COMPANY ESTABLISHMENT
Although the procedure to establish a business in Lithuania is quite straightforward, the help of experienced lawyers and specialists is needed. Throughout the years we have helped hundreds of companies to settle in Lithuania.
At Leinonen we offer high-quality accounting, financial, tax and legal services, enabling clients to focus on their core business. Therefore, we try to simplify even more the process of opening a business in Lithuania by talking our clients through the steps required by respectful authorities.
Leinonen’s team provides support when selecting which establishment form would be the most suitable for you (e.g. limited liability company, branch, etc.). It should be noted that the company’s activity in Lithuania may not require establishment of the company, i.e. tax registration for VAT, payroll or corporate income tax purposes may be sufficient.
Contact one of our experienced team members for further information regarding opening a company in Lithuania as well as registering a legal address in the country.
TAXATION
Lithuania is a business-friendly country. In addition to the stress-free procedure of opening a business in the country, from 2025 tax year, the standard corporate income tax (CIT) will be increased up to 16% (currently the rate is 15%) and the reduced CIT will be increased up to 6 % (currently the rate is 5 %) as a result of increasing costs for national Defense Fund package. In addition, if a company covers specific requirements, there may be no tax applied in the first year of operation!
Furthermore, the current VAT rate in Lithuania is 21%, although, in a few cases, there are reductions which apply to books and non-periodical publications, public transportation services determined by the Ministry of Communications or municipalities as well as accommodation services. Moreover, a reduced rate of 5% is applied to technical and medical aid devices and their repair services. Reduced VAT rate might be also applicable to other goods and services, provided in the legislation.
Moreover, from 2025 tax year additional limitations will also be imposed on the deductibility of the purchase price and rental costs of cars. The new deduction regime will be referred to the CO2 emissions of the car. Regarding N1 class (cargo transport), no restrictions are provided in the amendment of the CIT, changes are planned only for M1 class (passenger) cars.
If you want to find out more regarding taxation and/or requirements for tax reduction, contact one of our experienced tax specialists.
PAYROLL IN LITHUANIA
Lithuanian labor laws apply to foreign nationals and foreign businesses in the same manner as to domestic entities. That is why the country hosts thousands of international companies. However, the need of experienced payroll specialist is present as there are specifications relevant to the legislation in the country. Therefore, at Leinonen we offer consultations regarding payroll details relevant to Lithuanian’s law.
It is important to note that in Lithuania, in addition to the standard income tax of 20% (or progressive 32%), there is also social security contribution of 21.27% (19.50% paid by the employee and 1,77% paid by the employer) as well as additional reductions such as pension funds.
Contact our experienced team if you wish to know more about the details regarding payroll in Lithuania.
BEING AN EXPAT
As Lithuania is a member of EU, travelling and working in the country has been made easier for EU citizens. However, certain migration documentation might be required if an individual wishes to reside in the country for longer periods.
Most of the workers reside in Vilnius and Kaunas which are the most developed districts in Lithuania. The living costs in the country are very low compared to other countries in EU, therefore Lithuania is a popular destination for expats.
If you wish to find out more about laws and regulations for expats in Lithuania, contact a member of our experienced team.
ACCOUNTING IN LITHUANIA
Accounting in Lithuania is regulated according to the following legal acts:
- Accounting Law of the Republic of Lithuania;
- Business Accounting Standards or International Accounting Standards;
- Law on Company Financial Statements of the Republic of Lithuania;
- other legislation governing accounting and financial statements.
An employed accountant or a company providing accounting services is responsible for accuracy of accounting entries. It is important to note that all accounting records shall be supported by accounting documents (invoices, cheques, etc.). In addition, there are regulations that require specific documentation to be archived from 10 to 50 years. Therefore, having a reliable and experienced accountant is an essential part of any business.
Leinonen’s competitive advantage is the personal connection. We understand that accounting is a very important part of the business therefore we reachable and we can provide knowledgeable support at any time.
Contact one of our experienced accountants for more details related to accounting processes in Lithuania.
INTERESTING FACTS ABOUT LITHUANIA
- Lithuania is a member of both the European Union and the Eurozone, providing a stable and transparent business environment.
- Situated at the crossroads of Northern and Eastern Europe, Lithuania offers strategic access to both EU markets and Eastern Europe.
- Lithuania has a highly educated and multilingual workforce, with strong expertise in engineering, IT, and finance.
- Many Lithuanians are multilingual, with a significant portion of the population fluent in English (80% of young people), Russian (66% of population), and other languages.
- Lithuania ranks 11th out of 190 countries in the World Bank’s Ease of Doing Business 2023 report, excelling in areas like starting a business, getting credit, and trading across borders.
- Lithuania’s GDP grew by approximately 2.5% in 2023, showing resilience in a challenging economic environment.
- By 2023, 30% of Lithuania’s energy consumption was sourced from renewable energy, with targets to reach 45% by 2030, creating opportunities in the renewable energy sector.
