Company Formation in Lithuania
Service Name
Start
Pro
Elite
Company Name Check and Reservation
Company Formation including Government Fees
Company Secretarial Services for the First Year
Incorporation Documents Package
Registered Office Address for 1 Year
Corporate Bank Account Opening
–
Assistance with VAT Number Registration
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–
Total Cost
€1850
€2350
€2850
Company Formation in Lithuania: A Strategic Guide for Business in the EU
Lithuania has emerged as a dynamic and appealing jurisdiction for company formation, particularly for tech startups and FinTech businesses. With its highly educated workforce, excellent digital infrastructure, and a government committed to a pro-business environment, Lithuania offers a compelling platform for entrepreneurs seeking an EU foothold. This comprehensive guide will walk you through the entire process, from understanding the core benefits to navigating post-incorporation compliance. Mastering the Lithuanian company registration process is a crucial step towards building a successful and tax-efficient business within the EU.
Why Choose Lithuania for Company Formation?
The most common business structure in Lithuania is the Private Limited Liability Company (UAB), which is the equivalent of a UK LTD. It offers a range of significant advantages that attract a wide variety of businesses.
Favorable Tax Regime: Lithuania offers a competitive corporate income tax rate of 15%. A special incentive is available for small businesses, with a reduced rate of 0% for the first year and 5% thereafter on profits up to €300,000, provided certain conditions are met. This makes it an ideal launchpad for new ventures.
Access to the EU Single Market: As a full member of the European Union, a Lithuanian company enjoys unrestricted access to the EU Single Market and its over 450 million consumers. This status provides legal clarity and simplified trading across all member states.
Efficient and Digitalized Process: The company formation process is highly digitalized and efficient. The Lithuanian Centre of Registers (Registrų centras) provides a fast and user-friendly online application process, especially for those with a qualified e-signature.
FinTech Hub: Lithuania has become a leading FinTech hub in the EU. Its progressive regulatory environment and clear licensing procedures for electronic money institutions (EMI) and payment institutions (PI) have attracted global financial technology firms.
Limited Liability Protection: The UAB structure provides shareholders with limited liability, protecting their personal assets from the company’s debts and liabilities.
Pre-Incorporation Checklist: What You Need to Know
Before you initiate the company registration process, several key decisions and preparations are essential.
Choosing a Company Name: The company name must be unique and not be identical or misleadingly similar to an existing one. A preliminary search can be performed on the Centre of Registers’ website. The name must also indicate the legal form, such as “UAB.”
Appointing Directors and Shareholders: A Lithuanian UAB requires at least one director and one shareholder. There are no residency requirements for directors or shareholders, making it a highly flexible option for non-residents.
Defining the Registered Office Address: Your company must have a registered office address in Lithuania. This is the official location for receiving legal documents and correspondence. Many companies, especially non-residents, use the services of a professional company formation agent to provide this address.
Determining the Share Capital: The minimum share capital for a UAB is €1,000. The full amount of share capital must be paid up before the company is registered.
Preparing Legal Documents: The primary legal documents are the Articles of Association. These documents define the company’s objectives, share capital, and internal regulations.
The Company Formation Process: A Step-by-Step Guide
The Lithuanian company incorporation process is managed by the Centre of Registers. The most efficient method is to apply online via the E-Services portal or to use a professional corporate service provider.
Name Reservation: The first step is to reserve your chosen company name with the Centre of Registers.
Document Preparation: Your legal representative will prepare all necessary documents, including the Articles of Association and the application form.
Payment of Share Capital: The minimum share capital must be paid into a temporary bank account opened in the company’s name.
Submit the Application: The application, along with the signed documents and proof of share capital payment, is submitted to the Centre of Registers.
Awaiting Approval: The Centre of Registers will review the application. The processing time can be as short as 3-5 business days for an expedited process.
Receive the Certificate of Incorporation: Upon approval, the Centre of Registers will issue a Certificate of Incorporation, which is the official legal document that proves your company’s existence.
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Post-Incorporation Compliance and Obligations
The responsibilities of a Lithuanian UAB continue after formation. Failure to meet these obligations can result in fines and legal action.
Annual Financial Statements and Tax Filings: All Lithuanian companies are required to prepare and file annual financial statements with the Centre of Registers and the State Tax Inspectorate. This must be done within four months of the end of the financial year. The company must also submit its annual corporate income tax return to the tax authorities. It is critical to adhere to these deadlines, as late filings can result in significant penalties and negatively impact your company’s good standing.
Maintenance of Statutory Registers: You must maintain a set of internal registers, including a register of directors, shareholders, and beneficial owners.
Economic Substance: To benefit from Lithuania’s favorable tax treaties and reputation, it’s essential to demonstrate economic substance. This can be achieved by having local directors, a physical office, and employees, although this is not a strict requirement for all business types.
Practical Considerations for International Founders
For those based outside Lithuania, setting up a company is straightforward but requires careful planning.
Company Tax Residency: While a company incorporated in Lithuania is usually a Lithuanian tax resident, its tax residency can be challenged. The deciding factor is often the “central management and control” test. If all key business decisions and management are conducted by directors residing in another country, the company may be deemed a tax resident of that country as well. This can lead to complex international tax issues, making professional advice essential.
Banking and Fintech Solutions: Opening a business bank account for a newly formed Lithuanian company can be challenging, particularly if the beneficial owners and directors are non-residents. Banks have strict KYC (Know Your Customer) and due diligence procedures. However, the rise of Fintech and digital banking solutions has created new opportunities. Many of these platforms offer remote onboarding, streamlined processes, and can provide business accounts with a EUR IBAN, making them a viable and often more efficient alternative to traditional Lithuanian banks.
The Importance of Local Expertise: Navigating the legal and tax landscape in Lithuania, especially the unique corporate tax system, requires local expertise. Engaging a reputable corporate service provider or law firm is crucial to ensure a smooth formation process and ongoing compliance.
Conclusion
Company formation in Lithuania offers a strategic and tax-efficient pathway for international entrepreneurs and businesses. The combination of a competitive tax rate, excellent digital infrastructure, and a business-friendly environment provides an exceptional platform for global operations. By understanding the straightforward incorporation process and committing to ongoing compliance and economic substance requirements, you can successfully leverage the power and credibility of a Lithuanian UAB to achieve your business goals.
FAQ
The most common structure is the Private Limited Liability Company (UAB), which is comparable to a UK LTD. It provides limited liability protection and is a flexible option for entrepreneurs.
No, there are no residency requirements for directors or shareholders. This makes it highly accessible for international founders.
The minimum share capital for a UAB is €1,000. This amount must be fully paid up before the company is registered.
The process is managed by the Centre of Registers. It is highly digitalized, and for expedited services, formation can be as fast as 3-5 business days once all documents are submitted.
You must file annual financial statements with the Centre of Registers and the tax authorities. You are also required to register for corporate income tax and, if applicable, VAT.
The standard corporate tax rate is 15%. A significant incentive is available for small businesses, which may qualify for a reduced rate of 0% for the first year and 5% thereafter on profits up to €300,000.
A company's tax residency is determined by where its "central management and control" is exercised. If key management decisions are made outside of Lithuania, the company may be considered a tax resident of another country as well, which can create complex tax issues.
Yes, Lithuania has become a major FinTech hub in the EU. Its progressive regulatory environment and streamlined licensing procedures for electronic money institutions (EMI) and payment institutions (PI) have made it a top choice for financial technology firms.
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