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UAB company formation in Lithuania

LITHUANIAN COMPANYLITHUANIAN COMPANY

According to the World Bank Doing Business Report 2019, Lithuania is ranked 14th place in the world for ease of doing business. Opening a company and starting a business in Lithuania become easier and more convenient every year.

BENEFITS OF LITHUANIA FOR BUSINESS

  • Services are provided in: Russian, English, Lithuanian, Polish;
  • Remote company formation procedure. To do this, you just need to issue a notarized power of attorney;
  • The director and shareholder of a Lithuanian company can be a foreigner;
  • Reduced tax rate for small businesses, and in general, taxation in Lithuania is quite democratic comparing to other EU countries;
  • Free economic zones;
  • Lithuania has concluded double taxation treaties with 55 countries.

LITHUANIAN COMPANIES

You can open a company in Lithuania in the following organizational and legal forms:

  • closed joint stock company (Uždaroji Akcine Bendrove or UAB) - an analogue of a limited liability company (LLC) in Lithuania;
  • small society (Mazoji Bendrija or MB);
  • individual enterprise (Individuali Imone or II).

We will consider the details of registration and further support of a closed joint stock company, since UAB is the most popular organizational and legal form.

COMPANY FOUNDER IN LITHUANIA

Both an individual and a legal entity can open a company in Lithuania. There are no restrictions on residency - a company can be opened by a non-resident of Lithuania. The minimum number of founders is one.

DIRECTOR OF A LITHUANIAN COMPANY

Only a person can be a director of a Lithuanian company. There are no residency restrictions. An employment contract is concluded between the company and the director.

If the foreign director is not on the territory of Lithuania (perhaps a periodic visit), then no other documents, except for the employment contract, need to be drawn up.

If he plans to live in Lithuania, then he must apply for a type D work visa or obtain a residence permit in Lithuania. In this matter, we will help you.

AUTHORIZED CAPITAL OF THE COMPANY IN LITHUANIA

The minimum authorized capital is EUR 2,500. It must be paid during the registration process. The monetary contribution must be at least 2,500, the rest of the amount can be paid with property, the value of which is assessed by a certified specialist according to special rules. The monetary contribution can be transferred from the foreign bank account of the founder.

REGISTRATION OF UAB IN LITHUANIAREGISTRATION OF UAB IN LITHUANIA

UAB registration in Lithuania takes place in several stages:

  • Preparation of registration forms indicating the name of the company in Lithuanian and other necessary information about the founders and director of the company;
  • Preparation of an agreement or act on the establishment of a company, as well as a company charter;
  • Opening a savings account in a bank or an account in a payment system for depositing the authorized capital by the founders;
  • Provision of constituent documents and registration forms to a notary for certification and verification;
  • Submission of documents to the Registration Center;
  • Personal visit by the director of the company to the bank (if the account was opened in it) after the registration of the company - to re-register the savings account with the paid authorized capital into the current account.

To certify documents by a notary, you must personally visit Lithuania. However, in case of unwillingness or impossibility of personal presence, all the necessary documents in the presence of a notary can be signed by an attorney on the basis of a notarized power of attorney.

WHAT IS NECESSARY TO REGISTER A COMPANY IN LITHUANIA

  • Scanned copy of the passport for traveling abroad and the address of registration / residence of the founder;
  • Contact phone number of the future company;
  • The e-mail address of the future company;
  • Scanned copy of the passport for traveling abroad and the address of registration / residence of the director of the company (if he is not the founder);
  • Information about the future company (name, description of activities, composition of founders and directors, some personal information about them).

METHODS FOR REGISTRATION OF A COMPANY IN LITHUANIA

Company registration in Lithuania on the basis of a notarized power of attorney:

  • registration period is 5-7 days from the date of receipt of all necessary documents and information;
  • the authorized capital is contributed by the founder to the account independently, that is, the funds must come directly from the account of the founder of the company;
  • we accompany the preparation of all statutory documents, their notarization, opening an account in a bank / payment system, provide a legal address for the 1st year, submit all the necessary documents to the register of enterprises and pay all fees and duties (except for bank / payment system tariffs), and we also prepare a draft labor contract for the director of a Lithuanian company.

Buying a ready-made company in Lithuania:

  • possible on the basis of a notarized power of attorney;
  • registration period is 1-3 days from the date of receipt of all necessary documents and information;
  • the ownership of the company passes to you on the basis of a notarized purchase and sale agreement (it indicates that the company did not carry out any activity prior to the sale);
  • the company already has a definite name. It can be changed;
  • As a result, you will receive a ready-made company with the contributed authorized capital (the amount of the authorized capital itself is paid separately in the amount of 2,500 Euro), a savings bank account, a legal address for 1 year. The bank account must be re-registered with the director's personal visit.

Registration of a new company in Lithuania and its subsequent sale:

  • possible on the basis of a notarized power of attorney;
  • takes 6-8 days from the date of receipt of information and documents, but the company itself will already be registered in 5 days;
  • you choose the name yourself;
  • we accompany the preparation of corporate documents, their notarization, pay all fees and charges (except for bank / payment system tariffs), accompany the opening of an account with a bank / payment system, depositing the authorized capital (the amount of the authorized capital itself is paid separately in the amount of 2,500 euros); and provide a legal address for the 1st year.

During company formation in Lithuania or buying it (depending on the chosen option), in order to deposit the authorized capital, an accumulation account must be opened either in a bank or in a payment system. If a bank was chosen to open an account, then after registering the company, the director must personally transfer the savings account to the current account (activate). Bank account activation by power of attorney is not practiced in Lithuania. At the same time, the director needs to prove the company's connection with Lithuania (the presence of an office in Lithuania, hired employees, Lithuanian counterparties / suppliers, and so on). If it is not possible to prove the economic connection of the company with Lithuania, then the amount of the authorized capital can be transferred to another account, for example, to an account in a payment system or an account in a bank of another jurisdiction. This will also require the personal presence of the director.

ACCOUNT OPENING FOR A LITHUANIAN COMPANYACCOUNT OPENING FOR A LITHUANIAN COMPANY

Account in Lithuania

In Lithuania, there are both small local banks (Šiaulių Bankas, Medicinos bankas) and large Scandinavian banking groups with Russian-speaking or English-speaking staff - SEB banka, Swedbank, Luminor Bank. It is possible to open a multicurrency account. The state guarantee for one deposit in case of bank insolvency is 100,000 Euros in one bank.

Starting from 2020, it is quite difficult to open an account in Lithuania, as the compliance procedures of banks (especially banking groups) and requirements for new clients have become more strickt. To open an account in a Lithuanian bank, a company must have an economic connection with Lithuania (presence of Lithuanian counterparties, an office in Lithuania, employees, and so on). We can arrange office rent and hiring employees, but we will not be able to organize the presence of Lithuanian counterparties, if there are none in reality. If there is no such connection, then the chance of successfully opening an account in a bank in Lithuania is small.

In any case, for a Lithuanian company, you can always open an account in a bank of another European jurisdiction or in a payment system.

On average, the term for a bank to review documents varies from two weeks to several months, depending on which bank is reviewing the documents and company's business activity. At the time of submission of documents, most banks ask to pay a small preliminary non-refundable payment (verification fee), which, as a rule, is up to 500 Euros and is not returned by the bank in case of refusal to open an account.

The director of the company must personally be present at the bank at the time of opening a bank account or when it is activated, if it is a savings account for depositing authorized capital.

Bank account outside Lithuania

We will help you with bank account opening in Switzerland, namely with CIM Banque. At the same time, you do not need to prove to the bank that you have an economic presence (substance) in Lithuania or go to Switzerland. The opening procedure is carried out remotely.

Also, one of the Polish banks, for example, PKO, may be a good option. In this case, a personal visit to Krakow is required.

Payment system account

If necessary, we can accompany an account opening for a Lithuanian company in one or several payment systems in Lithuania:

  • Paysera;
  • Vialet;
  • Montify.

It is also possible to open accounts in payment systems from other jurisdictions.

We will determine the optimal payment system for you after a detailed study of your case.

An account in the payment system is opened remotely, and payment systems, as a rule, have no requirements for the organization of substance.

An important moment: not all the payment systems provide a direct IBAN in the required currency, namely some of them act as the sender / recipient of funds themselves, and the account holder's data is indicated only in the payment details.

We recommend too open 2-3 accounts at once in different banks / payment systems. It will allow the business to diversify its risks in case of a sudden closure or freeze of accounts.

ACCOUNTING IN LITHUANIAACCOUNTING IN LITHUANIA

Should the company  submit the reports?

All Lithuanian companies must maintain and submit the reports. According to the legislation, the director of the company is responsible for thepreparation and submission of reports on time.

Large and medium-sized enterprises undergo a statutory audit and submit full financial statements. A company should follow these requirements if at least two of the three conditions below are met:

  • net profit from sales for the reporting period reached 3.5 million euros;
  • the value of assets on the balance sheet of the company for the reporting period reached 1.8 million euros;
  • the average number of employees during the reporting period is 50 people.

Companies that do not meet the above conditions are considered small and submit simplified financial statements. They are also not required to conduct an annual audit.

Terms of preparation and submission of reports in Lithuania

The reporting period of the Lithuanian company coincides with the calendar year (from January 1 to December 31). Within 4 months from the end of the reporting period, the company must prepare an annual financial report. Further, the annual financial report must be approved at the annual meeting of shareholders.

The annual financial report must be submitted to the Register of Legal Entities of the Republic of Lithuania (Registrų centras) within 30 days after the decision on approval by the General Meeting of Shareholders has been made.

We provide accounting services for Lithuanian companies.

The cost of such accounting support will depend on the number and nature of the company's transactions (the number of transactions per month, the number of employees, the status of a VAT payer).

TAXES IN LITHUANIATAXES IN LITHUANIA

Income tax

The standard income tax rate in Lithuania is 15%.

The income tax rate for small businesses in Lithuania is 5%.

In order to apply it, the company must meet the following conditions:

  • the number of personnel does not exceed 10 employees;
  • the annual turnover is less than 300,000 Euro;
  • the shareholder owns only this enterprise.

If these conditions are met in the first year of the company's activity, then the rate is 0%.

VAT

The standard VAT rate in Lithuania is 21%.

For certain types of activities, preferential rates are provided in the amount of 9% and 5%.

The threshold for registration as a VAT payer in Lithuania is 45,000 Euros received from goods sold and / or services provided in the course of ordinary business activity during the last 12 months.

Income tax

Income tax (PIT) in Lithuania is levied at a rate of 15%.

Dividends

Dividends in Lithuania are taxed at a rate of 15%.

Dividends received by a Lithuanian company from a company registered in another EU country are not taxed.

If a Lithuanian company owns at least 10% of the shares of a subsidiary for at least 12 months, then dividends received from such a subsidiary are not taxed.

Capital gain

The standard rate is 15%.

If the parent company (owner of at least a quarter of the shares) sells the shares of the subsidiary company that it owned for at least two years, then the rate is 0%.

Royalty

The standard rate is 10%.

For European companies that meet the requirements of the EU Interest and Copyright Directive - 0%.

Interest rate

The standard rate is 10%.

Land tax

The land tax rate in Lithuania is set by the local government in the range of 0.01% - 4% of the market value of the land.

Property tax

The tax rate on real estate in Lithuania is set by the local authority in the range of 0.3% - 3% of the market value of real estate.

Social security contributions

The employer pays 30.98% of the accrued salary, and also contributes 0.2% to the Guarantee Fund. The employee pays 9%.

FREE ECONOMIC ZONES OF LITHUANIAFREE ECONOMIC ZONES OF LITHUANIA

SEZ Kaunas and Klaipeda

There are two free economic zones on the territory of Lithuania - Kaunas FEZ (534 ha) and Klaipeda FEZ (412 ha).

Both FEZs were founded in 1996 for a period of 49 years.

FEZs were created for the development of certain types of activities, such as: water and gas supply, wholesale trade, logistics services, construction, car repair services and so on.

To be eligible to work in the FEZ, the company must invest a minimum of 300,000 Euro (that is, the market capitalization of the company must be less than this amount).

To get tax credits:

  • a minimum of EUR 1,000,000 must be invested in the company's capital;
  • income from activities provided for by the FEZ must be at least 75% of the total income;
  • an independent auditor must give an opinion that the company has met the minimum capital requirements.

Reasons to work in the SEZ of Lithuania:

  • income tax rate for the first 6 years - 0%;
  • after the rate is - 7.5%, which is half the standard rate of income tax in Lithuania;
  • dividends and property are not taxed.

A company that operates in a FEZ can become a shareholder of a company outside the FEZ, but it does not have the right to create branches and representative offices outside the FEZ.

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