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Setting up a company in Lithuania
last updated March 21st, 2024
Lithuania had the highest growth in gross domestic product per capita in Europe over the period 2000-2020 (Eurostat), it ranks first for the availability of IT skills (IMD World Competitiveness Center, 2023), and the Fraser Institute describes it as the 12th most liberal economy in the world.
Public services for businesses are highly IT-enabled and available online (ranked 6th in Europe, according to the European Commission, 2022), and the procedures are clear and simple in most cases. The Tax Foundation estimates that in 2022 Lithuania has a highly competitive and efficient tax system, which we confirm.
Setting up a company is relatively quick. Despite what is frequently communicated on the internet, which usually claims that registration takes less than a week, the reality is more like three to five weeks, including all associated procedures, but excluding bank checks, as the duration can be random.
Who can set up a company ?
Any private or legal person, including foreigners. If your business is personal, it may not be necessary to set up a company. A self-employed status may be suitable, as it offers tax advantages and reduces costs.
We usually prefer the UAB status with a minimum capital of €1,000, but the MB (“Small Community”) status may also be suitable, in the context of a personal activity with the need to limit liability. Please contact us for further information.
What about accounting ?
It is compulsory for an MB or UAB to keep double-entry accounts.
What documents do I need to set up a company in Lithuania?
We need the name of the company, a list of its shareholders (scanned passport or ID) and its director. The company’s objects are also required (the articles of association may, however, stipulate that any legal commercial activity is permitted).
What about the director ?
A director has an employment contract and can be paid a monthly salary of a few euros for a few hours. The name of the director is indicated in the ESI extract of the Centre of Registers.
About VAT
Lithuanian companies are not automatically VAT payers. To do so, their activity must be subject to tax collection (commercial activity in Lithuania) and they must have at least one active employee (the director). “
Is it possible to deduct expenses such as company cars, travel expenses, meal expenses, client representation expenses, etc.?
The deductibility of the costs of a private car used for both private and business purposes is subject to the payment of taxes on the benefit in kind calculated on a flat-rate basis based on the tax value of the vehicle (consider around a hundred euros per month for a vehicle worth €15,000).
Properly documented travel expenses are deductible (transport, accommodation), and travelling expenses are covered by a flat-rate allowance depending on the country you travel set by the government ( e.g. €69 per day for a trip to France in 2024, for example); https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/TAIS.232345/asr
Other entertainment expenses and gifts are subject to strict rules to prevent misuse of corporate assets.
What are the main taxes and labour costs ?
VAT: 21%; corporation tax: 15%, reduced to 5% in certain cases (the majority shareholder is not a majority shareholder anywhere else, fewer than 10 employees and less than €300,000 annual turnover); personal income tax: 20%, deducted at source, degressive for low salaries, 15% for other income. Social security: 19.5% payable by the employee, 1.77% by the employer. In 2024, the legal minimum wage was €925 gross (i.e. €708.92 net and total company cost €941.37), and the average gross wage in the 4th quarter of 2023 was €2,110.30 gross.
All the statistics are available here: https://osp.stat.gov.lt/statistiniu-rodikliu-analize?hash=b3695e98-5d36-4aed-9778-a49772294e85#/
What about the personal taxation of a foreign shareholder in a Lithuanian company ?
Firstly, at company level, unless the tax authorities question the location of the centre of profits, profits will continue to be taxed in Lithuania. Lithuania will deduct 15% tax from dividends paid to shareholders, who must declare them in their country of tax residence, which will then deduct, as a general rule, the difference between its rate and the Lithuanian rate”.
Is it possible to set up a completely anonymous company, i.e. one where the list of shareholders is not accessible to anyone ?
No Lithuanian legal form guarantees total confidentiality. Anyone who pays will obtain the information from the Centre of Registers. However, on the ordinary ESI extract, the names of the shareholders will be masked, as long as there are at least 2 shareholders, so all you have to do is sell a share and the name of the main shareholder will not appear.
The name of the director will remain visible on many Internet sites
Can I obtain a Schengen business visa if I set up a company in Lithuania ? The legal requirements for obtaining a visa to invest in Lithuania are detailed on the Lithuanian government’s dedicated website here:
https://www.migracija.lt/noriu-gauti-viz%C4%851
Creating a fictitious company to obtain a Schengen visa will never work and Orixel does not assist with this type of procedure. We would also strongly advise you to beware of the many misleading advertisements on this subject, which promise a visa by asking for advance payments. Simulating the conditions under which a company operates in order to open up the right, after one year’s activity, after examining the company’s actual activity, would cost at least €36,000 and offers no guarantee of obtaining a visa, as the reality of the company’s activity is scrupulously checked by government officials.
Map of international migration in Lithuania: https://osp.stat.gov.lt/migracija“
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