Public liability company (in Lithuanian: “akcinė bendrovė” or abbreviation “AB”)
- minimum share capital must be not less than EUR 40,000.00;
- hares may be offered and traded in publicly;
- shareholder shall have such rights in a company as are incidental to the shares in the company owned by him.
Private limited liability company (in Lithuanian: “uždaroji akcinė bendrovė” or abbreviation “UAB”)
- the most convenient for business;
- minimum share capital: EUR 2,500.00;
- must have the general meeting of shareholders and a single-person management body – the manager of the company;
- no more than 249 shareholders.
Small partnership (in Lithuanian: “mažoji bendrija” or abbreviation “MB”)
- not less than 1 and more than 10 shareholders;
- no law provisions regarding minimum authorized capital;
- only natural person can be a shareholder;
- in the event of leaving the partnership, an opportunity to redeem a contribution of authorized capital.
Individual enterprise (in Lithuanian: “individuali įmonė” or abbreviation “IĮ”)
- only 1 owner;
- unlimited civil liability;
- no regulations regarding minimum share capital;
- permission to use the enterprise asset for owner personal matters.
SETTING UP A BUSINESS BY STEP:
The optimal procedure for setting-up the company usually takes 5-7 working days. The vast majority of companies are being established by using legal services of public notary. However, there is an option to establish the new company online, by using the internet platform of the Register of Legal Entities of the Republic of Lithuania. However, there will appear some drawbacks regarding key legal documents and issues related with the company.
The usual procedure for a company establishment is described below:
- Drafting key legal documents;
- Temporary reservation of the legal name in the Register (note: this action is not required);
- Opening of an accumulative bank account in any commercial bank in Lithuania;
- Transfer of payment to the company’s bank account;
- Receipt of the written consent from the landlord to register the company (note: this action is not required);
- Verification procedure by the public notary;
- Submission of the verified documents to the Register and payment of the Register’s fees;
- Incorporation of the company.
N.B. A business can be set up electronically in just one day if the entity’s establishment documents comply with the standard forms of documents.
- Corporate profit tax: 15 %.
- VAT (standard): 21 %, but for certain goods or services – reduced – 0%, 5% or 9%.
- Dividends (withholding tax): 0/15%
- Real estate tax: 0.3-3%
- Personal income tax: 15 %.
- Social security tax: 9 % paid by employee and 30.98 % paid by employer.
Other favorable tax conditions available to foreign companies – Free Economic Zones:
- No Corporate profit tax during the first 10 years and 50% lower corporate income tax rate (i.e. 7.5%) over the next 6 years;
- No Dividend tax for foreign investors;
- No Real estate tax.
Investment project incentive
Entities involved in an investment project are able to reduce their taxable profits by up to 50% of the actually incurred acquisition costs of long-term assets meeting certain requirements.
Expenses incurred for R&D purposes can be deducted three times in the tax period when they are incurred.
Advanced Pricing Agreements (APAs) and Binding Rulings
Available as from 1 January 2012
Investing in land
Land (except for agricultural and forestry) may be acquired only by legal or private persons who are established or residing in the EU or in OECD, NATO or EEA member countries. Such individuals and companies are allowed to buy up to 500 hectares of farmland (or more if the buyer is a stockbreeder), provided that the buyer has at least 3 years of farming experience or has completed studies leading to agriculture-related profession.
The labor relation in Lithuania are regulated by the Labor Code of the Republic of Lithuania, collective agreements and (or) work regulations. Most popular types of contracts are fixed-term and non-term contracts. As the fixed term employment contract is an often used special contract form in Lithuania, please notice that:
- Duration term shall be 2 years (with several exceptions where the maximum duration is 5 years).
- Notice period for expiration is 5 working days if work relation lasts more than 1 year and 10 working days if work relation lasts more than 3 years.
- Compensation – upon expiration of fixed-term contract exceeding 2 years, employee shall be entitled for compensation in amount of 1 average monthly salary.
More basic provisions:
- Normal working program: 8 hours/day and 40 hours/week.
- Minimum monthly salary EUR 400.00.
- Minimum hourly salary EUR 2.45.
- The average monthly salary EUR 884.40.
- Vacation: 20 working days per year of annual leave (if an employee works 5 days per week).
Publisher: Law firm „Constitus”