7 Advantages of a Private Limited Company in Lithuania

Lithuania’s business-friendly environment and advantages such as dynamic talent pool, tax incentives EU leading infrastructure and many more attract foreign investors to start a business in Lithuania. Hence, it is ideal to open company in Lithuania and you may be considering starting a private limited company in Lithuania. In this article, our team at Tetra Consultants has highlighted 7 advantages of a private limited company in Lithuania to help you decide whether you should register company in Lithuania.

1. Features of private limited company:

A private limited company in Lithuania allows for full foreign ownership where the shares can be entirely owned by foreigners. Since it is a private limited company, the shares are not listed on the stock exchange to trade freely. One advantage would be that since it is a limited liability company, it is a separate legal entity where the shareholder is not liable for debts, losses or legal action taken against the business. Hence, the shareholder will not be exposed to unlimited liability. In addition, the minimum share capital required is rather low at $3,280 USD. Therefore, the characteristics of a private limited company allow the easy starting of a business in Lithuania.

2. Fast incorporation:

The incorporation of a company in Lithuania is simple and fast. It can be done online through the Lithuania Register of Legal Entities and it takes approximately one day. 

3. Double taxation treaties:

Businesses in Lithuania benefit from the double taxation treaties. The double taxation treaties involve 57 partners worldwide allowing for foreign companies to avoid paying taxes on income in both Lithuania and in their home country. Therefore businesses will be able to fully benefit from the tax policy of Lithuania without having to incur tax in their home country.

4. VAT reimbursement:

 Goods and services in Lithuania are subjected to value-added tax (VAT). The standard VAT tax rate is 21% whereas the reduced VAT tax rate is are fixed at 9%, 5% and 0%.

However, VAT-registered businesses in European union member states are entitled to VAT reimbursement under the EU VAT Refund Directive. And under the 13th Directive, VAT-registered businesses in EU member states are also entitled to VAT reimbursement.

This process under the EU VAT Refund Directive will take up to 6 months depending on the complexity and up to 9 months under the 13th Directive. 

5. Low tax rate in Lithuania:

Generally, the corporate income tax rate in Lithuania is 15% which is lower than the worldwide average statutory corporate income tax rate of 23.54%. In the case of small and agricultural companies, they are subjected to a reduced corporate income tax of 0% or 5%, conditions apply. Requirements of a small company would be an annual income of less than 500,000 Lithuanian Litas and having less than 10 employees. Whereas credit institutions whose threshold exceeds 2,000,000 euros will be subjected to an increased corporate income tax of 20%. Ultimately, the corporate income tax rate in Lithuania is relatively lower, translating to a higher profit.

The tax on capital gains and dividends is also 15%.

Tax incentives

 There are tax incentives for foreign companies with at least more than 1 million euro investment and minimally 75% of the company’s business operating in the Free Economic Zone. These companies are entitled to corporate tax exemption for the first five years and subsequently, 50% reduced corporate income tax for the next 10 years. 

Whereas foreign companies who have an investment of fewer than 1 million euros but are situated in the Free Economic Zone are entitled to VAT and real estate tax exemption.

6. Attractive FinTech Jurisdiction:

According to the World Bank ranking, Lithuania is ranked 11th for doing business in 2020. Furthermore, Lithuania is one of the top 4 places in the world for Fintech, according to the Findexable Global FinTech Index 2020. Hence Lithuania provides a competitive advantage for FinTech businesses due to its fastest pan-European FinTech licensing process, the lower initial capital requirement for challenger banks, newcomer programs and other progressive regulations compared to other European jurisdictions. In addition, Lithuania has relatively lower incorporation and operational costs making Lithuania a more attractive place to start a Fintech company.

7. Benefits as a member of the European Union:

As a member of the European Union (EU), companies in Lithuania can benefit from a stable and democratic jurisdiction that is secure. In addition, it is able to enjoy free movement of labour, goods, services and capital which is important for trading companies. It has been noted that the EU membership increases the GDP per capita by approximately 12%. Therefore, Lithuania as a member of the EU, allows companies in Lithuania to have access to consumers, resources and a better reputation benefiting these companies.

Conclusion:

There are many advantages of setting up a private limited company in Lithuania. However, to fully understand whether starting a business in Lithuania as a foreigner is suitable for your business, you may wish to engage Tetra Consultants for advice. With Tetra Consultants by your side, the registration process of your business in Lithuania will be smooth and hassle-free. Our comprehensive service package includes planning and strategizing with our clients to select a suitable business entity, completing the registration process, obtaining required licenses, opening a corporate bank account, and ensuring your compliance with the government regulations. 

Contact us to find out how to register company in Lithuania and our dedicated and experienced team will revert within the next 24 hours.