited for large firms and can issue public stock.
- The number of stockholders is unrestricted. Stock can be traded on markets.
- €25,000 is the minimum share capital. The down payment must be at least 25%.
- A minimum of three people must be on your board of directors.
- Oversight by a supervisory council is mandatory for large ABs.
- Annual financial auditing is required—more stringent reporting standards.
General Partnership (KUB)
- A General Partnership agreement allows two to an unlimited number of participants to start a firm.
- Partners jointly own and control the company, with responsibilities divided by contract.
- For all duties and debts, partners are personally liable indefinitely.
- There are no minimum capital requirements. Capital contributions are decided by the partners.
- Profits & losses can be divided based on ownership percentage.
- Appropriate for small companies with a few members.
Branch Office
- A foreign company can open a branch office to operate in Lithuania.
- Because there is no independent legal organization, the parent firm bears full liability.
- The parent company handles branch registration and appointment of local management.
- Subject to all taxes, laws, and reporting requirements for its operations in Lithuania.
- Allows foreign businesses to establish local operations and presence.
How to Register a Company in Lithuania?
Registering a company in Lithuania involves several straightforward steps:
Documents Required
- Passport copy
- Proof of address
- Constituent documents like articles of association
- Company statutes and shareholder agreement
- Bank certificate showing deposit of share capital
Registration Fee
- The cost for registering a new company ranges from €100-150 paid to the Lithuanian Centre of Registers.
- Notary Fee: Approximately 120 EUR
- Registration in the Register of Legal Entities: 51.61 EUR
Tax Structure
- Corporate tax of 5% or 15%
- VAT at 21% (reduced rates available)
- Dividend tax of 15%
- Personal income tax at 15%
- Tax incentives like 0% tax for up to 6 years in special economic zones
Lithuania offers favorable tax rates for businesses compared to elsewhere in Europe Corporate income tax rates in Lithuania are competitive at 15%, lower than many other EU countries. There are also tax exemptions and incentives offered for small and new companies. The overall tax environment is relatively business-friendly.
Steps to Establish a Business in Lithuania
- Select a unique business name: Choose a name that follows Lithuanian naming rules. Get approval from the Lithuanian Language’s State Commission.
- Open a bank account: Open a particular temporary bank account to deposit the minimum capital required. The bank will give you a certificate showing proof of capital deposit.
- Choose a registered office address: It will be the official address where documents can be sent. It must be an actual office in Lithuania.
- Prepare legal documents: Draft company documents like articles of association in Lithuanian or with a certified translation. Documents must be notarized.
- Pay capital: Deposit at least 25% of the required minimum capital into the bank account. You will have 12 months after registering to pay the remainder.
- Registration of the company in the register of Legal Entities: Apply to the Lithuanian Centre of Registers to register the company. Once approved, the company will be added to the business register.
- Register for Taxes: Sign up with the tax authority and social security agency within 5 days of company registration.
- Convert bank account: Change the temporary capital deposit account into an operating business account. The company’s director must be present physically for this or legal advisors can solve this matter based on Power of Attorney. Advantages of Registering a Company in Lithuania
The following are the main advantages of starting a company in Lithuania:
- Fast and easy company registration in just 3-4 days entirely online. Low cost of €100-150.
- Direct access to the EU common market of 500 million consumers without trade barriers.
- Highly skilled workforce with technical abilities and multilingual skills.
- Low 5% corporate tax rate on profits up to €300k. Incentives like 0% tax for 6 years in particular zones.
- 11th in the world for business regulatory clarity.
- Temporary residence permits are available for investors and business owners.
- Euro currency provides exchange rate stability and eases financial transactions.
- A robust infrastructure that supports foreign direct investment.
- Lithuania boasts over 200 Fintech’s, including payment service providers, assisting businesses with operational bank account openings, payment cards, and more.
- Lithuania offers cost-effective labor and professionals, making it more economical compared to Western EU countries.
Conclusion
In the EU, Lithuania offers the best location to establish and run a successful business. Lithuania has streamlined the online registration process and offers incentives like low tax rates and free movement within the EU. For these reasons, opening a company in Lithuania is advantageous for gaining access to European markets and obtaining residency rights. Lithuania offers an outstanding platform for international businesses with its skilled workforce and favorable regulations.