In previous TransferGo Blog posts we’ve written about Lithuania’s unique independence day celebration and the country’s holiday traditions, as well as customer stories from some of our Lithuanian customers. However in this instalment we look at some of the advantages of expanding to or starting a business in Lithuania for the first time.
Lithuania is conveniently located in the centre of Europe and has a vast number of attributes that make it a preferred business location. Chief among these is a young, highly educated workforce, particularly in the areas of maths, technology and the sciences. Lithuania also boasts excellent business infrastructure, low labour costs, low office rental rates, and a one of the largest multilingual populations in Europe.
Types of Businesses in Lithuania
The Lithuanian government is very pro-business and is fairly open to helping non-residents start a business. The population also embraces non-resident businesses as well with a large percentage of young workers stating their goal is to work for a multi-national concern.
The government has reduced the amount of paperwork to start a small business and as a result the average time to legally establish a business is three business days. All of Lithuania’s business laws are fully EU compliant. Additionally 50 countries, including the US, China and Russia have tax and trade treaties with the country.
Most entrepreneurs looking to start a small or medium-sized business in Lithuania will be one of the following types:
- Sole Proprietorship – This is a business owned by a single person. The person has unlimited liability and personal assets are not separated from those of the business.
- Small partnership – These are public and private limited liability companies (LLC). Public LLCs must have a capital of at least €43,445. Private LLCs must have at least €2,900 in capital and from 1 to 250 shareholders. Lithuania also has limited liability micro companies. Micro LLCs can have up to 10 partners and starting capital can be as low as €1.
Types of Taxes and Tax Policy
One of the reasons that Lithuanian is so attractive to entrepreneurs is the country’s tax structure. Profit taxes are the fourth lowest in the region and the government offers a vast menu of tax incentives including 0% tax incentives in Free Economic Zones.
The taxes businesses pay are in line with most of the EU and include:
- Corporate income tax
- Social security contributions
- Real estate tax
- Vehicle tax
- Contributions to guarantee fund
- Land tax
- Environmental tax
- Tax on pollution from mobile sources
- Tax on pollution from packaging
- Fuel tax
Obviously not all businesses will be subject to all of the taxes. Those you will pay will be determined by the nature of your business.
Requirements for Opening a Business Bank Account
Opening a business bank account is fairly straightforward, even for non-residents.
In order to open an account for you, the bank will require:
- A copy of an electronic statement of your company from the Lithuanian Register of Legal Entities Establishment Act Company’s articles of association
- Company activity description (3-4 sentences about the main activities of your company)
- Passport of the company owner or director
- Most banks will also require you to complete a short questionnaire about your business
- The cost of opening a business account is about €200. The monthly fees depend on the type of account you choose.
How to Obtain Business Credit
Business loans are not extremely difficult to obtain. Banks offer micro loans as well as more traditional loans.
For larger loans banks typically look for guarantees such as:
- Real estate or other form of property
- Guarantees from third parties
Lithuania is well equipped and positioned to provide an excellent environment for business. However, the country is equally proud of its natural beauty and cultural heritage, both of which have contributed to Lithuania becoming a popular holiday destination in addition to having an attractive business culture.