Doing business in Lithuania
If you're looking for a gateway to the Baltics, look no further than Lithuania. This small Baltic country is home to a thriving business community, and offers many opportunities for entrepreneurs looking to expand their operations into new markets. In this article, we'll discuss some of the key aspects of doing business in Lithuania, from starting a company to getting funding from local investors. We'll also take a look at the challenges you may encounter while doing business in this country.
Business opportunities in Lithuania
There are many opportunities for entrepreneurs doing business in Lithuania. The country has a thriving economy, and is home to a number of well-educated and skilled workers. Additionally, Lithuania offers excellent access to regional markets, making it an ideal gateway to the Baltics and Central Europe.
Some of the key sectors where business opportunities exist in Lithuania include:
- Food and beverage
Challenges of doing business in Lithuania
While there are many advantages to doing business in Lithuania, there are also some challenges you'll need to be aware of. One of the biggest challenges is finding qualified workers. Lithuania has a relatively small population, and many skilled professionals choose to work in larger countries like Germany or the UK. Additionally, the country's infrastructure can be inconsistent, and there can be some bureaucracy involved in setting up and running a company. Finally, the Lithuanian population is under 3mln people. So it is a very small market. However, Lithuania can easily serve as a gateway to the rest of the Baltic countries and even the rest of (Eastern) Europe.
Legal forms in Lithuania
The UAB is the most common legal entity for foreign investors and entrepreneurs in Lithuania. This is the equivalent of a limited liability company. There are various other legal forms, that are basically the same as in the rest of Europe. Besides the UAB, the most important ones are the general partnership (TUB), limited partnership (KUB) and the branch of a foreign company.
Company formation in Lithuania
The steps to setting up a private limited company (UAB) in Lithuania are as follows:
- Preparing and legalizing the company’s documents - this costs usually a few hundred euros or less.
- Opening the bank account - this is usually free of charge.
- Registering at the business registrar of Lithuania - around 60 euros
- Registration with the tax authorities and obtaining a VAT number in Lithuania - free of charge
- Registering for social security - Free of charge
- Obtain necessary licenses and permits. Depending on the nature of your business, you may need to obtain various licenses and permits from local authorities.
Tax & accounting in Lithuania
In order to be tax compliant in Lithuania, a company should have the following services:
- Tax consulting
- Preparation of annual financial statements
- Preparation of tax returns
- Representation before the Lithuanian tax authorities
Tax advantages of doing business in Lithuania
First of all, Lithuania has one of the lowest corporate tax rates in Europe at just 15 percent.
In addition to the benefits listed above, businesses that invest in research and development (R&D) can enjoy a corporate tax rate of only 5 percent on the profit deriving from the commercial exploitation of patented inventions. This incentive is aimed at promoting innovation and growth in the Lithuanian economy.
Lithuania offers a number of free economic zones (FEZs) which offer tax and other benefits to businesses operating within them. These zones are aimed at promoting investment and economic growth in the country. Some of the key benefits offered by FEZs include full or partial relief of corporate tax, relief of tax on real estate, and 50% relief of land lease tax
Bank account in Lithuania
Opening a business bank account in Lithuania is a relatively simple process. Here are the steps you need to take:
1. Choose a bank. There are a number of banks in Lithuania offering business banking services, so you'll likely be able to find one that meets your needs.
2. Apply for a business account. You can usually apply for a business account online or in person at the bank branch. Be prepared to provide some basic information about your company, such as its name, address, and contact details.
3. Complete the application form and provide supporting documents. The bank will likely require some documentation to support your application, such as copies of your company's registration certificate and articles of association.
4. Wait for approval from the bank. Once the bank has reviewed your application, it will let you know if your account has been approved or not.
Visa and relocation to Lithuania
If you're an EU citizen, you can live, work, and start up a business in Lithuania without any restrictions. Lithuanian authorities are keen to attract foreign investment and businesses to the country, and are therefore keen to make it as easy as possible for EU citizens to get started.
If you're not an EU citizen, you may still be able to live and work in Lithuania with a visa. However, starting up a business in Lithuania may be more difficult if you're not an EU national. You'll likely need to get special permission from the Lithuanian authorities to do so.
Legal compliance and contracts in Lithuania
When doing business in Lithuania, a business should have the following contracts in place:
A sales contract to specify the product or servie you are selling. Additionally you should have general terms and conditions in place to fill the gaps and make sure you have covered everything from payment terms to liability.
If you are thinking of employing staff (including yourself) you should have this written down in an employment contract.
Furthermore, make sure that any office lease is formalized in a lease agreement.
Another contract that can avoid many headaches is the shareholders' agreement where you describe the relationship between yourself and your partners (shareholders) within the business. Even if you trust your partners 100%, it is still essential to leave no room for doubt and confusion.
Finally, as an EU member state, Lithuania is bound to the GDPR European privacy laws. This makes that most business should have a number of documents in order in order to be compliant.
Virtual Office and office space in Lithuania
If you're looking for a prestigious and professional address to set up your business in Lithuania, a virtual office might be the perfect solution. A virtual office provides you with a mailing address and telephone number in a prime location, without the need for you to actually rent or lease office space. This can be a great option if you're just starting out and don't yet have the resources to lease or rent an office.
There are a number of providers of virtual office services in Lithuania, so you should be able to find one that meets your needs. Be sure to read reviews before choosing a provider, as not all of them offer the same level of service.
If you're looking for physical office space in addition to your virtual office, there are a number of options in Lithuania. The largest and most popular cities for business, such as Vilnius and Kaunas, have a wide range of office space options available, from serviced offices to coworking spaces. You can usually find what you need by conducting a simple online search.
Fund your company in Lithuania
There are a number of ways to fund your company in Lithuania. The most common methods are:
1. Bank loans - Banks in Lithuania are usually willing to lend money to businesses, and there are a number of lending institutions with a presence in the country. However, you will need to have a good credit history and be able to provide a solid business plan in order to be approved for a loan.
2. Venture capital - If you're looking for capital to expand or start up your business, venture capitalists may be a good option. There is a healthy venture capital market in Lithuania, and investors are typically keen to invest in businesses that show potential for growth.
3. Grants and subsidies - The Lithuanian government offers a number of grants and subsidies to businesses operating in the country. This can be an attractive option for businesses that are just starting out, or those that are struggling financially.
4. Private equity - Private equity firms can be a great source of funding for businesses that are looking to expand or make acquisitions. The firms typically have a lot of experience with helping businesses grow, and can offer valuable advice and support.
Get your business in Lithuania started?
Lithuania is up and coming, exciting business opportunities lie ahead for many. Get started to today and explore opening and running a business in Lithuania.