Doing Business in Lithuania - blslawfirm.lt · 2 DOING BUSINESS IN LITHUANIA Law & Tax Guide 2008...

2008

Law & Tax Guide

Doing Business in Lithuania

2 DOING BUSINESS IN LITHUANIA

Law & Tax Guide 2008

PREPARED BY:Jurevičius, Balčiūnas & BartkusProfessional Law PartnershipSubačiaus 7LT-01127 VilniusLITHUANIATel. + 370 5 274 2400Fax + 370 5 274 2444E-mail: [email protected]

CONTACTS:Gintautas BartkusManaging Partner, AdvocateTel. + 370 5 274 2410E-mail: [email protected]

Raimundas JurevičiusPartner, AdvocateTel. + 370 5 274 2402E-mail: [email protected]

Gintaras BalčiūnasPartner, AdvocateTel. + 370 5 274 2401E-mail: [email protected]

Gytis KaminskasPartner, AdvocateTel. + 370 5 274 2411E-mail: [email protected]

Valentinas MikelėnasPartner, AdvocateTel.+370 5 274 24 [email protected]

Kęstutis JungevičiusPartner, AdvocateTel.+370 5 274 24 [email protected]

Iraida ŽogaitėPartner, AdvocateTel.+370 5 274 24 [email protected]

Lina MikalonienėPartner, AdvocateTel.+370 5 274 24 [email protected]

DISCLAIMERTo the best of our knowledge, the information provided in this publication is based on the laws and other legal acts of the Republic of Lithuania in force as of 1 January 2008. Imple-mentation of and changes to new Lithuanian legislation are in a dynamic state. The laws may at times appear to be internally inconsistent or in conflict with each other, and a numberof questions may arise regarding interpretation, understanding and application of the legis-lation in general, as well as in the context of specific business cases and circumstances.

This publication is for information purposes only.

We recommend the readers to seek professional advice from us, whenever decisions on investments into or regarding business activities in Lithuania are to be taken.

3DOING BUSINESS IN LITHUANIA

ABBREVIATIONS ................................................................................... 4

INTRODUCTION ..................................................................................... 5Geography ......................................................................................................................... 5Population and Language ................................................................................................. 5Useful Addresses and Telephone Numbers ...................................................................... 5State Holidays ................................................................................................................... 5

I. GOVERNMENTAL STRUCTURE AND ECONOMIC CLIMATE .................... 6A. Governmental Structure ............................................................................................. 6B. Economy ...................................................................................................................... 6C. Financial System .......................................................................................................... 7

II. INVESTMENT ENVIRONMENT ............................................................. 10A. Investment Incentives .................................................................................................. 10B. Privatisation .................................................................................................................. 11C. Competition Law .......................................................................................................... 13D. Environmental Law ..................................................................................................... 14E. Intellectual Property ..................................................................................................... 15F. Real Property ................................................................................................................ 17G. Regional and Universal International Trade Agreements Lithuania is a Signatory to . 18H. Legal Regulation of Import and Export ...................................................................... 18I. Employment and Labour Relations .............................................................................. 20J. Electronic Communications, Information Technologies and Electronic Signature ...... 22

III. COMPANY LAW ................................................................................ 24A. Companies .................................................................................................................. 24B. Licensing ..................................................................................................................... 26C. Bankruptcy Proceedings and Insolvency ..................................................................... 27

IV. TAXATION ........................................................................................ 28A. International Issues ..................................................................................................... 28B. Tax Administration ..................................................................................................... 28C. Immigration and Permits ............................................................................................ 35

V. CONTRACT LAW ................................................................................ 36

ADDENDUMS ...................................................................................... 39

Contents


ABBREVIATIONSATEA Additional tax-exempt amountCAP Common Agricultural PolicyCC Civil CodeCCP Code of Civil ProcedureCN Combined NomenclaturesCSDL or Central Depository – Central Securities Depository of LithuaniaEC European CommunityEEIG European Economic Interest GroupingEFTA European Free Trade AssociationEU European UnionFBF Financial Brokerage Firm or Specialised Financial Brokerage Units of BanksFEZ Free economic zonesGDP Gross Domestic ProductIFRS International Financial Reporting StandardsISC Insurance Supervisory CommissionLC Labour CodeOECD Organisation for Economic Cooperation and DevelopmentS SecuritiesSC Securities CommissionTEA Tax-exempt amountVAT Value Added TaxWIPO World Intellectual Property OrganisationWTO World Trade Organisation


Introduction

GEOGRAPHYLithuania is located on the eastern coast of the Baltic Sea with an area of 65,303 km2. In the north, it borders with Latvia (610 km), in the east and south it borders with Belarus (724 km) and Poland (110 km), while in the south-west it shares a border with the Ka-liningrad Region of the Russian Federation (303 km). The geographical centre of Eu-rope is 24 km to the north of Vilnius, which is the capital of Lithuania.

The climate in Lithuania is marine/conti-nental. The average annual temperature is +6.2°C, the average temperature in Janu-ary is approximately -2 - -4°C, the aver-age temperature in July is approximately +16 - +18.0°C.

POPULATION AND LANGUAGEThe population of Lithuania is about 3.38 mil-lion. 84.6 % are Lithuanians, 6.3% are Polish, 5.1% are Russians, and 4.0% - others.

The official language is Lithuanian. Thecurrency is the litas (LTL).

USEFUL ADDRESSES AND TELEP-HONE NUMBERSThe list of useful addresses and telephone numbers is provided in Addendum No 1.

STATE HOLIDAYS

In case the state holiday coincides with a non-working day, a non-working day is shifted to the closest day coming after the state holiday.

New Year 1 JanuaryDay of the Restoration of the State of Lithuania 16 FebruaryDay of the Restoration of Lithuania’s Independence 11 MarchEaster and Easter Monday 23 and 24 MarchInternational Labour Day 1 MayMother’s Day 4 MayMidsummer Day 24 JuneDay of th e State (Coronation of King Mindaugas) 6 JulyAssumption Day 15 AugustAll Saints’ Day 1 November Christmas days 25 and 26 December


I. Governmental Structure and Economic ClimateA. GOVERNMENTAL STRUCTUREThe Republic of Lithuania is an independ-ent democratic state. The legal system of the Republic of Lithuania is based on its Con-stitution adopted in 1992 by a referendum. Pursuant to the Constitution, sovereignty shall be vested in the People and shall be exercised either directly or through their democratically elected representatives. In Lithuania, the powers of the State are exer-cised by the Seimas (Parliament), the Presi-dent of the Republic, the Government, and the Judiciary.

The supreme legislative power is exercised by the one-chamber Seimas (Parliament); its 141 member is elected for a four-year term by universal, equal, direct suffrage and a se-cret ballot. The current Seimas was elected in October 2004.

The President of the Republic of Lithuania is the head of the State. He represents the Lithuanian State and performs the functions prescribed to him by the Constitution and laws. The citizens of the Republic of Lithua-nia elect the President of the Republic for a five-year term by universal, equal and directsuffrage, by means of a secret ballot. The current President of the Republic of Lithua-nia, H.E. Valdas Adamkus, was elected in June 2004.

In Lithuania, the supreme executive power is vested in the Government. It is comprised of the Prime Minister and ministers. Upon the approval of the Seimas, the President of the Republic of Lithuania appoints and dismisses the Prime Minister. Upon the pro-posal of the Prime Minister, the President of the Republic of Lithuania appoints and dismisses ministers. The present Govern-ment is made up of the coalition of Social Democratic Party, Liberal and Centre Un-ion, Farmers’ Union, as well as the Party of Civil Democracy, which is headed by the Prime Minister Gediminas Kirkilas.

On 1 May 2004 Lithuania was accepted as full member of the European Union, on 29

March 2004 Lithuania joined NATO. On 21 December 2007 Lithuania became a fully-fledged member of the Schengen area.

B. ECONOMYB.I. Type of Economy

After the restoration of independence on 11 March 1990, consistent and long-term reforms related to economic liberalization and privatization transformed Lithuania’s economy from a planned economy to a mar-ket economy. Because of those economic reforms, Lithuania’s economy is now one of the fastest-growing economies in Cen-tral and Eastern Europe, with Lithuania’s private sector producing over 80% of the Gross Domestic Product.

Lithuania’s geographical position in the re-gion enables the country to be active both from the north to the south and from the west to the east directions, and to use the advantages provided by its geographical po-sition to the maximum extent possible. The Baltic region is a very important intersec-tion point for both transport and trade roads in the middle of the European continent. Lithuania’s geographical position is con-venient for transit, two recognized transport corridors of continental importance cross the country’s territory. The fact that Lithua-nia is a sea state with an ice-free Klaipeda port that has a modern container terminal is also very important for the development of transit. The Republic of Lithuania has a wide network of motorways with a high quality maintenance and repair system.

Lithuania’s strategic objective to ensure the endurance of its achievements made during the independence period has been achieved by joining the European Union and NATO. In the Baltic Sea region, Lithuania is estab-lishing its role as one of the leaders in the region, in particular by facilitating EU and NATO policy-making in regard to its east-ern neighbours, thus enhancing the security and stability in the entire region.

B.2. Key economic indicators

Lithuania’s economy saw further growth in 2007. The first estimate of the actualGross Domestic Product (GDP) for 2007 is 8.7%. In 2006, as compared with 2005, its actual GDP increased by 7.5 % (in 2005, as compared with 2004, GDP increased by 7.3 %). In January – November 2007, the export of goods increased by 10.4%, as compared with the same term in 2006, while the import of goods rose by 14.4%. In January – November 2007, the major ex-port in Lithuania included mineral products (13.4%), mechanical appliances, electrical equipment and machinery (12.7%), vehicles and auxiliary transport facilities (10.7%). The major import in Lithuania included me-chanical appliances, electrical equipment and machinery (17.5%), mineral products (17.1%), vehicles and auxiliary transport facilities (16.5%). In January – November 2007, the main export partners of Lithua-nia were Russia (14.9%), Latvia (12.9%), Germany (10.8%) and Poland (6.3%). The main partners of import were Russia (17.8%), Germany (15%), Poland (10.8%) and Latvia (5.4%).

In the third quarter of 2007 unemployment rate was the lowest one throughout the last five years and made 3.9%, whereas in thethird quarter of 2006 it reached 5.7%.

Gross Domestic Product (GDP) per capita is one of the indicators reflecting the eco-nomic development of the country. Accord-ing to the data of the Department of Statis-tics, in 2007, GDP increased by 8.7% and amounted to LTL 96,675.6 million (EUR 28 billion), GDP per capita reached LTL 28,632 (EUR 8,292). In the fourth quarter of 2007 GDP amounted to LTL 27,160.2 million, as compared to the fourth quarter of 2006, it rose by 7,9%.

In 2007, fast pace of value added growth was in the companies of agriculture and for-estry (28.7%), construction (16.7%), trade, hotels and restaurants, transport and com-


munications (12.9%), industry and energet-ics (7.7%), financial intermediation and real property (6.7%).

Annual inflation in Lithuania in 2007 made8.1% (as compared to 2006, when the country saw 4.5% inflation). Such jump ofinflation (as compared to 2006) was causedby the upward movement of prices for food and beverages, as well as accommodation, utilities services, gas and other fuel, goods of transport group and services. The in-crease in prices of the above-mentioned products and services however was com-pensated by 5.8% drop in prices for cloth-ing and footwear.

According to the data of the Department of Statistics, foreign direct investment (FDI) from 1 January 2007 to 1 October 2007 increased by 18.4% and amounted to LTL 34,25 billion (EUR 9,92 billion). As of 1 October 2007, FDI per capita amounted to LTL 10,160 (EUR 2,943). The major FDI in 2007 belonged to investors from Po-land (19.5%), Denmark (13.1%), Sweden (10.9%), Russia (10.0%), Germany (8.7%), Estonia (5.7%), Finland (5.3%), Netherlands (4.3%) and Latvia (4.0%). In the first-thirdquarter of 2007, FDI from the EU countries constituded LTL 27,65 billion and it made 80.7% of the total FDI. The major FDI was made to manufacturing (38.2%), financialintermediation companies (17.0%), trans-port, storage and communications (12.8%), wholesale and retail (10.5%), electricity, gas and water supply (9.2%), real property (8.1%). Investments to manufacturing and financial intermediation companies have in-creased mostly, while investments in trade decreased quite significantly.

Some of the key economic indicators are presented in Addendum No 2.

B.3. The main industries

The sales of production of the Lithuanian industrial enterprises have been tenden-tiously rising already for several years. In 2007, these industrial enterprises sold their production for EUR 15.11 billion (without VAT and excise), i.e. by 10.4% more as com-pared to the previous year. During the first9 months of 2007, as compared to 2006, the whole industrial production increased by 6.1%. The production of mining and quarry-ing, manufacturing within the same period increased by 5.5%. The production of min-ing and quarrying, manufacturing (without production of refined oil products) rose by

14.9%. The scope of production within the same period increased in the enterprises engaged in manufacture of motor-vehicles, trailers and semi-trailers (40.8%), manufac-ture of other transport equipment (27.1%), manufacture of radio, television and com-munications as well as apparatus (22.8%), manufacture of textile products (17.1%), manufacture of metal products, except for machinery and devices (17.1%), manufac-ture of rubber and plastic products (15.6%), manufacture of pulp, paper and paper prod-ucts (11.8%).

In January-October 2007, as compared to the same period in 2006, a part of sales and services of mining and quarrying and manufacturing outside Lithuania’s market constituted 55.4%, whereas in Lithuania’s market - 44.6%. Within the same period, as compared to the same period of 2006, a part of sales and services of the produc-tion outside Lithuania’s market constituted 50.2% in the enterprises of manufacture of basic metals, 67.3% - in the enterprises of manufacture of refined oil products, 45.7%- in the enterprises of manufacture of leather and leather products, 60.1% - in the enter-prises of manufacture of timber and timber products (except for furniture), 78.3% - in the enterprises of manufacture of radio, tel-evision and communications equipment as well as apparatus.

The export to the EU and EFTA countries made 73% of all the exported production. On the other hand, manufacturers of food products and beverages, construction mate-rials, ceramic materials are mainly oriented at the internal market.

Information technologies and telecommuni-cations sector is one of the most promising sectors of Lithuania’s economy. This sector includes information technologies (comput-ers, PCs, servers, network components, ac-cess devices, data transmission solutions, infrastructure solutions, etc.), IT services and complex solutions (Internet, program-ming, etc.), telecommunications services (fixed, mobile communications, etc.). In2005, the growth in the number of mobile services users in Lithuania was the fastest among all EU member states.

Lithuania is also widely distinguished among Central and East European coun-tries as a leader in the field of biotechnol-ogy. Lithuania’s biotechnology firms arerapidly expanding with the help of foreign investments.

C. FINANCIAL SYSTEMC. 1. The central bank and the commercial bank sector

The Bank of Lithuania is the central bank of the Republic of Lithuania. Its main pur-pose is ensuring price stability. The Bank of Lithuania is independent from the Govern-ment of the Republic of Lithuania and other state institutions. The Bank of Lithuania performs the following functions: it issues the money of the Republic of Lithuania; defines and implements monetary policy;establishes a regulatory system for the litas exchange rate and announces the officiallitas exchange rate; manages and uses for-eign reserves of the Bank of Lithuania and disposes of them; performs the functions of the state’s treasurer; issues and cancels licences to credit institutions of the Repub-lic of Lithuania, as well as issues and with-draws permits for establishing branches and representative offices of foreign credit insti-tutions, supervises their activities and estab-lishes the principles of financial accountingand accounting procedures applicable to them; creates and manages the inter-bank transfer system and establishes require-ments for the participants of the inter-bank transfer system; collects data on money in circulation and in banks, payment balance, Lithuania’s finances and related statistics,implements standards applicable to the col-lection, accountability and availability of such statistics, and prepares the payment balance of the Republic of Lithuania.

The status of the Bank of Lithuania will undergo considerable changes due to the adoption of the euro, which is provision-ally planned in the year 2010. On 26 May 2006, the provision stating that the Bank of Lithuania has the exceptional right to issue money was deleted from the Constitution of the Republic of Lithuania. The provision on the appointment procedure of the president of the Board of the Bank of Lithuania was also deleted, and it was established that his legal status to be regulated by the law.

At the end of 2007, 9 commercial banks held licences from the Bank of Lithuania, 3 foreign bank branches, Central Credit Un-ion of Lithuania and 67 credit unions were operating in Lithuania.

In 2007, the decrease tendency of the con-centration of the banks was being observed in various market parts. The capital market share of the three largest Lithuanian banks AB SEB Bank, AB Bank Hansabankas, AB DnB NORD Bank decreased from 69 % to


67.7 %, while the market share of one local branch of foreign banks increased. In 2007, all national commercial banks and branches of foreign banks in Lithuania complied with all the prudential requirements and ratios established. Last year the banking activities retained rapid development. Four banks: AB DnB NORD Bank, AB Bank Snoras, AB Šiauliai Bank, and AB SEB Bank increased their statutory capital. Con-sequently, 2007 the banks’ statutory capital increased up to LTL 3.1 billion and the shareholders’ equity increased during the fourth quarter of 2007 by 7.6%. It should be noted that Lithuanian banking system is dominated by Scandinavian capital. The increase in the assets of commercial banks constituted 37.5% and as of 1 January of 2008 equalled to LTL 81 billion.

In 2007, the banks continued to actively react to the increased borrowing needs, though, in 2006, the lending slightly slowed down in comparison with 2005. This was influenced by the rapid economic develop-ment, favourable economic expectations and lower interest rates. In 2007, among the loans that were granted to individual clients dwelling loans were further prevailing; dur-ing the year the volume of housing acquisi-tion loans increased 61.6%.

According to the data as of 1 January 2008 of the non-audited financial statements sub-mitted by the banks, in 2007, all banks and branches of foreign banks, except for the branches, which only last year commenced their activities in the Baltic countries, of Balti Investment Grupi Pank AS and MP Investment Bank hf, were operating profit-ably and generated LTL 1.154 million in profit, i.e. 73% more as compared with theyear of 2006.

Last year saw a successful development of credit union activities. In the year 2007 the assets of credit unions increased by 41.9%. During the year the amount of loans ex-tended by credit unions increased by 1.5 times and constituted 69% of all capital. As of 1 January 2008, loans amounted to LTL 455.3 million.

C.2. Securities market and the regulatory institution for securities

In Lithuania, the securities market consists of the following:1. Regulated Market – means a multilater-

al system operated and/or managed by a market operator, which brings together

multiple third-party buying and selling interests in financial instruments – ad-mitted to trading into this system and under the rules of the Securities Com-mission – in a way that results in a con-tract. Vilnius Stock Exchange currently is the sole regulated securities market in Lithuania;

2. Intermediaries of public trading in se-curities - investment firms or (herein-after referred to as IF) or respectively licensed credit institutions;

3. Multilateral Trading Facility (MTF) means a multilateral system, operated by an IF or a market operator, which brings together multiple third-party buying and selling interests in financialinstruments – in the system and in ac-cordance with the rules of the facility – in a way that results in a contract. Currently, the alternative market First North operates in the Baltic states, which in Lithuania is administered by Vilnius Stock Exchange;

4. Market maker means a person who holds himself out on the financial mar-kets on a continuous basis as being will-ing to deal on own account by buying and selling financial instruments againsthis proprietary capital at prices definedby him;

5. Systematic internaliser means an IF which, on an organised, frequent and systematic basis, deals on own account by executing client orders outside a reg-ulated market or an MTF;

6. Central Securities Depository of Lithua-nia (CSDL or Central Depository);

7. Interbanking Asset Transfer System of the Bank of Lithuania – the settle-ment system of the Bank of Lithuania ensuring the fulfilment of monetary set-tlements for transactions in securities between BF and banks according to the settlement instructions received from the Central Depository. The Central De-pository and the mentioned system (cur-rently - the Settlements Centre of the Bank of Lithuania) ensure the delivery versus payment;

8. Issuers – persons offering to issue or is-suing their securities in order to at tract available investment funds;

9. Investors - natural or legal persons that own securities or financial instrumentsor intend to acquire such;

10.Clients - natural or legal persons, to whom an IF provides investment and/or ancillary services. According to the Lithuanian law, the clients may be grouped as professional (the ones who possess the experience, knowledge and

expertise to make its own investment decisions and meet other criteria of pro-fessional clients established in the legal acts) and non-professional clients;

11. Lithuanian Securities Commission (LSC) - a state institution supervising and con-trolling the securities market, protecting the interests of investors and perform-ing other functions prescribed to it by the Law on Securities of the Republic of Lithuania and the Law on Markets in Financial Instruments of the Republic of Lithuania.

The Lithuanian Securities Commission is a supervisory institution for the securities market, which was established on 3 Sep-tember 1992 by a Resolution of the Gov-ernment of the Republic of Lithuania. In September 1996, the Lithuanian Securities Commission became a member of IOSCO, the International Organisation of Securities Commissions. The main functions of the Securities Commission are the following: to monitor compliance with the rules of fair trade in the public trading of securities; to take measures assuring effective function-ing of the securities market and protect the interests of investors; to shape the economic policy of the state, which would promote the development of the securities market; spread knowledge about the principles of the securities market functioning; take other measures to implement the Law on Securi-ties, the Law on Markets in Financial Instru-ments as well as other legal acts concerning the securities market.

In 2004, the biggest operator of the stock exchanges in the Nordic Europe OMHEX acquired part of the shares of the National Stock Exchange and, as result, Vilnius Stock Exchange was established. Vilnius Stock Exchange is the only regulated stock ex-change operator in Lithuania. Vilnius Stock Exchange is part of OMX, which through its exchanges in Copenhagen, Stockholm, Helsinki, Riga, Tallinn and Vilnius offers access to approximately 80 percent of the Nordic and Baltic securities markets.

In 2007, Vilnius Stock Exchange achieved the best results throughout all its history: in 2007, general turnover reached EUR 4.53 billion.

C.3. Insurance and insurance supervision system

Supervision of the insurance business in the Republic of Lithuania is exercised by the ISC of the Republic of Lithuania. Its main objective is to ensure reliability, efficiency,safety and stability of insurance system as


well as protection of the rights and interests of the insurer, the insured, beneficiaries andthird parties. The ISC observes, analyses, checks and supervises the accomplishment of the insurance market participants’ activi-ties as well as controls the compliance of the insurance market participants with laws and other legal acts. The ISC also issues and eliminates licences of the insurance activ-ity, reinsurance activity and activity of in-surance brokers companies, applies impact measures as established in the laws, addi-tionally, prepares, approves, changes and declares legal acts related with insurance market participants invalid.

After accession to the EU, branches of in-surance enterprises from other EU member-states began their activities in Lithuania. Their activities are supervised not by the Lithuanian ISC, but rather by the insurance market supervisory institutions of the respec-tive EU member-states. The Lithuanian insur-ance market is successfully integrating into the common insurance market of the EU.

Lithuanian insurance market is character-ised by the rapid development and high po-tential for growth. Following the data of the ISC, the pace of development of insurance market has only been increasing since 2003 and reached the highest point in 2006. - in-surance market increased by more than 37% (during the year of 2007 the Lithuanian in-surance market rose by 35.6%).

In 2007, an amount of the signed insurance premiums reached LTL 1.945 billion, insur-ance payoffs increased by LTL 637.3 mil-lion (35.5%).

The market share of life insurance also continued to increase, in total, during the year of 2007, a number of the concluded life insurance agreements amounted to LTL 75.1 thousand, i.e. was 28.6% bigger than in 2006. Differently than in 2006, 2007 saw a bigger growth (55.9%) in a number of traditional life insurance agreements than in a number of investment life insur-ance agreements (19.1%). In total, 68.7% during the year of 2007 investment life in-surance agreements covered a portfolio of the concluded life insurance agreements. In comparison with 2006, in 2007, a common amount of the signed life insurance premi-ums increased by 53.5% (up to LTL 694.9 million), whereas life insurance payoffs during 2007 grew by 78.5% and constituted LTL 59.8 million. In 2007, development pace of the life insurance payoffs exceeded development pace of the signed premiums.

During 2007, a number of the concluded non-life insurance agreements exceeded

LTL 4483 thousand, i.e. was 9.2% bigger than in 2006. Civil liability insurance of transport vehicles owners was the largest group of non-life insurance by the conclud-ed agreements in 2007 (55.4%). Within non-life insurance market, a sum of the signed premiums, in comparison with 2006, rose by 27.3% up to LTL 1.3 billion, whereas a sum of payoffs amounted to LTL 577.5 mil-lion. i.e. was 32.2% bigger than in 2006.

At the beginning of 2008, 6 life insurance com-panies, 12 non-life insurance companies, 10 branches of insurance companies of other EU member-states were operating in Lithuania.

It should be noted that more than 300 insur-ance companies of the EU member-states render services in the Republic of Lithuania though they are not established in the Re-public of Lithuania (a such opportunity is envisaged in the EU legal acts).

At the end of 2006, mostly, foreign insur-ance companies were the shareholders of the insurance companies as registered in the Republic of Lithuania (they owned 76.6% of the total statutory capital), commercial banks owned 5.2% of the capital, natural persons - 7.5% and the Government – 4.4%. The main foreign shareholders come from Poland (26%) and Denmark (21%).

At the end of 2006, the assets possessed by insurance companies amounted to LTL 2.7 billion. This indicator during the year in-creased by 32.6%; at the end of 2005, balance value of the assets as possessed by insurance companies constituted LTL 2.1 billion.

2006 saw an increase in insurance compa-nies profitability. A common result of the in-surance companies of the year 2006 – profitafter taxes – exceeded LTL 35.3 million (in comparison with 2005, profit of insurancecompanies was minimal and amounted to LTL 3.6 million). Profitability indicator was2.5% in 2006. 15 out of 23 insurance com-panies during 2006 made a profit. Capitalchange of insurance companies during 2006 constituted 6.0%, asset change – 1.3%, investment change – 3.1%. An increased activity scope and favourable situation in finance and real property markets led to an increase of profitability of the insurancecompanies activity.

C.4. Currency

The official currency in the Republic of Lithuania is the litas, which constitutes 100 cents. Cash banknotes and coin litas as well as cent coins. and From 1 April 1994 through 1 February 2002, the litas was pegged to the

US dollar. Since 2 February 2002, the litas is pegged to the euro and the official exchangerate is LTL 3.4528 for EUR 1. The decision to peg the litas to the euro was made consid-ering the fact that Lithuania’s economy has become increasingly related to the economy of the European Union.

Litas issued into circulation by the Bank of Lithuania are backed 100% by gold reserves that are converted by foreign currency re-serves by the Bank of Lithuania. Bank of Lithuania assures free Litas exchange by gold reserves and converted foreign cur-rency reserves into anchor currency at an official litas rate in the territory of the Re-public of Lithuania, as well as assures free exchange of this currency into litas.

The Bank of Lithuania exercises an exclu-sive right to put money into circulation or withdraw it from circulation. The Bank of Lithuania establishes the nominal value of money to be put into circulation, its identifi-cation, security and validity marks, arranges for banknote printing and coin minting as well as their storage. Banknotes currently in circulation include 10, 20, 50, 100, 200, and 500 litas banknotes, while coins in circula-tion include 1, 2, and 5 litas coins as well as 1, 2, 5, 10, 20, and 50 cents coins.

Acceding to the European Union (EU), Lithuania undertook to adopt the euro single currency of the EU in the future. Lithuania planned adopting the euro from 1 January 2007, however, the average annual inflationin Lithuania was slightly higher than the ref-erence value established by the Maastricht Treaty. On 19 December 2007 the Govern-ment of the Republic of Lithuania accepted the Convergence Programme of Lithuania for 2007 where it was emphasised that Lithuania will endeavour to join the euro area. Ac-cording to the available data, the best period for acceding the euro area starts from 2010. From the currency changeover date, the euro will become the single currency that will be the legal tender, except for the defined dualcirculation period of 15 calendar days, when the payments in the litas banknotes and coins will be still allowed as well.

All the client funds held in the accounts in the litas will be converted into the euro free of charge.

Upon the adoption of the euro, every refer-ence in the legal acts, contracts and other documents to the litas will be considered as a reference to the euro, and amounts de-nominated in litas will be recalculated un-der irrevocably established recalculation rate of euro and litas.


II. Investment Environment

A. INVESTMENT INCENTIVESA.l. Legal framework

PrinciplesThe legal system of the Republic of Lithua-nia recognises generally accepted principles of the legal regulation of investments. The principle of equal treatment means that both Lithuanian and foreign investors are sub-ject to equal business conditions pursuant to the Law on Investment as well as other legislation. The principle of equal protec-tion means that the laws of the Republic of Lithuania protect rights and lawful interests of both local (Lithuanian) and foreign in-vestors. Attention should also be paid to the fact that the Republic of Lithuania applies the principle of free access to all sectors of economy. Foreign investment is permitted in all lawful commercialeconomic activi-ties, subject to the restrictions prescribed by the laws of the Republic of Lithuania. The Law on Investment establishes that foreign investment is prohibited in the ar-eas guaranteeing state security and defence (except for the investments from economic entities compliant with the European and Trans-Atlantic integration criteria selected by Lithuania, subject to the State Defence Council’s consent). A licence as issued by an authorised institution is necessary for investing into certain spheres. Attention should be drawn to the fact that legal restric-tions as established by the laws are applied to foreign investors with regard to acquisi-tion of land into ownership.

Applicable legislation• Treaty of Accession 2003 (Official Ga-

zette (Valstybės Žinios), 2004, No 1-1); • Constitutional Law of the Republic of

Lithuania on Implementation of Part 3 Article 47 of the Constitution of the Republic of Lithuania No IX-960 of 20 June 2002 (Official Gazette (ValstybėsŽinios), 2002, No 64 - 1503) (hereinafter – the Constitutional Law);

• Law on Investment of the Republic of Lithuania No VIII-1312 of 7 July 1999 (Official Gazette (Valstybės Žinios),1999, No 66-2127);

• Law on the Fundamentals of Free Eco-nomic Zones No I-976 of 28 June 1995 (Official Gazette (Valstybės Žinios),1995, No 59-1462);

• Law on Concessions of the Republic of Lithuania No I-1510 of 10 September 1996 (Official Gazette (Valstybės Žinios),1996, No 92-2141);

• Law on Land of the Republic of Lithuania No I-446 of 26 April 1994 (Official Gazette(Valstybės Žinios), 1994, No 34-620);

• Other legal acts

Relevant institutions • Ministry of Economy of the Republic of

Lithuania• Ministry of Foreign Affairs of the Repub-

lic of Lithuania

Investment incentives and the European UnionDuring the negotiations for EU accession, Lithuania achieved a 7-year transition pe-riod with respect to the acquisition of ag-ricultural land by foreigners, and if neces-sary, this restriction may be extended for another 3 years. A review of the transition period instruments is performed in the third year after the accession. Upon the Commission’s proposal, the Council may unanimously resolve to shorten or termi-nate the transition period.

A.2. Our highlights

International treatiesThe Republic of Lithuania has concluded about 30 bilateral international treaties con-cerning promotion and mutual protection of investments. Usually such treaties establish a more favourable investment treatment on a mutual basis. It should be noted that most of the treaties on investment promotion and

protection do not provide for an obliga-tion of the Republic of Lithuania to expand treatment, incentives or privileges in respect of regulated investments provided for in a common market, customs union, economic union, free trade zone or a regional econom-ic development agreement that the country belongs to or may belong to in the future, or to expand the provisions of a current or future agreement regarding double taxation with a third country. Moreover, the Repub-lic of Lithuania has also concluded over 40 bilateral treaties on avoidance of double taxation of income and capital and preven-tion of tax evasion. These treaties provide for certain tax benefits for foreign invest-ment in the Republic of Lithuania.

Investment types The Law on Investment provides for the following types of foreign investment in the Republic of Lithuania:

1. Establishment of an undertaking, acqui-sition of capital or a part thereof of an undertaking registered in the Republic of Lithuania;

2. Acquisition of any type of securities;3. Building, acquisition of fixed assets or

increase of their value;4. Lending funds or other assets to under-

takings where the investor owns a part of the capital entitling it to control the undertaking or exert a considerable influ-ence upon it;

5. Implementation of concession and leas-ing contracts.

Investment protection and guaranteesThe laws of the Republic of Lithuania pro-tect investors’ rights and lawful interests. The laws of the Republic of Lithuania pro-vide that an investor has the right to manage, use and dispose of the object of investment. Upon payment of the taxes prescribed by the laws of the Republic of Lithuania, an in-vestor is entitled to convert the profit ownedby him into foreign currency and transfer it


abroad without any restrictions. State and municipal authorities and officials are pro-hibited to interfere with management, use and disposal of the investment objects ac-cording to the procedures upon the applica-ble laws. Damage inflicted upon the investorby unlawful actions of state or local authori-ties and their officials are compensated ac-cording to the procedure established by the laws of the Republic of Lithuania.

Foreign investment is subject to protection in case of expropriation, i.e. an object of in-vestment may be seized (expropriated):

1. Only according to the procedure pre-scribed by laws;

2. Only for public needs;3. Only for just compensation.Foreign investors are granted the right to legal protection in case of violation of their rights and lawful interests. Investment dis-putes between foreign investors and the Republic of Lithuania are resolved upon agreement of both parties, by the courts of the Republic of Lithuania, international ar-bitration institutions or other institutions. In case of investment disputes, foreign inves-tors have the right to directly address the In-ternational Centre for Settlement of Invest-ment Disputes.

The Law on Investment provides for the types of investment incentives, however, such investment incentives are only applica-ble to the extent they are not in conflict withthe EU legislation regulating state support.

Free economic zonesThe Law on the Fundamentals of FEZ pre-scribes the procedure and conditions of es-tablishment, functioning and liquidation of FEZ in the Republic of Lithuania. The right to invest in FEZ is granted to the Republic of Lithuania, foreign states, and internation-al organisations, legal and natural persons of both the Republic of Lithuania and for-eign countries.

FEZ may be used for the economic-com-mercial activities not prohibited by the laws of the Republic of Lithuania that cor-responds to the purposes provided for in the articles of association of an undertaking. The list of areas of capital investment and activities prohibited for undertakings oper-ating in FEZ, as provided for in the Law on the Fundamentals of Free Economic Zones, is exhaustive.

The Law on the Fundamentals of FEZ pro-vides for certain tax benefits, customs ben-efits, benefits as regards state levies and other benefits for FEZ undertakings. Thesebenefits are applied to the extent they do notcontradict the legislative acts of the EU.

At present, Klaipeda FEZ is operating ac-cording to the laws of the Republic of Lithuania. Kaunas FEZ is still in the process of starting operations. Siauliai FEZ is under liquidation subject to the Law on Liquida-tion of Siauliai Free Economic Zone.

B. PRIVATISATIONB.I. Legal framework

PrinciplesThe principle of privatisation of State and municipal property for cash is applied in the Republic of Lithuania.

Applicable legislation• Civil Code of the Republic of Lithuania of

18 July 2000 (Official Gazette (ValstybėsŽinios), 2000, No 74-2262);

• Law on Markets of Financial Instruments of the Republic of Lithuania No X-1024 of 18 January 2007 (Official Gazette(Valstybės Žinios), 2007, No 17-627);

• Law on the Privatisation of State-Owned and Municipal Property of the Republic of Lithuania No VIII-480 of 4 November 1997 (Official Gazette (Valstybės Žinios),1997, No 107-2688);

• Statute of the Central and Eastern Euro-pean Privatisation Network No VIII-655 of 12 March 1998 (CEEPN) (OfficialGazette (Valstybės Žinios), 1998, No 38-995);

• Law on Managing, Using and Disposing of State Owned and Municipal Property of the Republic of Lithuania No VIII-729 of 12 May 1998 (Official Gazette(Valstybės Žinios), 1998, No 54-1492).

Relevant institutions• State Property Fund• Municipal Property Funds or other mu-

nicipal administrative units• Privatisation Commission• Municipal Property Privatisation Com-

missions

B.2. Our highlights

ConceptPrivatisation means the transfer of State-owned and municipal property (shares and other property) to the ownership of potential buyers under the privatisation transactions concluded in accordance with the procedure established by the Law on the Privatisation of State-Owned and Mu-nicipal Property (hereinafter - the Law on Privatisation), as well as the transfer of State or municipality control in companies controlled by the State or municipality by floating a new issue of shares financed bythe additional contributions.

Subjects of privatisationIn the privatisation process, a buyer may be a Lithuanian or a foreign natural or legal person acquiring the privatisation object ac-cording to the Law on Privatisation.

A buyer may not be a Lithuanian State or municipal company, public limited liabil-ity company or private limited liability company, bank and insurance company, in which more than 1/2 of voting shares are owned by the State or municipality, as well as the offices and organisations fund-ed from the State or municipal budget of Lithuania or a foreign State. In case a po-tential buyer is recognized as a strategic investor by a resolution adopted by the Government of the Republic of Lithuania, the privatisation process becomes subject to a different legal regime.

Property for privatisationAny property or shares of a company, which are publicly owned by the State or munici-pality and included in the list of objects of-fered for privatisation, established by the Government of the Republic of Lithuania, may be privatised. A State/municipality controlled company is a company, in which more than 1/2 of voting shares are owned by the State or municipality. According to the Law on Privatisation the property not included in the list approved by the Govern-ment of Lithuania may not be privatised.

Methods of privatisationUnder Lithuanian law privatisation may take the form of any of the following:

• Public sale of shares;• Public auction;


• Public tender;• Direct negotiations;• Transfer of the State or municipal control

at a company controlled by the State or municipality;

• Lease with option to purchase.Public sale of shares is a method of selling shares belonging by the right of owner-ship to the State or municipality, where the shares are sold in an open manner, without limiting either the number of buyers or the number of shares subscribed by them, and where the price for selling of the shares is determined according to the supply and demand ratio. Shares of private companies may not be sold by the method of public subscription of shares.

A public auction is a method of selling of a privatisation object where the number of potential buyers participating in the auction is not limited and where the privatisation transaction is concluded with the highest bidder. If the terms for the privatisation of the object have been specified, they may notbe changed when concluding the privatisa-tion transaction.

A public tender is a transfer of one or sev-eral privatisation objects to potential buyer - the successful bidder - whose written of-fers with regard to the price and investment, subject to the fulfilment of the requirementsas stipulated in privatisation conditions, have been found to be the best. The potential buyer or potential buyers, who have submit-ted the highest bids and whose bids do not differ from the best bid by more than 10%, are offered to improve bids within the

Government’s established term.According the improved bids of the poten-tial buyers, the composed queue of the po-tential buyers is approved by the Head of the State’s Asset Fund. Having submitted the best improved bid, a potential buyer is recognised as the winner of a public tender and is invited to coordinate purchase-sale agreement. Potential buyer’s recognition as the tender’s winner is deemed invalid if he/she, within the set time, does not submit measures of implementation assurance of the agreed obligations as indicated in the privatisation programme, does not arrive to coordinate purchase-sale draft agreement in writing, refuses to sign purchase-sale agree-ment or does not pay for the object as ac-quired in a public tender by the established date (when for the privatisation object it must be paid at once). In such case, other

potential buyer, who is in a potential buyers queue, in turn, is recognised as a winner of a public tender under the order of the estab-lished legal acts and thus invited to coordi-nate a purchase-sale agreement.

Direct negotiations is a transfer of one or several privatisation objects to the winner of a public tender, whose written offers with regard to the price and investment subject to the implementation of the requirements as stipulated in the privatisation conditions, have been found to be the best.

Transfer of control at a company controlled by the State (municipality) is the issue of convertible debentures or new shares from additional contributions, which results or may result in the reduction of the number of shares in the authorised capital owned by the State or municipality. A company controlled by the State or municipality may be privatised by the transfer of control only in the event of failure to sell the shares in the company or when no less than 1/2 of the shares owned by the State or munici-pality in the company under the State or municipality control have been privatised by other methods.

Lease with an option to purchase is a pub-lic method of privatisation when a poten-tial buyer, upon signing the privatisation transaction and taking over the privatisation object – the long-term tangible assets, ac-quires the right to hold and use the object. The potential buyer shall acquire the right of ownership to the privatisation object only after he fully settles for the object and meets the other requirements of acquisition of the privatisation object set forth in the privatisa-tion transaction.

Privatisation procedureProperty is privatised according to the pro-cedure prescribed by the Law on Privatisa-tion by concluding a privatisation agree-ment, under which the possessor of a State or municipal privatisation object undertakes to transfer the privatisation object into the ownership of the buyer, and the buyer un-dertakes to pay the amount specified in theprivatisation agreement and/or fulfil otherobligations established in the agreement. Privatised property is sold by privatisation institutions such as the State Property Fund (in case the State property is privatised) or Municipal Property Funds or other munici-pal administrative units (in case the munici-pal property is privatised).

Every privatisation object holder must

present to the State Property Fund and/or potential buyers the documents and other information about the privatisation object in the manner prescribed by the Government. Confidential information must be furnishedto the potential buyers only upon prior re-ceipt of their written pledge to protect the information.

The following information on the privatisa-tion object must be publicly announced in the Information Bulletin of Privatisation: the object privatisation programme (name and privatisation method of the object; pri-vatisation conditions, privatisation terms; short description of the privatisation ob-ject); the time of visit to the company, the shares whereof are offered for sale and other asset which is being privatising; the proce-dure of privatisation documents acquisition and payment for them; the place of sale of the privatisation object.

A potential buyer for the obtainable pri-vatisation object makes the payment in the currency which is established in the object privatisation programme and which is considered a legal payment measure un-der the valid Lithuanian legislative acts or under the legislative acts of the country where the payment has to be made. The terms and procedure for the payment of the privatisation object are set in the pri-vatisation agreement.

The privatisation object can be purchased at once (within five working days after thesigning of the purchase-sale agreement of the privatisation object) or in portions (by stages). An owner of the privatisation object determines the latest possible term of the payment for the privatisation object. The term cannot be longer than 5 years when the shares are offered for sale and the term can-not be longer than 2 years when long-term tangible asset is offered for sale, except for the cases, when long-term tangible asset is offered for sale in leasing with an option for purchase way.

Paying in portions the privatisation object, the first portion must be paid not later thanwithin five working days after the day of thesigning of the purchase-sale agreement of the privatisation object. The payment by the first portion must be of not less than 51% ofthe whole payable sum for the privatisation object as determined in the purchase-sale agreement, when shares are offered for sale, or not less than 25% of the payable sum for the privatisation object as determined in the purchase-sale agreement, when long-term tangible asset is offered for sale. The buyer


must pay interest on deferred payments. Interests are calculated under the Govern-ment’s established order based on the av-erage interest rate of commercial banks ap-plied to the outstanding amount.

C. COMPETITION LAWC.I. Legal framework

PrinciplesThe laws of the Republic of Lithuania protect freedom of fair competition by re-stricting and/or prohibiting the following anticompetitive actions: unlawful anticom-petitive agreements, abuse of a dominant position, and other actions of unfair com-petition. Moreover, legislative acts of the Republic of Lithuania establish merger control in order to protect the freedom of fair competition established by Part 4 of Article 46 of the Constitution of the Re-public of Lithuania.

From 1 May 2004, Lithuania directly ap-plies respective EU competition regulations that prohibit restriction of competition.

Applicable legislation• Treaty establishing the European Com-

munity (Official Gazette (Valstybės Žinios), 2004, No 2-2);

• Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 083);

• Commission Regulation (EC) No 2790/1999 of 22 December 1999 on the ap-plication of article 81(3) of the Treaty to categories of vertical agreements and concerted practices (OJ 1999 L 336);

• Council Regulation (EC) No 1/2003 of 16 December 2002 on the implemen-tation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ 2003 L 001);

• Council Regulation (EC) No 139/04 of 20 January 2004 on the control of concentrations between undertakings (OJ2004 L 024);

• Law on Competition of the Republic of Lithuania No VIII-1099 of 23 March 1999 (Official Gazette (Valstybės Žinios),1999, No 30-856);

• Law on Advertising of the Republic of Lithuania No VIII-1871 of 18 July 2000 (Official Gazette (Valstybės Žinios),2000, No 64-1937);

• Government Resolution No 1591 of

6 December 2004 On Approval of the Rules on Establishment of the Amount of a Fine Imposed for Violations of the Law on Competition of the Republic of Lithuania (Official Gazette (ValstybėsŽinios), 2004, No 177-6567);

• Resolution of the Competition Council of the Republic of Lithuania No 17 of 24 February 2000 On the Explanations of the Competition Council Regarding the Definition of the Relevant Market (Offi-cial Gazette (Valstybės Žinios), 2000, No 19-487);

• Resolution of the Competition Council of the Republic of Lithuania No IS-172 of 9 December 2004 Amending Resolution of the Competition Council of the Republic of Lithuania No 1 of 13 January 2000 On Approval of Requirements and Condi-tions for Agreements Which Because of Their Minor Importance Do Not Appre-ciably Restrict Competition (Official Ga-zette (Valstybės Žinios), 2004, No 181-6732);

• Resolution of the Competition Council of the Republic of Lithuania No 52 of 17 May 2000 On Explanations of the Com-petition Council regarding Determina-tion of the Dominant Position (OfficialGazette (Valstybės Žinios), 2000, No 24-363; No 52-1516);

• Resolution of the Competition Council of the Republic of Lithuania No 45 of 27 April 2000 On Approval of Procedure for Submission and Examination of Notifica-tion on Concentration and of Calculation of Aggregate Turnover (Official Gazette(Valstybės Žinios), 2000, No 38-1084);

• Resolution of the Competition Council of the Republic of Lithuania No 1S-132 of 2 September 2004 Regarding Agreements Meeting Conditions of Part 1, Article 6, of the Law on Competition of the Re-public of Lithuania, and On Invalidation of Some Resolutions of the Competition Council of the Republic of Lithuania (Of-ficial Gazette (Valstybės Žinios), 2004,No 137-5027);

• Other legal acts.

Relevant institutions• European Commission• Competition Council of the Republic of

Lithuania

C.2. Our highlights

Application of legal provisions on competitionLithuanian legal provisions on competition are applicable to all undertakings or groups thereof, including undertakings registered

outside of Lithuania, if their economic ac-tivities restrict competition in Lithuania’s domestic market. Undertakings include enterprises, their combinations (associa-tions, amalgamations, consortiums, etc.), institutions or organisations, or other legal or natural persons, who perform or may perform economic activity in Lithuania or whose actions affect or whose intentions, if realised, could affect economic activity in Lithuania.

The EU regulations concerning competition are applicable, provided that restriction of competition may influence trade betweenthe EU Member States. Moreover, the EU Commission and Council regulations gov-erning application of exceptions to certain prohibited agreements shall be applicable even if the prohibited agreements lay down in the Competition Law may not affect mu-tual trade between the EU Member States.

Prohibited agreements restricting competitionAgreement restricting competition means a contract concluded in any form (written or verbal) between two or more undertak-ings or concerted actions of undertakings, including decisions of any combination of undertakings or of representatives of such combination, which create barriers to com-pete in the relevant market or which may weaken, distort or otherwise negatively affect competition, e.g. an agreement to directly or indirectly set (fix) prices forgoods or other purchase or sales condi-tions. All the agreements which have their object or effect the restriction of competi-tion or which restrict or may restrict com-petition are prohibited and are void from the moment of their conclusion.

Prohibition of abuse of a dominant positionThe Treaty establishing the European Com-munity and the Law on Competition pro-hibits abuse of dominant position within the relevant market by carrying out actions, which restrict or may restrict competition, unreasonably limit the possibilities of other undertakings to act in the market, or vio-late the interests of consumers. A dominant position means the position of one or more undertakings in the relevant market directly facing no competition or position enabling to make unilateral decisive influence in suchrelevant market by effectively restricting competition. Unless proved otherwise, the undertaking shall be considered to have a dominant position in the relevant market in


case its market share is of no less than 40%, also if each of a group of three or a smaller number of undertakings with the largest relevant market shares, jointly hold 70% or more of the relevant market.

Prohibition of other actions of unfair competitionUndertakings are prohibited from perform-ing any actions contrary to fair business practices and good customs if such actions may be detrimental to other undertaking’s possibility to compete; for example, it is prohibited to use without authorization a reference mark identical or similar to other undertaking’s name, registered trade mark or unregistered well-known trade mark or other preferred reference mark with a dis-tinguishing feature, if this causes or may cause confusion with that undertaking or its activity, or where it is sought to take undue advantage of the reputation of that under-taking (its mark or reference) or where this may harm the reputation of that undertaking (its mark or reference) or cause reduction in the distinguishing feature of the mark or ref-erence used by that undertaking, etc.

Merger Control Undertakings must inform the Competi-tion Council on an intended concentration and receive a permission, if the aggregate income of undertakings to take part in the concentration exceeds LTL 30 million in the last year preceding the year of concen-tration and if the aggregate income of each of at least two of the undertakings to take part in the concentration exceed LTL 5 mil-lion in the last year preceding the year of concentration.

Furthermore, the Competition Council is entitled to obligate undertakings to submit notifications on concentration and applyconcentration control procedures even if the general income indicators provided for in the law are not exceeded, provided that a probability exists that subsequent to con-centration a dominant position will be cre-ated or strengthened, or competition in a respective market will be significantly lim-ited. However, this right of the Competition Council to apply the concentration control procedure on its own initiative may only be exercised in the cases when less than 12 months have passed since implementation of concentration.

Council Regulation (EC) No 139/2004 on the control of concentrations between

undertakings as well as other EU legisla-tive acts in relation to concentration with a Community dimension may only be ap-plicable if concentration in accordance with the criteria laid down in the above Regu-lation is considered attainable on a Com-munity dimension. For example, when the total general income of undertakings to take part in the concentration exceed EUR 5,000 million in the last year preceding the year of concentration and if the total income of each of at least two of the undertakings with a Community dimension to take part in the concentration exceeds EUR 250 million, unless each of the above undertakings gets over 2/3 of the general income generated with a Community dimension in the same EU Member State.

State aidLithuanian undertakings are subject to the European Union state aid regulations laid down in Articles 87 - 89 of the Treaty Es-tablishing the European Community and in the Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty.

Aid provided in any form by an EU Mem-ber State or from its funds supporting cer-tain undertakings and production of certain goods, distorts or may distort competition and is therefore incompatible with the com-mon market principles and prohibited, pro-vided that it affects trade between Member States. State aid may be provided in differ-ent forms, e.g. tax relief, loan, guarantee, services, etc. If the EU Member State vio-lates the EU legal regulations concerning state aid, the European Commission is en-titled to impose strict sanctions both against the respective EU Member State, and the recipient of such aid, i.e. an undertaking.

Liability for actions restricting competitionIn case it is established that undertakings committed prohibited actions restricting competition, the Competition Council, pur-suant to the principles of objectivity and proportion, has the right to:

1. Obligate the undertakings to terminate il-legal activity, to carry out actions restor-ing the previous situation or eliminating the consequences of the infringement;

2. Obligate the undertakings or controlling persons, who have effected concentration without notifying the Competition Coun-

cil or without acquiring its permission, to carry out actions restoring the previous situation or eliminating the consequences of the concentration;

3. Impose fines on undertakings, e.g. upto10% of aggregate annual income during the last year for prohibited agreements, abuse of the dominating position, concen-tration, subject to notification, involvingviolation of the concentration conditions laid down by the Competition Council, or violation of obligations, and up to 3% of aggregate annual income during the last year for actions of unfair competition committed, etc.

Moreover, undertakings that have com-mitted a breach of the Competition Law requirements shall compensate damages inflicted upon other legal and private persons.

Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Arti-cles 81 and 82 of the Treaty contain equiva-lent sanctions applicable to undertakings.

D. ENVIRONMENTAL LAWD.I. Legal framework

PrinciplesThe environmental laws of the Republic of Lithuania enshrine fundamental principles of modern environmental law, e.g. high level of environmental protection, prudence and preventive actions, source of harm, in-tegration, the polluter pays, sustainable and consistent development.

Applicable legislation• Law on Environmental Protection of the

Republic of Lithuania No I-2223 of 21 January 1992 (Official Gazette (ValstybėsŽinios), 1992, No 5-75);

• Law on Assessing Environmental Impact of Planned Economic Activities of the Republic of Lithuania of 15 August 1996, new wording of the Law No X-258 of 21 June 2005 (Official Gazette (ValstybėsŽinios), 2005, No 84-3105);

• Law on State Natural Resources Taxes of the Republic of Lithuania No I-1163 of 21 March 1991, new wording of the Law No X-616 of 25 May 2006 (Official Gazette(Valstybės Žinios), 2006, No 65-2382);

• Law on Pollution Tax of the Republic of


Lithuania No VIII-1183 of 13 May 1999 (Official Gazette (Valstybės Žinios),1999, No 47-1469, 2002, No 13-474);

• Law on Petroleum and Natural Gas Re-sources of the Republic of Lithuania of 7 October 1992, new wording of the Law No IX-1564 of 20 May 2003 (OfficialGazette (Valstybės Žinios), 2003, No 51-2253);

• Law on Waste Management of the Re public of Lithuania No VIII-787 of 16 June 1998 (Official Gazette (ValstybėsŽinios), 1998, No 61-1726, 2002, No 72-3016);

• Law on Management of Packaging and Packaging Waste of the Republic of Lithuania No IX-517 of 25 September 2001 (Official Gazette (Valstybės Žinios),2001, No 85-2968).

Relevant institutions• Ministry of Environment of the Republic

of Lithuania• Committee on Environment Protection

of the Parliament of the Republic of Lithuania

• National Control Commission for Prices and Energy

• State Territorial Planning and Construc-tion Inspectorate

• Geological Authority of Lithuania• State Metrology Authority• General Forest Enterprise• State Protected Areas Authority• State Authority for Environment Pro-

tection• Administrations of county governors• Municipalities of towns and districts

Environmental law and the law of the European UnionThe Republic of Lithuania and the Euro-pean Union have agreed on the following transitional periods:

• A four-year transitional period (start-ing from the end of 2005) for municipal wastewater treatment according to the EU specifications;

• A four-year transitional period (from 2004) for restricting volatile organic combination emissions while transport-ing and storing petroleum;

• An eight-year transitional period (from 2008) for restricting emissions of sulphur dioxide and nitrogen oxides in power sta-tions in Vilnius, Kaunas and Mažeikiai.

D.2. Our Highlights

Taxes on state natural resourcesLaw on Taxes on State Natural Resources establishes tariffs of the tax on the use of state natural resources. In the event, the re-sources are explored at the taxpayer’s ex-penses, smaller fee tariffs for the use of state natural resources are applied to taxpayers. A bigger fee tariff is applied for non-de-clared or declared smaller amount of natu-ral resources than really extracted and (or) without permit extracted amount of natural resources. Tariffs of a taxpayer as provided for in the Law on Taxes on State Natural Resources are indexed under the consumer price index of fiscal year published by theDepartment of the Statistics under the Gov-ernment of the Republic of Lithuania.

Pollution taxesThe Law on Pollution Tax establishes that tax objects include the following: emis-sions, certain products specified by the law,packages with contents specified by the law.Manufacturers and importers are exempt from tax on pollution with production and/ or packaging waste for the entire volume of the products and/or packaging, provided that they are carrying out product and pack-aging waste utilisation assignments given by the Government, and under the order established by the Government or another authorised institution presents documents supporting the volume of the production or packaging waste reused, recycled or used for energy generation.

Activity planningThe Law on Environmental Protection es-tablishes the basic obligations of the user of natural resources which are relevant in developing economic activities, i.e. to as-sess possible environmental impact of its economic activities at its own expense, to implement measures eliminating or reduc-ing negative environmental impact, to com-pensate for environmental damage caused by unlawful activity, etc. According to the Law on Assessing Environmental Impact of Planned Economic Activities, environ-mental impact assessment has to be carried out when the planned economic activity is included in the list of the types of economic activities subject to environmental impact assessment or when the selection process reveals that environmental impact assess-ment shall be mandatory to the planned economic activity, or when implementa-

tion of the planned economic activity may impact the territories of European ecological net ‘Natura 2000’ and authorised institution identifies that this impact may be significant.

Waste managementThe Law on Waste Management establishes general requirements for waste prevention, record keeping, collection, storage, trans-portation, utilisation and disposal to prevent its negative effects on the environment and human health as well as provides for main principles of the organisation and planning of waste management systems. The Law on Waste Management provides that the waste holder, pursuant to the procedure prescribed by the law as well as other legal acts, has to manage waste himself or transfer it to a waste manager. Enterprises, which during the discharge of their economic-commer-cial activities generate waste, must sort it according to the procedure established by the Government or an institution authorised by it. The Law on Waste Management es-tablishes that enterprises which during the discharge of their economic-commercial activities generate waste in excess of the limits established by the Ministry of Envi-ronment and enterprises, which utilise, dis-pose of or handle waste for a period of time in excess of the period prescribed by law, must obtain licenses in accordance with the procedure established by the Ministry of Environment.

The Law on Management of Packaging and Packaging Waste which came into force on 1 January 2003 prescribes that producers and importers must take all the necessary measures to ensure that empty transport, grouped and sales packaging as well as its waste are managed in accordance with the priorities laid down in the law and that tar-gets for collection, recycling and reuse of packaging and packaging waste set by the Government or an institution authorised by it are attained. Producers and importers, which do not meet these requirements, must pay a tax for pollution of the environment with product waste pursuant to the proce-dure established by the law.

E. INTELLECTUAL PROPERTYE.I. Legal framework

PrinciplesProtection of copyright and related rights is granted upon having created (performed)


certain work. Objects of copyright and re-lated rights are not registered in Lithuania. Industrial property rights are recognised and protected only after being registered ac-cording to the procedure prescribed by laws of the Republic of Lithuania.

All intellectual property rights are exclu-sive, i.e. other persons do not have the right to use intellectual property without the con-sent of the owner of the intellectual prop-erty rights, unless otherwise provided by the law. Owners of intellectual property rights may defend violated rights in court.



• Law on Copyright and Related Rights of the Republic of Lithuania No VIII-1185 of 18 May 1999 (Official Gazette(Valstybės Žinios), 1999, No 50-1598);

• Patent Law of the Republic of Lithuania No I-372 of 18 January 1994 (OfficialGazette (Valstybės Žinios), 1994, No 8-120);

• Law on Trade Marks of the Republic of Lithuania No VIII-1981 of 10 October 2000 (Official Gazette (Valstybės Žinios),2000, No 92-2844);

• Design Law of the Republic of Lithuania No IX-1181 of 7 November 2002 (Offi-cial Gazette (Valstybės Žinios), 2002, No 112-4980);

• Law on the Legal Protection of Topogra-phies of Semiconductors Products of the Republic of Lithuania No VIII-791 of 16 June 1998 (Official Gazette (ValstybėsŽinios), 1998, No 59-1655).

Relevant institutions• Ministry of Culture of the Republic of

Lithuania• State Patent Bureau• Vilnius District Court (the court of first

instance for disputes regarding patent and trademarks’ property rights)

Intellectual property and the European UnionStarting from 1 May 2004, the Republic of Lithuania is subject to the Council Regula-tion (EC) No 40/94 of 20 December 1993 on the Community trade mark, pursuant to which subjects of Lithuania are entitled to register a Community trade mark whereas all registered Community trademarks cover

the Republic of Lithuania. It should be noted that from 1 May 2004 the validity of Com-munity trademarks registered up to that date has been automatically extended to cover the Republic of Lithuania. However in ac-cordance with the Treaty of Accession, us-age of a Community trade mark registered prior to Lithuania’s accession to the EU may be prohibited, if the previous trade mark or another previous right was legitimately reg-istered, applied or acquired in the Republic of Lithuania prior to the accession date, or, in certain cases, if the priority date is earlier that the date of accession to the EU.

Lithuania is also subject to the Council Regulation (EC) No 6/2002 of 12 Decem-ber 2001 on Community design, according to which Lithuanian subjects are entitled to register a Community design, and all registered Community designs cover the Republic of Lithuania. Moreover, from 1 May 2004, the validity of registered designs has been automatically extended to cover Lithuania. It should be noted that the Treaty of Accession stipulates that the claimant or bearer of a previous right in a new Mem-ber State may object to usage of such Com-munity design on the territory the previous right is protected. Herein, a ‘previous right’ means a right acquired or applied for legiti-mately prior to accession.

The Council Regulation (EC) No 1383/2003 of 22 July 2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights is effective in the Republic of Lithuania as well.

E.2. Our highlights

International obligationsThe Republic of Lithuania has been a mem-ber of WIPO since 30 April 1992. The Re-public of Lithuania is also a signatory to the main international treaties and conventions in the area of intellectual property.

Copyright and related rightsCopyright is applied to original literary, scientific and artistic works which are theresult of creative activities of an author expressed in any objective form. Both au-thor’s moral rights, which belong only to the author, and author’s economic rights, which may be transferred to third parties, are recognised in Lithuania.

In Lithuania, protection is granted to such related rights as performers’ economic and moral rights, rights of producers of phono-grams, rights of broadcasting organisations and rights of producers of the first recordingof an audiovisual work (film).

Owners of copyright and related rights are entitled to grant the authorisation for the exercise of their economic rights to as-sociations of collective administration of copyright and related rights established for this purpose. At present, the following col-lective administration associations exist in Lithuania: LATGA-A and AGATA.

PatentsThe form of protection of inventions is a patent granted by the State Patent Bureau. Only patentable, new and industrially appli-cable inventions are registered. The owner of a patent has the right to prevent other persons from using, without his authorisa-tion, a patented method of manufacturing a product as well as manufacturing, selling, importing, etc. a patented product or a prod-uct manufactured using a patented method of manufacture.

It should be noted that on 1 December 2004 the European Patent Convention en-tered into force, binding for the Republic of Lithuania. Following this Convention in a single application for the European Pat-ent an applicant may designate a number of the states-parties to the European Patent Convention where he wishes the patent to be valid. Such application is examined and the European patent is obtained through a unitary procedure.

An application for the European Patent may be submitted to the European Patent Officedirectly or through the State Patent Bureau of the Republic of Lithuania. It should be mentioned that the European Patent desig-nating the Republic of Lithuania affords to its owner the same rights as the national pat-ent granted by the State Patent Bureau of the Republic of Lithuania.

TrademarksIn Lithuania, trademarks are registered with the Register of Trademarks of the Repub-lic of Lithuania, administered by the State Patent Bureau. Only registered trademarks are protected, unless a trademark has been recognised as well known by the court. The laws establish the rights of the owner of a trademark, including the right to prevent any


third persons from using in the course of a trade without an authorisation of the owner any sign which is identical or confusingly similar to the registered mark in relation to goods and/or services, which are identi-cal or similar to those for which the mark is registered. It is noteworthy that an inter-national trademark registration where the Republic of Lithuania is indicated or which is extended to the Republic of Lithuania is granted the same protection as a trademark registered under the Law on Trademarks of the Republic of Lithuania. As mentioned above, as of 1 May 2004 Community trade-marks are effective in Lithuania.

DesignLegal protection is applied to design regis-tered in the Design Register of the Republic of Lithuania administered by the State Pat-ent Bureau. Only new design with unique features may be registered. The designer who created a design is granted personal moral rights, as well as the right to regis-ter the design in his name (which may be transferred to third persons). Moreover, the owner of a registered design has an exclu-sive right to use the design, authorise third persons to use the design or prevent them from manufacturing, offering, sale, intro-duction to market, etc. of products or parts thereof, which are copies of the design or are essentially its copies, when this is in-tended for commercial purposes, without an authorisation of the owner of the designs. As mentioned above, from 1 May 2004, Com-munity design is effective in Lithuania.

Investment of intellectual property rightsAuthors’ economic rights, ancillary eco-nomic rights as well as economic rights to objects of industrial property may be in-vested (as a contribution in kind) in under-takings operating or being established in the Republic of Lithuania.

F. REAL PROPERTYEl. Legal framework

PrinciplesThe real property market in the Republic of Lithuania is regulated following gen-erally accepted principles of ownership immunity and protection of rights of a just acquirer (possessor).

Applicable legislation• Law of the Republic of Lithuania on

Amendments to Article 47 of the Constitu-tion of the Republic of Lithuania No IX-1305 of 23 January 2003 (Official Gazette(Valstybės Žinios), 2003, No 14-540);

• Constitutional Law of the Republic of Lithuania on Implementation of Part 3 of Article 47 of the Constitution of the Republic of Lithuania No I-1392 of 20 June 2002 (Official Gazette (ValstybėsŽinios), 2002, No 64-1503) (hereinafter - the Constitutional Law);

• Civil Code of the Republic of Lithuania of 18 July 2000 (Official Gazette (ValstybėsŽinios), 2000, No 74-2262);

• Law of the Republic of Lithuania on Real Property Register No I-1539 of 24 Sep-tember 1996 (Official Gazette (ValstybėsŽinios), 1996, No 100-2261);

• Law of the Republic of Lithuania on Real Property Cadastre No VIII-1764 of 27 June 2000 (Official Gazette (ValstybėsŽinios), 2000, No 58-1704);

• Law of the Republic of Lithuania on Land No 1-46 of 26 April 1994 (Offi-cial Gazette (Valstybės Žinios), 1994, No 34 - 620);

• Provisional Law of the Republic of Lithuania on Acquisition of Agricultural Land No IX-1314 of 28 January 2003 (Official Gazette (Valstybės Žinios),2003, No 15-600) (hereinafter - the Pro-visional Law);

• Law of the Republic of Lithuania on Con-struction No 1-1240 of 19 March 1996 (Official Gazette (Valstybės Žinios),1996, No 32-788);

• Law of the Republic of Lithuania on Ter-ritorial Planning No 1-1120 of 12 De-cember 1995 (Official Gazette (ValstybėsŽinios), 1995, No 107-2391);

• Law of the Republic of Lithuania on Restoration of Rights of Ownership of Citizens of the Republic of Lithuania to Existing Real Property No VIII-359 of 1 July 1997 (Official Gazette (ValstybėsŽinios), 1997, No 65-1558);

• Law of the Republic of Lithuania on Pos-session, Using and Disposing of State-Owned and Municipal Property No VIII-729 of 12 May 1998 (Official Gazette(Valstybės Žinios), 1998, No 54-1492).

Relevant institutions• State Enterprise Centre of Registers• Mortgage Departments under the Dis-

trict Courts

• Department of Heritage under the Ministry of Culture of the Republic of Lithuania

• Administrations of county governors• Municipalities

F.2. Our highlights

Acquisition of landIn accordance with the Constitutional Law, persons permanently residing and legal enti-ties as well as other registered organizations in the EU Member States, OECD, or NATO Member States or countries participating in the European Economic Area Agreement as well as Lithuanian subjects have the same rights to acquire land, inland waters and for-ests in Lithuania.

An exception is made to acquisition of agricultural land and woodland: until the end of the 7-year transition period stipu-lated in Lithuania’s Treaty of Accession to the European Union, foreign subjects (ex-cept for foreigners permanently residing in Lithuania and engaged in agricultural activities for not less than 3 years as well as foreign legal persons and other foreign organisations with established representa-tive or branch offices in Lithuania) maynot acquire land of the abovementioned purpose in Lithuania.

A person from the State of Lithuania may acquire not more than 300 hectares of agri-cultural land. In Lithuania one person may acquire not more than 500 hectares of agri-cultural land.

Land owned by the State of the Republic of Lithuania by the right of exclusive owner-ship (nationally significant inland waters,littoral land or land within the territories of State seaports, etc.) may not be acquired into private ownership.

Foreign subjects that do not comply with the selected European and Trans-Atlantic integration criteria, may lease, use or man-age land in Lithuania on other grounds pro-vided for by the law.

Acquisition of structuresLithuanian and foreign subjects have the same rights to acquire flats, buildings andother structures in Lithuania. Structures owned by the State of the Republic of Lithuania by the right of exclusive own-ership may not be acquired into private ownership.


Sale and purchase of a real property objectAccording to Article 6.393 of the Civil Code of the Republic of Lithuania, a sale-purchase agreement of any real property object must be concluded in a notarial form, and failure to meet the said requirement shall make the agreement null and void. Please note that the title to the acquired real property shall pass to the purchaser at the moment of transfer thereof to the purchas-er, which is to be documented by a state-ment of transfer and acceptance signed by the purchaser and the seller or by any other document provided for in the agreement. It should also be emphasised that a notarised sale-purchase agreement of a real property object has the power of law to the parties in question, however, it may only be invoked against and carry legal implications to third parties in case the transfer of the title has been registered with the Real Property Reg-ister according to the procedure prescribed by the laws.

Lease of a real property objectThe Civil Code of the Republic of Lithua-nia provides for a simple written form for a lease agreement of real property object. Ac-cording to Articles 6.531 and 6.547 of the Civil Code, a lease of a real property object may only be invoked against third parties if it is registered in the Real Property Regis-ter. Thus, upon change of the real property owner, the new owner acquires the lessor’s rights and obligations under the lease regis-tered with the Real Property Register. On the other hand, upon change of the real property owner, the lessee is entitled to terminate the lease even if it has been registered with the Real Property Register.

G. REGIONAL AND UNIVERSAL IN-TERNATIONAL TRADE AGREEMENTS LITHUANIA IS A SIGNATORY TOThe international trade relations of the Re-public of Lithuania can be divided into the following groups: firstly, contractual rela-tions through the EU, secondly, an individu-al participation in the regional and universal international trade agreements.

On 1 May 2004, Lithuania acceded the common foreign trade policy area of the EU and took over all the EU contractual rela-tions with third countries and international organisations as well as trade instruments applied by the EU to third countries.

As regards the participation in international trade organizations, the Republic of Lithua-nia has been a member of the World Trade Organisation (WTO) from 31 May 2001. Membership in WTO has made Lithuania’s trade with third countries more liberal, trans-parent and more predictive, Lithuania be-came more attractive for foreign investors.

Lithuania also actively cooperates with the Organisation for Economic Cooperation and Development (OECD). From 1998, Lithua-nia participated in the Baltic Regional Pro-gram established by the OECD, the primary aim of which was stimulation of the eco-nomic growth of the Baltic countries. After the achievement of the main objectives of this program, the BRP was finished in theyear 2005. At present, Lithuania is a fully-fledged participant or has an observer’s sta-tus in various OECD programmes, schemes and committees.

As regards the regional trade agreements, Lithuania takes active part at the Council of the Baltic Sea States (CBSS). One of the three working groups within the CBSS is the Working Group on Economic Cooperation (WGEC). The WGEC examines problems related to the regional economic coopera-tion and suggests measures for improving the conditions for investment and trade in the Baltic Sea region.

H. LEGAL REGULATION OF IMPORT AND EXPORTHI. Legal framework

PrinciplesMembership in the EU, the EU free trade agreements with third countries, member-ship in the World Trade Organisation pre-vent the unilateral application of duties or application of other trade barriers, thus en-suring the principle of free trade.

Applicable legislation• Council Regulation (EEC) No 2913/92 of

12 October 1992 establishing the Com-munity Customs Code (with subsequent amendments);

• Commission Regulation (EC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regu-lation (EEC) No 2913/92 establishing the Community Customs Code (with subse-quent amendments);

• Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the common customs tariff (with subsequent amendments);

• Council Regulation (EEC) No 918/83 of 28 March 1983 setting up a Community system on relieves from customs duty (with subsequent amendments);

• Commission Regulation (EC) No 800/1999 of 15 April 1999 laying down com-mon detailed rules for the application of the system of export refunds of agricul-tural products (with subsequent amend-ments);

• Treaty of Accession 2003 (Official Ga-zette (Valstybės Žinios), 2004, No 1-1);

• Order of the Minister of Finance of the Republic of Lithuania on Approval of the Regulations of the Customs Department under the Ministry of Finance No 171 of 10 July 1998 (Official Gazette (ValstybėsŽinios), 2004, No 98-3652);

• Law on Value Added Tax of the Republic of Lithuania No IX-751 of 5 March 2002 (Official Gazette (Valstybės Žinios),2002, No 35-1271);

• Law on Excise Duties of the Republic of Lithuania No IX-569 of 30 October 2001 (Official Gazette (Valstybės Žinios),2001, No 98-3482);

• Law on Customs of the Republic of Lithuania No IX-2183 of 27 April 2004 (Official Gazette (Valstybės Žinios),2004, No 73-2517).

Relevant institutions• Ministry of Finance of the Republic of

Lithuania• Customs Department under the Ministry

of Finance• State Tax Inspectorate under the Ministry

of Finance• Ministry of Economy of the Republic of

Lithuania• National Payment Agency under the Min-

istry of Agriculture• Lithuanian Regulatory Authority for Ag-

ricultural and Food Products Market

The European Union and import/export regulationsMembership in the EU and WTO limits Lithuania’s possibility of unilateral appli-cation of customs duties, quantitative re-strictions for import or export (i.e. quotas), discriminatory internal taxes and licensing policies that hinder trade as well as open new opportunities for business.


H.2. Our highlights

Customs tariffs and typesThe Community Customs Code and its im-plementation regulations stipulate that du-ties are collected for all goods imported into the Community customs territory, except for goods that are:

Not subject to customs duties;Subject to customs tariffs suspensions laid down in separate legislative acts of the EU;

Duty-free, based on the exceptions provid-ed for in the Council Regulation (EEC) No 918/83.

The following customs rates are applied to calculation of customs according to the computation method:

• To the value (ad valorem) - a set percent-age based on the value of goods;

• Specific (quantitative) - set as a fixed sumper standard unit of measurement of a commodity (e.g., tons of oil);

• Mixed - one part of the duty is calculated according to the ad valorem standard; the other as a fixed sum per standard unit ofmeasurement for a commodity.

When setting customs rates, goods are cate-gorised according to the codes of Combined Nomenclature. Starting from 1 January 2008 the new version of the Combined No-menclature (CN), as approved by the Com-mission’s Regulation (EC) No 1214/2007 of 20 September 2007, applies.

Summarised information on tariff and non-tariff regulation applied in the EU is pro-vided in the TARIC database.

TARIC is an instrument for application of the Community customs tariff and other EU trade regulation means including the goods nomenclature, applicable customs tariffs and as well as other instruments of tariff and non-tariff regulation.

TARIC code structure is based on 8-digit combined nomenclature codes with two ad-ditional digits, or in certain cases 1-2 addi-tional 4-digit codes (e.g. where anti-dump-ing duties apply). By its nature, TARIC system is not a legislative act; however, it is the basic tool for administration of customs activities, since TARIC information is up-dated on a daily basis.

Import duty rate, depending on the country

of origin of goods, may be autonomous, conventional or preferential.

Goods which are imported or temporar-ily imported or are in transit through the Community territory may be held in cus-toms warehouses until they are allowed to circulate in the Community customs territory or are transported from it. The establishment and operation of customs warehouses is provided for in the Com-munity Customs Code.

Instances of exemption from import dutiesDuties are not payable when goods cross the Community customs territory in transit and are not allowed to freely circulate in the Community customs territory or (in certain cases) where they are imported temporarily or in case they are not subject to any estab-lished customs rate.

Council Regulation (EC) No 918/83 pro-vides for exemptions, establishing relief from customs duties applicable to (the list is not exhaustive):

• Personal belongings of individuals who are changing their place of residence and moving from a third country into the Community;

• Items imported in the Community in the case of marriage;

• Small parcels with items of low value for non-commercial purpose;

• Capital goods and related equipment im-ported to the Community from a third country by a company, which is terminat-ing its activity abroad and transferring it to the Community;

• Material, appliances and equipment re-lated to education, science and culture;

• Goods intended for charity and philan-thropic organisations: items for the blind and disabled;

• Items imported for trade promotion (low-value samples of goods, advertising ma-terials, etc.);

• Fuel contained in automobiles and trains, which are crossing the Community bor-der and fuel reserves contained in and supplied to ships and air craft of interna-tional transport;

• Lithuanian and foreign currency as well as securities.

In addition, goods, which are allowed to cir-culate freely in Lithuania (except for goods imported and brought to another Member State or goods exempt from import VAT)

are subject to 18% Value Added Tax. Cer-tain goods (regardless of whether they are imported or produced within the Communi-ty) are also subject to an excise tax. Excise tax applies to ethyl alcohol and alcoholic beverages, processed tobacco, energy prod-ucts (including fuel) and electricity.

The customs, in accordance with the Regu-lation on Common Customs Tariff, uses an integrated tariff of the Republic of Lithua-nia in applying customs and its adminis-tered taxes, measures of common agricul-ture policy as well as bans and restrictions of import, export and transit falling under its competence.

Export regulationThe European Union does not apply any du-ties on goods for export. This encourages the manufacture and export of the Commu-nity goods – an exporter can only be a com-pany registered in an EU Member State or a representative office of a foreign company.

Common agricultural policyCAP includes agriculture and trade in ag-ricultural products. The purpose of CAP is protection of the Community market from fluctuation of the world prices and low-price import in order to ensure reasonable income for Community manufacturers, the purpose of which is to support land sector by ensuring procurement prices of agricul-ture production. The legal provisions of CAP were laid down in the Treaty Estab-lishing the European Community (Treaty of Rome) of 1957, whereas detailed rules and requirements are provided for in various regulations as published by the Council and Commission of the European Community.

Agricultural products include farming, live-stock, fishery products as well as relatedproducts of the first production stage. Trademechanism of goods received as a result of processing agricultural products applicable to certain goods is regulated by Council Regulation (EC) No 3448/93.

Duties payable upon implementation of the CAP instruments may be classified as follows:

• Specific customs duties;• Ad valorem duties;• Combined or alternative duties;• Countervailing charges;• Preferential rates of CAP charge;• Safeguard charges.


As regards application of CAP instruments, the Customs Department or its authorised customs agency performs the following functions related to import of agricultural products:

• Verification of and drawing import docu-ments provided for in the agricultural trade system (e.g. agricultural products import licences);

• Customs verification of imported agricul-tural products;

• Organisation and control of collection of import duties on agricultural and fisheryproducts;

• Administration of agricultural and fish-ery products import tariff quotas classi-fied based on the time of acceptance of acustoms declaration for release of quota goods for free circulation.

I. EMPLOYMENT AND LABOUR RELATIONSI.1. Legal framework

PrinciplesLabour relations in the Republic of Lithua-nia are based on the following principles: freedom of association, freedom to choose one’s field of work, governmental assistancefor individuals in implementing their right to work, equality of subjects of labour law, en-suring a safe and healthy work environment, just payment for work performed, prohibition of forced and mandatory work of any form, the stability of labour relations, etc.

Applicable legislation• Labour Code of the Republic of Lithua-

nia No IX-926 of 4 June 2002 (OfficialGazette (Valstybės Žinios), 2002, No 64-2569);

• Law on Public Service of the Republic of Lithuania No VIII-1316 of 8 July 1999 (Official Gazette (Valstybės Žinios),1999, No 66-2130);

• Law on Trade Unions of the Republic of Lithuania No I-2018 of 21 November 1991 (Official Gazette (Valstybės Žinios),1991, No 34-933);

• Law on Labour Councils of the Republic of Lithuania No IX-2500 of 26 October 2004 (Official Gazette (Valstybės Žinios),2004, No 164-5972);

• Law on European Labour Councils of the Republic of Lithuania No IX-2031 of 19 February 2004 (Official Gazette(Valstybės Žinios), 2004, No 39-1271);

• Law on Safety and Health of Employ-ees of the Republic of Lithuania No IX-1672 of 1 July 2003 (Official Gazette(Valstybės Žinios), 2003, No 70-3170);

• Law on State Social Insurance of the Re-public of Lithuania No I-1336 of 21 May 1991 (Official Gazette (Valstybės Žinios),1991, No 17-447);

• Law on the Legal Status of Aliens of the Republic of Lithuania No IX-2206 of 29April 2004 (Official Gazette (ValstybėsŽinios), 2004, No 73-2539);

• Law on the State Labour Inspector-ate of the Republic of LithuaniaNo IX-1768 of 14 October 2003 (Official Gazette (Valstybės Žinios), 2003, No 102-4585);

• Law On Guarantees For Posted Workers of the Republic of Lithuania No X-199 of 12 May 2005 (Official Gazette (ValstybėsŽinios), 2005, No 67-2406);

• Law on Participation of Employees in Decision Making in European Companies of the Republic of Lithuania No X-200 of 12 May 2005 (Official Gazette (ValstybėsŽinios), 2005, No 67-2407.

Relevant institutions• Ministry of Social Security and Labour of

the Republic of Lithuania• State Social Insurance Fund Board under

the Ministry of Social Security and La-bour

• Lithuanian Labour Exchange under the Ministry of Social Security and Labour of the Republic of Lithuania

• State Labour Inspectorate of the Republic of Lithuania

Employment, labour relations and the European UnionDuring the negotiations for accession to the EU in the area of freedom of move-ment for persons, the EU asked for a tran-sitional period ranging from two to seven years starting from the commencement of Lithuania’s membership (according to the 2+3+2 formula), during which the Member States of the EU can limit the free move-ment of labour force from Lithuania. In turn, Lithuania also has the right to limit the free movement of labour force from those Member States that have imposed limita-tions on Lithuania. After the accession to the EU the United Kingdom, Sweden and

Ireland do not impose limitations on free movement of labour force from Lithuania. Greece, Island, Spain, Portugal and Finland do not impose those limitations any more, as well. Denmark, the Netherlands, Italy and Norway apply simplified work permitsfor the nationals of Lithuania. Lithuania has the right to negotiate elimination of the transitional period with the member States that apply the restriction to free movement of labour force.

I.2. Our highlights

Employment of foreignersAn alien (non EU citizen) intending to work in Lithuania is required to obtain a work permit, unless he complies with the terms that do not require such permit. Together with the work permit, the alien intending to reside in Lithuania is required to obtain a permit for temporary or permanent resi-dence in the Republic of Lithuania.

Regardless of the type of employment in Lithuania, the EU citizens are not re-quired to hold work permits. These citi-zens are obliged to declare their place of residence in the Republic of Lithuania, if they intend to work here at least 3 months within half of a year.

Conclusion of an employment contractAn employee may only commence with working after he/she and the employer have signed an employment contract. The employee must also receive a copy of the contract prior to starting work as well as a document confirming his/her identity. Theemployment contract must be executed in writing according to the model form ap-proved by the Government of the Republic of Lithuania.

The employment contract must contain es-sential provisions, i.e. those on which par-ties must agree to validate the employment contract, and other provisions. The essen-tial provisions are: the place of work and work functions. Separate types of employ-ment contracts can also provide for other essential provisions (e.g. term of contract, seasonal work, etc.). Besides the essential provisions, in every employment contract both parties are required to agree on the conditions of payment for work. Further, an employer and an employee can agree upon are any other conditions that are not


forbidden to agree upon by the Lithuanian labour legislation or collective agreements, and that do not aggravate the position of the employee with respect to the position estab-lished by legislation.

Fixed-term employment contractIt is forbidden to enter into a fixed-term em-ployment contract, if the work is of perma-nent nature. Exceptions may be applicable in accordance with the laws or collective agree-ments. The duration of the fixed-term em-ployment contract may not exceed 5 years.

Altering employment conditionsAn employer does not have the right to de-mand from an employee to perform tasks, which have not been agreed upon in the employment contract, with the exception of cases specified in the Labour Code. The fol-lowing are the cases of possible alterations of employment contract conditions:

• When shifting production, changing its output, the technology used or organisa-tion of work, as well as other cases of in-dustrial necessity. On this basis, the law limits the possibility of changing essen-tial provisions of the employment con-tract and remuneration conditions;

• When it is essential to avoid a natu-ral disaster or an industrial accident, to quickly eliminate it as well as its effects and prevent future accidents, extinguish a fire and in other unforeseeable cases. Anemployee can be transferred to another work in the same location for a period of up to one month. On this basis, essential provisions of the employment contract can be changed;

• In the event of downtime, consideration shall be given to the employee’s profes-sion, line of work, qualifications, physicalhealth, and the possibilities of decreasing the employee’s salary are limited.

RemunerationRemuneration encompasses principal pay-ment for work and supplementary pay ments, paid in any manner directly to the employee for the work performed. Remu-neration is paid in cash only.

An employee’s hourly rate or monthly sal-ary cannot be less than the minimum hourly rate or minimum monthly salary as set by the Government of the Republic of Lithua-nia. The current legislation provides for a

minimum hourly rate of LTL 4,85 (EUR 1.40), and a monthly salary of LTL 800 (EUR 231,69) for work in normal working conditions. In case of deviation from normal working conditions, also in cases of over-time work, night work, work performed on weekends and public holidays, an increased salary is paid out. Employees must be paid at least twice a month, or, in cases of the employee’s written request - once a month.

Termination of employment contract on the employer’s initiativeAn employer may terminate the employ-ment contract both when the employee is at fault and when he/she is not. In cases where an employee has offended his responsibili-ties, he/she can be dismissed without a prior notice. It must be noted that the laws estab-lish certain limitations and guarantees when terminating an employment contract even in cases where an employee is at fault.

The employer may terminate the employ-ment contract with an employee without employee‘s fault, upon a prior notice of ter-mination as set forth in the Labour Code of the Republic of Lithuania, and if employee may not be transferred to another work un-der his/her consent.

Non-term employment contract can only be terminated for valid reasons (the employee’s qualifications, professional aptitude, his/herbehaviour at work, economic or techno-logical circumstances, restructuring of the workplace and similar), and must provide a prior notice of termination as set forth in the Labour Code of the Republic of Lithuania. Certain restrictions are in effect when termi-nating employment contracts with individu-als of certain categories (under the age of 18, the handicapped, etc.); also, individuals of certain categories must be given prefer-ence to remain at work when staff is being downsized. Additionally, termination of the employment contract with a prior notice when the employee is not at fault is only permissible when it is not possible to transfer the employee to another work upon his/her consent. An employer can terminate a fixed-term employment contract before the expiry thereof only in extraordinary cases when an employee cannot, be transferred to another work with his consent or upon payment of an average wage to the employee for the re-maining period of the employment contract.

An employment contract with the employee can also be terminated without a prior notice on specific grounds stipulated in the law.

An employee is entitled to terminate a non-term employment contract as well as a fixed-term employment contract prior to itsexpiry by giving his employer written no-tice thereof at least 14 days in advance. Col-lective agreements may set a different pe-riod of notice up to one month. The Labour Code provides for the circumstances when the minimum period of notice to terminate an employment contracts by initiative of an employee may be 3 days.

Guarantees and limitations when terminating an employment contractWhen terminating an employment contract with an employee who is not at fault, the employer must pay out a severance pay the amount whereof depends on the length of uninterrupted employment with the em-ployer and other conditions stipulated in laws (it may vary from one to six months’ average monthly salaries).

The laws provide for a number of limita-tions and guarantees that are applicable when terminating contracts with employ-ees and depend on the age of an employee, maternity (paternity), representation of em-ployees (membership in trade unions or la-bour councils) and other circumstances.

Representation of employeesIn case of collective employment relations, the rights and interests of employees may be represented and protected by trade unions, or, if there is no trade union in the company, and the representation function is not trans-ferred to a respective trade union of the ap-propriate sector of economic activity - by a works council (or in certain cases - by the European Works Council). Works councils may be formed and operate within one en-tity only. One of the main functions of an employees’ representative is negotiation with the employer regarding the collective agreement, its compliance control, recom-mendations to the employer regarding or-ganisation of work, organising and manag-ing strikes, etc.

Material liabilityThe basis for employee’s material liability is a guilty and illegal act of the employee who caused damage to the employer, cau-sality and the link between the damage and the employee’s work functions. The issue of compensation for damages can be consid-ered under the labour legislation if, at the time of the deed, the parties were in labour


relations, in other cases this issue shall be considered under the general procedures prescribed by the civil law.

The law allows an employer to seek com-pensation for damages equivalent up to the employee’s three average monthly wages if there are no grounds for full material li-ability, i.e. the employee’s intent, criminal act, an agreement between employer and employee regarding full material liability, etc. Damages not exceeding the employee’s one-month average salary can be deducted from the employee’s salary by the employ-er’s written order, while in other cases - fol-lowing the procedure set for the settlement of labour disputes.

J. ELECTRONIC COMMUNICATIONS, INFORMATION TECHNOLOGIES AND ELECTRONIC SIGNATUREJ.I. Legal framework

PrinciplesThe legal acts of the Republic of Lithua-nia regulating electronic communications activities are based on the following prin-ciples: effective management and use of limited resources, technological neutrality and functional equivalence, proportional-ity, minimum necessary regulation, legal certainty in dynamic market, economic development and assurance of efficient competition, protection of consumer rights, objectivity of regulation criteria, conditions and procedures, transparency and non-discrimination.

Applicable legislation• Law on Electronic Communications of

the Republic of Lithuania No IX-2135 of 15 April 2004 (Official Gazette (ValstybėsŽinios), 2004, No 69-2382);

• Law on Electronic Signature of the Re public of Lithuania No VIII-1822 of 11 July 2000 (Official Gazette (ValstybėsŽinios), 2000, No 61-1827);

• Law on Legal Protection of Personal Data of the Republic of Lithuania No I-1374 of 11 June 1996, new wording of the Law (Official Gazette (Valstybės Žinios),2003, No 15-597);

• Law on the Provision of Information to the Public of the Republic of Lithuania No I-1418 of 2 July 1996, new wording

of the Law (Official Gazette (ValstybėsŽinios), 2006, No 82-3254);

• Law on the Ratification of the Statutesof the International Telecommunications Union and the Convention of the Inter-national Telecommunications Union of the Republic of Lithuania No VIII-1340 of 28 September 1999 (Official Gazette(Valstybės Žinios), 2000, No 5-123).

Relevant institutions• Government of the Republic of Lithuania• Ministry of Transport and Communica-

tions of the Republic of Lithuania• Communications Regulatory Authority

under the Government of the Republic of Lithuania

• Information Society Development Com-mittee under the Government of the Re-public of Lithuania

• State Data Protection Inspectorate• Lithuanian Standards Board• Competition Council of the Republic of

Lithuania• Ethics Commission for Journalists and Pub-

lishers Radio and Television Commission of Lithuania Knowledge Society Council.

J.2. Our highlights

Electronic communicationsThe Law on Electronic Communications regulates social relations pertaining to elec-tronic communications services and net-works, associated facilities and services, use of electronic communications resources as well as social relations pertaining to radio equipment, terminal equipment and electro-magnetic compatibility. Undertakings have the right to engage in electronic communi-cation activities without any prior consent of the state and under the requirements of the Law on Electronic Communications and regulations adopted by the Communica-tions Regulatory Authority (which regulate the general conditions and requirements applicable to electronic communication ac-tivities). However, certain electronic com-munications’ activities require an obligatory notification to be provided to a respectivesupervisory institution.

Subjects having substantial influence in therelevant electronic communications market, i.e. subjects separately or jointly with other subjects holding a position considered as dominating, are subject to additional require-

ments of transparency, non-discrimination, accounting and other management provided by the Law on Electronic Communications.

Electronic signatureThe Law on Electronic Signature establish-es that a secure electronic signature created using a secure signature creation device and confirmed by a valid qualifying certificate,has the same legal power in the case of elec-tronic documents as a signature in written documents and is permissible as evidence in court. It should be noted that signature veri-fication data is public. The abovementionedlaw also provides that certification serviceproviders in Lithuania issuing qualifying certificates are obliged to register with theinstitution responsible for supervising elec-tronic signatures in accordance with the procedure established by the law. Qualify-ing certificates issued by foreign certifica-tion service providers are considered to be equally valid in law to the qualifying cer-tificates issued by Lithuanian certificationservice providers.

Protection of personal dataThe Law on Legal Protection of Personal Data is applicable to the management of personal data if:

• Personal data is managed, as part of its activities, by a data manager established and operating in Lithuania;

• Personal data is managed by a data man-ager, established outside Lithuania, but subject to the laws of Lithuania in accord-ance with the international public law;

• Personal data is managed by a data man-ager established and operating in a state which is not an EU member state, but who uses means of automated personal data management installed in Lithuania, unless such means are used for sending data in transit; Pursuant to Lithuania’s ob-ligations with respect to membership in the EU, this law also ensures free move-ment of personal data.

According to the law personal data shall be considered as any information relat-ing to a natural person – the data subject who is identified or who can be identifieddirectly or indirectly by reference to such data as a personal identification number orone or more factors specific to his physical,physiological, mental, economic, cultural or social identity. It should be noted that addi-tional legal requirements apply to process-ing and management of special categories


of personal data (such as data related to the racial or ethnic origin of a natural person, his political opinions, religious, philosophi-cal or other beliefs, membership in a trade union, and data concerning his health, sex life and criminal convictions).

MediaThe Law on Provision of Information to the Public establishes that public information appearing in the media, i.e., books, newspa-

pers, magazines, newsletters, television and radio programs, cinema productions, etc. must be presented in a correct, precise and unbiased manner. The law ensures the right of every individual to gather information and publicise it in the media, record information in writing, photograph, film and record itby other means. According to the law, the freedom of information is guaranteed, i.e. it is prohibited to influence the producers and distributors of public information, their owners or journalists; the confidentiality of

the source of information is guaranteed; cer-tain restrictions are established, for example, it is forbidden to unlawfully restrict the free-dom of information, etc. The law provides that public information producers and/or distributors can be only legal persons and branches of foreign legal persons or other or-ganisations registered in accordance with the Lithuanian law. Any private or legal person of the Republic of Lithuania or a foreign state may act as a participant with a public infor-mation producer and/or provider.


III. Company Law

A. COMPANIESA.1. Legal framework

PrinciplesThe principle of personal freedom to engage in economic-commercial activities means that natural persons in Lithuania may en-gage in economic activity with or without incorporating a company. All the companies (except for personal companies and part-nerships) are limited liability legal persons liable for their obligations by the assets owned by or trusted to the company, thus ensuring the principle of separation of the assets of a legal person from the assets of its incorporators and owners. The principles of freedom of companies to establish branches and representative offices and enter intoassociations are also ensured in Lithuania. The Civil Code establishes a prohibition to provide for different rights, obligations or privileges to certain legal persons in legal acts for discriminatory purposes, as well as to restrict the capacity of a legal person other than on the grounds and under the pro-cedure prescribed by laws, and eliminates the application of ultra vires with respect to private legal persons.

Applicable legislation• Council Regulation (EC) No 1435/2003

of 22 July 2003 on the Statute for a Eu-ropean Cooperative Society (SCE) (OJL 207, 18August2003,p. 1-24);

• Council Regulation (EEC) No 2137/85 of 25 July 1985 on the European Economic Interest Grouping (EEIG) (OJ 1985 L 199, 1 p.);

• Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute of a

European company (SE) (OJ 2001 L 294,1 p.);• Civil Code of the Republic of Lithuania of


• Code of Civil Procedure of the Republic of Lithuania No IX-743 of 28 February

2002 (Official Gazette (Valstybės Žinios),2002, No 36-1340);

• Law on the Register of Legal Persons of the Republic of Lithuania No IX-368 of 12 April 2001 (Official Gazette (ValstybėsŽinios), 2001, No 55-1940);

• Law on European Cooperative Societies of the Republic of Lithuania No X-696 of 15 June 2006 (Official Gazette (ValstybėsŽinios), 2006, No 73-2764);

• Law on the European Economic Interest Grouping of the Republic of Lithuania No IX-193 9 of 22 December 2003 (Of-ficial Gazette (Valstybės Žinios), 2004,No 4-43);

• Law on European Companies of the Re-public of Lithuania No IX-2199 of 29 April 2004 (Official Gazette (ValstybėsŽinios), 2004, No 78-2710);

• Law on Companies of the Republic of Lithuania of 13 July 2000 (new wording and subsequent amendments to the Law No IX-1889 of 11 December 2003 (Offi-cial Gazette (Valstybės Žinios), 2003, No 123-5574));

• Law on Individual Companies of the Republic of Lithuania No IX-1805 of 6 November 2003 (Official Gazette(Valstybės Žinios), 2003, No 112-4991);

• State and Municipal Enterprise Law of the Republic of Lithuania of 21 Decem-ber 1994 (new wording and subsequent amendments to the Law No IX-1895 of 16 December 2003 (Official Gazette(Valstybės Žinios), 2004, No 4-24);

• Law on Partnerships of the Republic of Lithuania No IX-1804 of 6 November 2003 (Official Gazette (Valstybės Žinios),2003, No 112-4990);

• Law on the Farmer’s Farm of the Repub-lic of Lithuania No IX-1250 of 10 De-cember 2002 (Official Gazette (ValstybėsŽinios), 2002, No 123-5537);

• Law on Cooperative Companies (Coop-eratives) of the Republic of Lithuania of 1 June 1993 (new wording and subsequent amendments to the Law No IX-903 of 28 May 2002 (Official Gazette (Valstybės

Žinios), 2002, No 57-2296);• Law on Agricultural Companies of the

Republic of Lithuania of 16 April 1991 (new wording and subsequent amend-ments to the Law No IX-330 of 17 May 2001 (Official Gazette (Valstybės Žinios),2001, No 45-1574);

• Law on Associations of the Republic of Lithuania No IX-1969 of 22 January 2004 (Official Gazette (Valstybės Žinios),2004, No 25-745);

• Government Resolution No 1407 of 12 November 2003 On Establishment of the Register of Legal Persons and Approv-al of Its Regulations (Official Gazette(Valstybės Žinios), 2003, No 107-4810).

Relevant institutions• Ministry of Economy of the Republic ofLithuania• Ministry of Justice of the Republic ofLithuania• State Enterprise Centre of Registers• Lithuanian Securities Commission• Bank of Lithuania• Insurance Supervisory Commission

A.2. Our highlights

Types of companiesThe following companies with the status of legal person may be presently established in the Republic of Lithuania:

• Public or private limited liability com-pany;

• Individual enterprise;• Partnership (general or limited);• State enterprise;• Municipal enterprise;• Agricultural company;• Cooperative company;• European company;• European cooperative society;


• European economic interest grouping

Registration of companiesAll companies together with all other legal persons are registered with the Register of Legal Persons of the Republic of Lithuania administered by the State Enterprise Cen-tre of Registers. A company registered with the Register of Legal Persons is issued a certificate of a legal person of an estab-lished form and allocated a legal person’s code. Companies must notify the admin-istrator of the Register of Legal Persons about any changes in their registration data within 30 days.

Public and private limited liability companiesPublic and private limited liability compa-nies (hereinafter jointly referred to as the “company”) are enterprises the authorised capital of which is divided into shares. They are limited liability private legal persons and their assets are separated from their shareholders’ assets.

The company is liable under its obliga-tions only by its own assets. Shareholders are liable under the company’s obligations only within the amount, which they must pay for shares. The authorised capital of a public company may not be lower than LTL 150,000 (approximately EUR 43,445). Its shares may be distributed and traded pub-licly. The authorised capital of a private company may not be lower than LTL 10,000 (approximately EUR 2,900). It must have less than 250 shareholders.

The general meeting of shareholders is the supreme body of a company; its other bod-ies are the supervisory council, the board and the head of the company. The manda-tory bodies of a company are the general meeting of shareholders and the head of the company.

Individual enterprisesAn individual enterprise is owned by a single natural person. The owner of an in-dividual enterprise may not own another in-dividual enterprise. An individual enterprise is a legal person of unlimited liability and its assets are not separated from its owner’s as-sets. The owner is liable for the obligations of the enterprise with all of his property.

PartnershipsPartnerships may be general and limited. A general partnership is an enterprise of un-limited liability established on the basis of a partnership agreement by joining the prop-erty of several natural or legal persons into the joint and several ownership in order to engage into economic-commercial activi-ties with the common name of the firm.

The limited partnership is also a legal person of unlimited liability; however only with re-spect to the general members thereof. The general members of the limited partnership shall be jointly and severally liable with all of their property for the obligations of the limited partnership, also after its liquidation, whereas limited members are liable only for the part of their property that is transferred for the joint activity of the partnership under the agreement.

State and municipal enterprisesState or municipal enterprises are limited liability legal persons the assets whereof are owned by the Republic of Lithuania or a respective municipality. State and mu-nicipal enterprises manage, use and dis-pose of the enterprise assets by the right of property trust. The purpose of state and municipal enterprises is provision of pub-lic services, manufacturing products and other operations in order to meet public interests. State and municipal enterprises are public legal persons.

Cooperative companiesA cooperative company is an enterprise established by natural and/or legal persons according to the procedure prescribed by laws in order to satisfy the economic, so-cial and cultural needs of its members. Its members contribute funds to form its capi-tal, share risks and benefits according tothe turnover of goods and services of its members with the cooperative company and they are actively involved in the man-agement of such company.

Agricultural companiesThe agricultural company is an enterprise established by natural and legal persons under an incorporation agreement, where income from agricultural production and services rendered to agriculture constitute over 50% of the total income from sales during the business year. There are 2 groups of persons participating in the company’s management: members and stakeholders.

The company must have at least 2 mem-bers. The company is a limited liability le-gal person. The company may be founded by Lithuanian and foreign natural and legal persons. The company members meeting is the supreme body of the company. The com-pany’s management bodies are the board or the administration.

European companyThe European company (SE, or Societas Europaea) is a limited liability legal person established within the territory of the Com-munity as a public limited liability compa-ny. Its purpose is to merge or form a holding of companies governed by the law of dif-ferent Member States. The SE with the reg-istered office in Lithuania shall be subjectto the legal regulations of the Republic of Lithuania mutatis mutandis, regulating the activities of public limited liability compa-nies, unless stipulated otherwise in specificlegislative acts.

The subscribed capital of the SE may not be less than EUR 120,000. Lithuanian public and private limited liability companies may incorporate the SE.

A SE comprises a general meeting of share-holders, a supervisory council (or another supervising body), a board and a manager. The obligatory bodies of the SE are the gen-eral meeting of shareholders and the man-ager. Employees of the SE are entitled to participate in the management of the SE in adoption of decisions vital to the operations of the company.

European cooperative societyEuropean cooperative society (SCE, or Societas Cooperativa Europaea) is a legal person established within the territory of the Community as a cooperative company having limited liability, unless otherwise provided by the statutes of the SCE. Where the members of the SCE have limited liabil-ity, the name of the SCE shall end in ‘lim-ited’. The purpose of the SCE is to satisfy the needs of the members and (or) develop their economic and (or) social activities.

The SCE with the registered office inLithuania shall be subject to the legal regu-lations of the Republic of Lithuania mutatis mutandis regulating the activities of public limited liability companies and cooperative companies, unless stipulated otherwise in


specific EU and (or) Lithuanian legislativeacts governing SCE.

The subscribed capital of the SCE may not be less than EUR 30,000.

A SCE comprises a general meeting of shareholders, and either a supervisory body and a management body (two-tier system) or an administrative body (one-tier system) de-pending on the form adopted in the statutes.

European economic interests groupingEuropean economic interests grouping (EEIG) is an unlimited liability private legal person. The purpose of EEIG is to facilitate or develop economic activities of members and to improve or increase the results of those activities: an EEIG may not carry out professional activities in respect of third persons, hold shares of any kind in another undertaking, exercise, directly or indirectly, a power of management or supervision over its members’ activities, and employ more than 500 persons.

Both private and public legal persons as well as other organisations with the regis-tered office within the territory of the Com-munity, and private persons engaged in industrial, commercial, craftsmanship and agricultural activities or provision of pro-fessional or other services in the EU may incorporate an EEIG. At least 2 promoters operating in different EU Member States must establish an EEIG.

The bodies of EEIG are the meeting of members and the manager.

Branches and representative offices ofenterprisesIn Lithuania, enterprises (including foreign enterprises) may establish their branches for performing some elected or all func-tions as well as representative offices whichhave the right to represent and protect the interests of the legal person, to conclude agreements and perform other actions on behalf of the company that established the representative office, to execute exportand import operations, but only between the representative office and foreign legalpersons or other organisations which estab-lished the representative office or betweensuch representative office and enterprises,institutions or organisations related to it. It should be noted that neither the branch nor the representative office has the status of anindependent legal person.

To implement certain aims, several enter-prises may also join into associations.

B. LICENSINGB.I. Legal framework

PrinciplesIn order to ensure proper supervision and control of activities related to the national security, increased threat to human life, health and the environment, the Republic of Lithuania has established control mecha-nisms and higher requirements applicable to companies engaged in such activities. Under Lithuanian law, these higher require-ments, i.e. the requirement to obtain a li-cence before the commencement of certain economic activities, may only be granted according to the principles of expedience, impartiality, non-discrimination, necessity, effectiveness, proportionality, etc.

Applicable legislation• General provisions on licensing are es-

tablished in the Civil Code of the Repub-lic Lithuania of 18 July 2000 (OfficialGazette (Valstybės Žinios), 2000, No 74-2262) as well as in:

• Government Resolution No 274 of 15 March 2004 On Approval of Methodical Regulations for Licensing of Economic Commercial Activities (Official Gazette(Valstybės Žinios), 2004, No 41-1333).

• More specific provisions on licensing areset forth in separate legal acts establish-ing licensing regimes for different types of activities, for example:

• Law on Energy of the Republic of Lithuania No IX-884 of 16 May 2002 (Official Gazette (Valstybės Žinios),2002, No 56-2224);

• Law on Banks of the Republic of Lithua-nia No IX-2085 of 30 March 2004 (Offi-cial Gazette (Valstybės Žinios), 2004, No 54-1832);

• Law on Financial Institutions of the Republic of Lithuania No IX-1068 of 10 September 2002 (Official Gazette(Valstybės Žinios), 2002, No 91-3891);

• Law on Alcohol Control of the Repub-lic of Lithuania No I-857 of 18 October 1995, new wording of the Law No IX-2052 of 9 March 2004 (Official Gazette(Valstybės Žinios) 2004, No 47-1548);

• Law on Provision of Information to the

Public of the Republic of Lithuania No I-1418 as of 2 July 1996, new wording of the Law No X-752 of 11 July 2006 (Official Gazette (Valstybės Žinios)2006, No 82-3254);

• Law on Tobacco Control of the Republic of Lithuania No I-1143 of 20 December 1995(Official Gazette (Valstybės Žinios),1996, No 11-281, 2003, No 117-5317);

• Law on Insurance of the Republic of Lithuania No IX-1737 of 18 September 2003 (Official Gazette (Valstybės Žinios),2003, No 94-4246).

B.2. Our highlights

Main economic activities types requiring licencesA company may engage in any economic or other activity within the territory of the Republic of Lithuania as long as the laws of the Republic of Lithuania or incorporation documents of the company do not prohibit it. Specific activity types such as banking,pharmacy, telecommunications, gambling, life or property insurance, production and sale of tobacco, alcohol products or guns, import and export of petroleum products as well as other areas of activities related to increased threat to human life, health, the environment or national security are subject to licensing. In total there are forty types of economic activities in Lithuania for the per-formance of which the company is required to acquire a licence. Licensing is only ap-plicable when it has concrete grounds and in case the licence is the most appropriate means for achievement of these goals. Li-censing may not be applicable as means for restriction of the number of market players engaged in certain economic activity.

LicensingThe licenses are issued by the institutions or agencies provided for in a law regulat-ing the respective activity or authorised by the Government upon the instruction of the Government of the Republic of Lithuania. In addition, these institutions perform the supervision of compliance with the condi-tions applicable to licensed economic activ-ity, suspend and cancel the licenses. Licens-ing may not be subject to any exceptions, advantages or privileges granted to certain persons seeking to obtain a licence.

A licence is issued for an indefinite period oftime if the conditions specified in the licens-ing regulations are met. Refusal to issue a li-


cence cannot be grounded on inexpediency of the activity and has to be reasoned. A fee for the issue of a licence cannot exceed the costs of the issue of a licence issue and the supervision of the licensed activity.

C. BANKRUPTCY PROCEEDINGS AND INSOLVENCYC.1. Legal framework

PrinciplesThe laws of the Republic of Lithuania ad-dress the issues of bankruptcy and insolven-cy in accordance with the following prin-ciples: protection of creditors’ economic rights, priority to restoration of solvency, priority to satisfaction of economic claims of employees of a bankrupt enterprise.



• Code of Civil Procedure of the Republic of Lithuania of 28 February 2002 (Offi-cial Gazette (Valstybės Žinios), 2002, No 36-1340);

• Enterprise Bankruptcy Law of the Repub-lic of Lithuania No IX-216 of 20 March 2001 (Official Gazette (Valstybės Žinios),2001, No 31-1010);

• Law on Restructuring of Enterprises of the Republic of Lithuania No IX-218 of 20 March 2001 (Official Gazette (ValstybėsŽinios), 2001, No 31-1012);

• Law on Guarantee Fund of the Republic of Lithuania No VIII-1926 of 12 Sep-tember 2000 (Official Gazette (ValstybėsŽinios), 2000, No 82-2478).

Relevant institutions• Ministry of Economy of the Republic of

Lithuania• Ministry of Justice of the Republic of

Lithuania

C.2. Our highlights

Preconditions for bankruptcy proceedings If an enterprise finds itself in a situationwhere it fails to settle with the creditor/cred-itors after the lapse of three months from the deadline established for the discharge of the

liabilities of the enterprise or prescribed by laws, and the overdue liabilities/debts are in excess of over a half of the net book value of the assets of the enterprise, it may be con-cluded that the enterprise is insolvent and bankruptcy proceedings may be initiated. There are two types of bankruptcy proceed-ings: judicial and extrajudicial.

Extrajudicial bankruptcy proceedingsThe creditors’ meeting convened by the General Manager or the owner of the en-terprise may decide to carry out bankruptcy proceedings out of court. Such a decision has to be voted in favour of by the creditors whose claims in terms of value account for at least 4/5 of the amount of the enterprise’s liabilities. Having passed such a decision, the creditors appoint the administrator of the enterprise who takes over the manage-ment of the enterprise and is in charge of performing the bankruptcy procedures.

Judicial bankruptcy proceedingsThe creditors, the owner or the General Manager of the enterprise may file a petitionwith the court for instituting the enterprise bankruptcy proceedings. A petition is to be filed with a district court of the locality inwhich the registered office of the enterpriseis situated. Judicial bankruptcy proceedings are carried out in accordance with the provi-sions prescribed by the Code of Civil Pro-cedure. Upon making a decision to institute bankruptcy proceedings, the court appoints the administrator of the enterprise, sets a time limit within which the creditors shall have the right to file their claims and a timelimit within which the enterprise managing bodies must transfer to the administrator the assets of the enterprise, as well as makes other procedural decisions.

Procedure for satisfying creditors’ claimsThe administrator organises the sale of the assets of the enterprise and satisfies theallowed creditors’ claims. The creditors’ claims secured by pledge and/or mortgage are paid first of all from the proceeds ob-tained from the sale of the pledged assets of the enterprise. The proceeds received from the sale of non-pledged assets are first of all used for satisfying the econom-ic claims of the employees; secondly, for satisfying claims regarding taxes and oth-er payments to the budget, and finally, forsatisfying all the other creditors’ claims.

Claims of the creditors of each successive sequence are met after full payment of the claims of the creditors of the preceding sequence. If assets are insufficient to sat-isfy all of claims of one sequence in full, the said claims are paid in proportion to the amount due to each creditor.

Simplified bankruptcy processIf the creditor files an application in rela-tion to unsatisfied claims related to employ-ment relationship, claims for the compensa-tion for damage caused by grievous bodily harm or other injury, occupational disease or death in accident at work, and/or the en-terprise possesses no assets or its assets are insufficient to cover legal and administra-tion costs, bankruptcy proceedings may be instituted and the case may be heard follow-ing the simplified bankruptcy process andwithin shorter time limits of the bankruptcy process. During the simplified bankruptcyprocess the creditors’ meetings are not con-vened, and all the bankruptcy related issues are resolved by the court.

Enterprise restructuring processEnterprise restructuring process means change of the type of economic activities, upgrading of the production, rationalisation of work, sale of the enterprise assets or a part thereof, acquisition of assets of other enterprises through their merger or division, implementation of technical, economic and organisational measures intended to restore solvency of the enterprise, change in the amount of the enterprise’s liabilities to its creditors and deadlines for their discharge, in order to enable an enterprise, which is in temporary financial distress but has notdiscontinued its operations, to retain and develop activities, repay the debts, restore solvency and avoid bankruptcy.

The General Manager of the enterprise makes a proposal to the creditors for the enterprise restructuring and, upon their con-sent, files a petition in the court on initiat-ing the enterprise restructuring proceedings. The case is investigated in court according to the provisions of the Code of Civil Pro-cedure, unless the Law on Restructuring of Enterprises provides otherwise.

Restructuring is carried out in accordance with the restructuring plan accepted by the enterprise creditors’ meeting and confirmedby the court. Duration of restructuring of the enterprise may not be longer than four years.


IV. Taxation

A. INTERNATIONAL ISSUES

Treaties on avoidance of double taxationLithuania has concluded 44 applicable bi-lateral treaties on avoidance of double taxa-tion. All the treaties are based on the OECD/UN model agreement:

Investment and tax benefits

Free economic zonesLithuanian and foreign enterprises may de-velop their business in free economic zones. FEZ enterprises may enjoy the following incentives.

If capital investments reach the amount of EUR 1 million, and at least 75% of the company’s income during the tax period that the limit of EUR 1 million was reached in consisted of income from manufactur-ing, processing, warehousing activities performed within the zone, from wholesale of goods warehoused within the zone or provision of services related to the activi-ties carried out on the territory of the zone, the company is granted exemption from

profit tax for the first 6 tax periods (years),whereas in the subsequent 10 tax periods (years) it is subject to a 50% reduction in profit tax. Exemption from VAT and realestate tax may be applicable irrespective of the amount of the investment in a FEZ.

Small enterprisesAn enterprise with gross income below LTL 500,000 (EUR 144,810) during a tax year and with an average number of employees not exceeding 10 has the right to apply a 13% profit tax (the standard rate is 15%), ora company (individual company or partner-ship) with an average number of employees not exceeding 10 and the income not exceed-ing LTL 1 million (approx. EUR 289,620) per tax year has a right to apply zero income tax rate to the amount of LTL 25,000 (ap-prox. EUR 7,240) and a 15% profit tax rateto the remaining amount of profit.

Shipping entitiesIncome recieved by shipping entity from international carriage by seagoing vessels and activities directly related thereto may be taxed with a fixed rate corporate incometax in case it meets the requirments definedin the provisions of the Law on Corporate income tax.

After a shipping entity acquires the right and chooses to pay a fixed rate corporate incometax, the chosen rate shall be applied for a period not shorter than until 31 December 2016. Fixed corporate income tax is calcu-lated with respect to net tonnage of the fleetby applying 15% of corporate income tax.

Other incentives and relievesThe majority of municipalities in Lithuania offer land tax relieves and in some cases provide financial aid to businesses for creat-ing new job places.

The real estate tax in Lithuania varies from 0.3 to 1%. The municipalities may apply the tax rate within these limits.

Certain tax incentives are applied in regard of enterprises, where the owners or employ-ees are handicapped. Enterprises with 40% or more employees belonging to target groups (disabled people, long time unemployed etc.) may benefit from 0% profit tax rate.

Accounting and auditApart from certain exceptions applied to small and/or unlimited liability enterprises, accounting must be based on the accrual principle. The Bank of Lithuania requires that banks in Lithuania present accounts according to the IFRS. From 1 January 2004 the majority of the Business Account-ing Standards (based on IFRS and the EU directives) came in accounting principles in the following areas: accounting for de-ferred taxes, provisions for various assets, accounting for derivative financial instru-ments. Consolidation is also being manda-tory starting from 1 January 2004.

Enterprises may choose to present accounts according to IFRS or BAS. Enterprises whose securities are traded in regulated markets shall present financial statementsaccording to IFRS.

Audit is mandatory for all states and mu-nicipal companies, public companies. Au-dit is mandatory for all private companies, general partnership and limited partnerships (provided all general members thereof are private or public companies) meeting at least two of the three below criteria:

• Revenues from sales exceed LTL 10,000,000 (EUR 2,896,200) over the past accounting year.

• Over the accounting year, the average number of employees on the list of em-ployees was at least 50.

• Assets on the balance sheet exceed LTL 5,000,000 (EUR 1,448,100).

B. TAX ADMINISTRATIONIt is necessary to follow all the applicable Lithuanian requirements for accounting and

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bookkeeping of other enterprise documents. Documents must be kept in Lithuanian. If necessary, documents may be kept in two languages. The form and contents of ac-counting documents are also regulated. The documents must contain certain mandatory data of the parties to the transaction. Invoic-ing procedures have been harmonized with the EU directives: electronic invoices may be used, the buyer may issue invoices, and a favourable procedure of invoice storage has been introduced. If mandatory data is miss-ing, such documents are not recognized for tax purposes.

Answers of a local or central tax administra-tor to individual inquiries of a legal entity are not legally binding. Though tax admin-istration institutions may later treat the issue differently (e.g. during the next tax inspec-tion). However, explanations received by the taxpayers often help to avoid penalties and late payment fines.

Fines currently applicable in case of viola-tions are 10 – 50% from the amount of tax underpayment. Notable that a tax dispute may be a long and expensive process, as usually it requires judicial proceedings.

Transactions with associated persons and price adjustmentTax laws are strict about transactions with associated persons located both in Lithua-nia and abroad. Therefore, it is advisable to maintain arm’s length business relations based on market prices. Lithuanian enti-ties, which (i) under the law submit an-nual financial statements and (ii) the salesproceeds of which exceed LTL 10,000,000 (approx. EUR 2,900,000) in the year prior to the year when the transaction with as-sociated parties took place, are obliged to keep documentary evidence regarding the transaction value.The Tax Inspectorate may recalculate the tax base and redefinethe transaction itself for tax purposes, if it has grounds to suspect intentional tax eva-sion. On 1 January 2004 OECD guidelines for transfer pricing were adopted.

B.I. Corporate taxes

Residents and registration of taxpayersEnterprises registered in Lithuania must pay taxes in Lithuania on profits and capitalgains earned both in Lithuania and abroad. Withholding taxes paid abroad and not exceeding the tax payable in Lithuania on

foreign income may be credited. Moreover, relieves may be applied according to appli-cable international treaties.

Enterprises without a residence in Lithua-nia (non-residents) are subject only to a few taxes and only in regard to certain income sourced in Lithuania (see chapter Withhold-ing taxes).

An enterprise is considered to be a resident in Lithuania if it was incorporated and reg-istered in Lithuania. An enterprise must reg-ister with a territorial tax inspectorate as a taxpayer and social insurance contributions payer and receive the registration number of a tax - and social insurance-payer as well as a certificate within 5 business days afterthe date of its registration with the Register of Enterprises (permanent establishments - within 5 business days after launching their activities in Lithuania).

Any changes in the data presented upon reg-istration of the enterprise must be reported in 5 business days.

Permanent establishmentA foreign enterprise is considered as act-ing through a permanent establishment in Lithuania if:

• It is permanently engaged in commercial activity in Lithuania, or

• It is engaged in commercial activity through a dependent agent, or

• It uses a construction site, building, con-struction, equipment, etc., or

• It uses equipment or construction, includ-ing bores or ships, for exploration and extraction of natural resources.

Usually permanent establishments are sub-ject to the same tax requirements as other enterprises with certain exceptions (deduc-tion of administrative expenses of the head office, etc.). No tax is applied onrepatri-ated profit of branches (permanent estab-lishments).

Taxation of partnerships and personal enterprisesPartnerships and personal enterprises are considered taxpayers and are taxed at the same tax rates as companies.

Financial and tax yearThe financial and tax year coincides withthe calendar year. However, a different tax year may be established taking into account

the peculiarities of the taxpayer’s activity. A taxpayer, upon the consent of the Tax In-spectorate, may have a different 12-month tax year, if this is necessary due to the sea-sonal nature of activity or if the group, to which the taxpayer belongs, applies a tax year different from a calendar year.

Tax rateThe standard profit tax rate applied to legalentities is 15%. Small enterprises with an annual income not exceeding LTL 500,000 and an average number of employees not exceeding 10 are subject to a 13% profittax rate, moreover, a company (individual company or partnership) with an average number of employees not exceeding 10 and the income not exceeding LTL 1 million (approx. EUR 289,620) per tax year has a right to apply zero income tax rate to the amount of LTL 25,000 (approx. EUR 7,240) and a 15% profit tax rate to the remainingamount of profit.

Calculation of taxable profit

General principlesTaxable income is calculated by subtract-ing non-taxable income (e.g. after-tax divi-dends, revenues from revaluation of fixedassets under certain circumstances, pay-ments received from Lithuanian insurance companies within the amount of incurred losses, etc.) from the accounting profit, tak-ing into account non deductible expenses and deductible expenses of limited amount.

Deductions are allowed if they are incurred during the usual business activity provided that documentary evidence is presented. Limited deductions are allowed only if they do not exceed a certain limit and consist of the following: depreciation and amortiza-tion, business trips, entertainment expens-es, provisions for bad debts and similar. Sponsorship reduces taxable profit twice,provided it does not exceed 40% of the tax-able profit. Non-deductible amounts includedividends, limited deductions in excess, ex-penses not related to companies’ activities or inappropriately documented. Losses in-curred in transactions with related persons may not be deducted from taxable income if the market price was not applied.

Payments to tax havens may be deducted only in case the Lithuanian enterprise can prove that certain conditions evidencing the economic basis of the transaction were met.


Other taxes (e.g. social insurance contribu-tions, real estate tax, land tax etc.) are also deducted from taxable income.

Starting from 1 January 2004, the princi-ple of ‘thin capitalization’ is applied under Lithuanian tax legislation. Following the Lithuanian thin capitalization rules, inter-est on shareholder and related party loans is deductible, however, interest on control-led debt as well as currency exchange losses on controlled debt are not deductible. A controlled debt exists when there is debt to a controlling lender, and debt to equity ratio exceeds 4:1 (only the exceeding part is treated as controlled debt). The ratio is computed as of the end of the relevant tax year, but the equity does not include the result for that year. A controlling lender is one that controls, directly or indirectly, either more than 50% of the shares of the borrower alone, or more than 10% alone and more than 50% together with related persons. Members of the group of a control-ling lender are also controlling lenders. If the borrower can prove that the borrowing occurred under arm’s length conditions, thin capitalization rules will not be applied.

Depreciation and amortisationThe object of depreciation (amortization) may be a certain unit of assets or a group of identical units.

Three depreciation methods are applied: straightline, accelerated and production (the latter two are applicable only to certain types of assets).

The selected depreciation method is applied to all the assets of the same type and may be changed only under certain circumstances. The rates depend on the useful life of the as-set and may not exceed the maximum rates established by the laws (minimum rates are not established):

Losses

Tax losses may be carried forward for 5 years. Losses incurred as a result of disposal of securities or derivative financial instru-ments are calculated separately and may be carried forward for 3 years by deducting them from the future gains from disposals of securities and/or derivative financial instru-ments. However, there is a draft law which will probably incorporate application of un-limited carry forward for tax losses and 5 years carry forward for losses incurred as a result of disposal of securities or derivative financial instruments.

Capital gainsCapital gains on the sale of shares of the company registered in an EEA country or another tax treaty country are exempt from tax if all the following conditions are met:

• Shares have been held for at least 2 years;

• At least 25% of the company’s skares have been held throughout that period.

Capital gains and losses are calculated by subtracting the acquisition costs and related expenses from sales proceeds. Gain (loss) received from other sources than transfer of securities and derivative financial instru-ments is viewed as operating profit or lossand taxed according to the respective pro-cedure. Losses from disposals of securities and derivative financial instruments maybe carried forward for three years to offset gains derived from disposals of such items. Losses from disposal of shares of subsidiary companies registered in an EEA country or in another tax treaty country if shares have been held for at least 2 years and the hold-ing represents at least 25% of the company throughout that period cannot be carried forward, but can be offset against capital gains derived from disposals of securities and derivative financial instruments.

DividendsA 15% tax is applied to dividends received both from Lithuanian and foreign enterpris-es. Withholding tax deducted and paid from Lithuanian company dividends by foreign enterprise may be credited against Lithua-nian enterprise profit tax.

Dividends received from Lithuanian and foreign enterprises shall not be taxed if the recipient (including permanent establish-ments, provided that the shares are owned by a foreign entity, the permanent establish-

ment of which is the recipient of the divi-dends) thereof has owned no less than 10% of the shares for at least 12 months. The re-cipient may consider such dividends as non-taxable income in Lithuania.

Groups of enterprisesTaxes of groups of Lithuanian enterprises are not consolidated and no benefits are ap-plied to losses of groups.

Controlled foreign enterprisesProfit of controlled enterprises located incountries or areas where taxes are below 75% of the Lithuanian tax rate (which is 15%) is added to the taxable profit of thecontrolling Lithuanian enterprise and taxed at the standard profit tax rate. A part of profitgenerated by an EEIG is also added to the profit of the Lithuanian company participat-ing in the EEIG.

Return terms and paymentDuring a calendar year, taxpayers must submit two advance profit tax statements:by January 31 and by October 31, while an annual tax return has to be submitted by 1 October of the following year. The final ad-justed amount of profit tax has to be paid onthe following business day after October 1.

Profit tax is paid in advance for two periods:

• For a period of nine months based on the profit tax paid for the year before the pre-vious year.

• For a period of three months based on the profit tax paid for the previous year.

Advance profit tax has to be paid on a quar-terly basis. Newly established enterprises are not required to pay advance profit taxuntil October of the following year after the enterprise was established. Advance pay-ments are not obligatory if the profit of theenterprise does not exceed LTL 100,000 (EUR 28,962) for the current year.

Advance profit tax may be computed on thegrounds of forecasted profit tax; however,the amount of advance profit tax over a taxyear has to be no less than 80% of the an-nual profit tax.

Withholding tax

Apart from dividends (see above), certain oth-er income of non-residents sourced in Lithua-nia is taxed with a 10% with holding tax:

Type of asset Time (years)

Intangible assets 3-15New buildings and premises

8

Other buildings and premises

15-20

Computer equipment 3Transport vehicles 4-10Machinery and equip-ment

5-15

Other assets 4-6


• All types of interest on loans• Royalties• Know-how• Sale, rent or other transfer of real estate

located in Lithuania• Compensations for violations of copy-

rights and ancillary rightsIn the period from 2009 to 2010 interest and copyright payments to a foreign enti-ty -resident of an EU Member State - shall be taxed with a 5% withholding tax, and starting from the year 2011 this income of the above-mentioned foreign entities will not be taxed.

A foreign enterprise operating in a country that has a treaty with Lithuania on avoid-ance of double taxation may apply for a tax incentive, provided that it meets the follow-ing requirements:

• Along with the request to apply incen tives provided for in the treaty, it presents a residence certificate (standard form) en-dorsed by the foreign tax authority;

• The recipient of income is the actual ownerof income;

• The transaction is carried out at arms’ length;

• The income was not received via its per-manent establishment or permanent base in Lithuania.

If the Lithuanian Tax Inspectorate requests additional information, such documents must be presented.

Tax overpayment may be returned to non-residents (under a standard request form).

The Lithuanian enterprise is responsible for computation and payment of with-holding taxes. Moreover, the Lithuanian enterprise must present to the territorial tax inspectorate a standard monthly state-ment on the amounts paid and the tax de-ducted until the 15th day of the follow-ing month. Sanctions are applied, if the Lithuanian enterprise fails to compute withholding tax or reduces taxes without a foreign resident’s certificate.

B.2. Temporary social tax

Since 1 January 2006 a temporary social tax was introduced. The taxable base of social tax was the same as of corporate in-come tax. In 2006 taxable profit was sub-ject to temporary social tax at the rate of 4% and in 2007 - 3%. In 2008 temporary social tax is annulated.

B.3. Value Added Tax

RegistrationResidents (both natural persons and legal entities) must register for VAT in Lithuania, if their income from economic activities over a period of 12 months exceeds LTL 100,000 (EUR 28,962). There is no lower registration line.

Farmers subject to a compensatory VAT tar-iff, taxable persons engaged in activities ex-empt from VAT (e.g. insurance companies) or Lithuanian legal persons who are non-taxable persons (e.g. budgetary institutions, state companies) must register for VAT, provided that the value of goods purchased from other EU Member States during the current or previous calendar year exceeded LTL 35,000 (approx. EUR 10,137).

Lithuanian and foreign enterprisesEnterprises and natural persons without a residence in Lithuania must register for VAT or designate a fiscal agent in case theyare going to engage in activity in Lithuania, which is subject to VAT. The requirement to designate a fiscal agent is not applicableto taxable persons established in other EU Member States who may be directly regis-tered for VAT in Lithuania.

In case of certain services, the place of their provision is considered to be the residence of the recipient (e.g. consulting, engineer-ing and similar services, royalties, software, etc.); they are subject to “reverse charge mechanism” as regards VAT. In the case when the obligation to calculate and pay VAT for goods supplied or services pro-vided falls on the buyer of these goods or services in Lithuania, the foreign person does not have to register for VAT Lithuania. EU undertakings engaged in distance mar-keting in Lithuania, i. e. bringing goods into Lithuania from another Member State and supplying them to private persons, taxable persons engaged in VAT-exempt activities (e.g. insurance companies), or legal persons that are not taxable persons (e.g. budgetary institutions, state companies) must regis-ter for VAT if their sales income from dis-tance marketing in Lithuania exceeded LTL 125,000 (approx. EUR 36,203) during the current or previous year.

Foreign taxable persons are not obliged to register for VAT in Lithuania if they are engaged in supply of goods or provision of services that are VAT-exempt on the terri-

tory of the country, that are not subject to VAT or are zero-rated. However, in certain cases even if an undertaking is engaged in zero-rated activities on the territory of Lithuania, e.g. in supply of goods where goods are supplied for temporary custody of the customs, brought into a free zone or a free warehouse, or to a VAT relief ware-house, the foreign undertaking is subject to registration as a VAT payer.

A possibility has been introduced for per-sons of third countries engaged in provision of services to non-taxable persons of the EU Member States by electronic means to register for VAT in Lithuania, except for the cases when they have already been regis-tered for VAT in another EU Member State.

Call-off stock simplificationA non-resident entity is not required to reg-ister for VAT purposes in Lithuania if goods are transported or dispatched from another EU Member State to Lithuania and deliv-ered to the warehouse of a taxable person identified for VAT purposes in Lithuaniabut not supplied straight to the Lithuanian taxable person. In order to apply a simplifi-cation a taxable person of Lithuania should overtake title of the goods within 12 months after the delivery and goods should be used only for economic activities of this taxable person. The obligation to charge VAT un-der a “reverse charge mechanism” falls to a Lithuanian customer receiving the goods upon a delivery of them to Lithuania.

Tax rates and objectThe standard VAT rate is 18%. A 5% rate is applied to passenger route transporta-tion services approved by state institutions, books, periodicals, medicine, hotel services, certain food products, attendance of various artistic, cultural and sporting events, 9% - for construction, renovation and heat isola-tion of residential premises covered by the state and municipal budgets, preferential loans granted by the state and by special state funds.

A 0% VAT rate is applicable to goods ex-ported from the EU, transport and other services directly related to the exportation of those goods as well as goods supplyed to other EU country and other cases estab-lished by the laws.

Self-production or essential improvement of real estate is subject to VAT. Under cer-tain circumstances, transfer of goods free of charge is subject to VAT.


Certain goods and services related to insur-ance, finance, education, healthcare andpublic sector are not subject to VAT. Sale and rent of real estate older than 24 months are not subject to VAT, although the par-ties may agree to apply it. Persons, who have chosen to calculate VAT on sale or lease of real estate, should charge VAT on all the respective transactions for at least two years. Analogous rules are applicable while selecting VAT taxation of certain fi-nancial services.

Goods and services supplied outside Lithua-nia are not subject to Lithuanian VAT.

A few special VAT payment schemes are ap-plied (e.g. services related to tourism, sec-ond-hand items, etc.).

VAT deductionInput (import) VAT is subject to VAT deduc-tion, unless it is related to non-business or VAT exempt supplies of goods or services. There are some cases when VAT deduction is prohibited or limited (e.g. 25 % of in-put VAT on entertainment or input VAT on acquisition and hire of means of transport designated for not more than 8 people ex-cluding the driver etc.). Input VAT related to supply of goods or services outside Lithua-nia may also be deducted provided such goods or services would be subject to VAT if they were supplied in Lithuania.

If a taxable person makes both taxable and exempt supplies, input VAT should not be recovered in full. First of all input VAT has to be attributed to taxable and non–taxable activities, and only when it is impossible, a pro rata calculation may be used. Using a pro rata the amount of input VAT to recover is calculated based on the percentage of the actual recovery amount of the previous year. Input VAT is fully recovered if the share of non–taxable activities does not exceed 5%.

VAT refund

Foreign taxable persons who do not have a fixed establishment in Lithuania may ap-ply for Lithuanian VAT refund on the basis of reciprocity principle. Lithuanian input VAT can be refunded only when incurred on goods or services intended for business ac-tivities (e.g. fuel, accommodation). VAT can not be refunded in such cases as car lease, taxi services, entertainment (for taxable per-sons of other EU countries 75% of VAT on entertainment expenses can be refunded).

The minimum claim period for VAT refund is three months, the maximum – 1 year. The minimum claim amount for a period of less than a year is LTL 700 (EUR 200), for an an-nual claim the minimum amount is LTL 100 (EUR 29). Deadline for VAT refund is the 30 June of the year following the year when input VAT was incurred. The tax should be refunded during a period of 4 months.

Adjustment of VAT reportsVAT report is adjusted if the assets are no longer used for VAT taxable activity or the share of VAT non-taxable activity exceeds 5%. Input VAT related to real estate may need to be adjusted for 10 years after its acquisition; VAT related to movable prop-erty - for 5 years after its acquisition (only the movable property which is depreciated over a period longer than 4 years for profittax purposes).

Returns and paymentMonthly VAT returns must be filled in andVAT must be paid by the 25th day of the fol-lowing month. Advance VAT must be paid by those VAT payers the average payable VAT of which exceeds LTL 100,000 (EUR 28,962) in 3 consecutive months. In cases when VAT report is adjusted, the annual VAT return must be presented by October 1 of the following year.

Members of international groups may re-quest for a different than monthly VAT pe-riod, if the group applies such a period.

B.4. Social insurance

Each employ er with a residence in Lithua-nia must register its employees with a re-spective social insurance institution. Each employee must be issued a social insurance certificate.

The employer deducts 3% from the employ-ee’s gross salary as the social insurance con-tribution paid by the employee. Social insur-ance contributions are not deducted while computing the employee’s income tax, which is deducted from the gross salary. Most of the employers must also pay social insurance contributions equal to 30.98% of the gross salary, however depending on the amount of accidents the social insurance contributions might be increased to 31.23% or31.7%.

Self-employed persons (owners of personal enterprises, partners, notaries, attorneys-at-

law, etc.) are subject to a different scheme of social insurance contributions, i.e. they are only subject to mandatory social pen-sion insurance:

• For the basic pension amount. Contribu-tion amount is 50% of the basic pension, and

• For the additional pension amount, pro-vided that the taxable income (profit) lessthe statutory income (profit) tax equals orexceeds 12 minimum monthly salaries. The contribution amount is 15% of the income declared for the state social insur-ance purposes;

• For the mandatory health insurance an-nual contribution amount for 2008 is ap-prox LTL 428 (approx. EUR 124). If 30% of annual income tax (or annual value of business licence) is less than this amount a self-employed person has to pay the dif-ference.

Foreign citizens, who arrive in Lithuania for work purposes from non-EU states or states that are parties to international treaties and are employed by a Lithuanian employer are subject to the same rules as Lithuanian citizens.

Starting from 1 May 2004 Lithuania is sub-ject to EU regulations laying down social security principles for persons migrating between Member States. The Basic prin-ciple is that social insurance contributions should be paid in the state the person works in with certain established exceptions. Fur-thermore, Member States (their authorized institutions) are entitled to agree on appli-cation of other exceptions apart from the ones established by regulations. The most common case is that social insurance con-tributions are permitted to be paid in the state the employee comes from, provided that he/she has not been employed in an-other state for over 5 years. Afterwards the contributions have to be paid in the country of the actual employment.

Thus foreign employers not registered in Lithuania but having employees working according to employment agreements on the territory of Lithuania, who are subject to social insurance in Lithuania, must register as insurers in Lithuania and pay the same social insurance contributions as Lithuanian employers.

Moreover, Lithuania has entered into bi-lateral social insurance agreements with Byelorussia, Czech Republic, Ukraine, Rus-sia, Netherlands, Finland, Estonia, Latvia and the US establishing special social insur-ance systems.


B.5. Various other taxes

Payments to the Guarantee FundEnterprises with a residence in Lithuania, except branches, permanent establishments and representative offices in Lithuania, mustpay contributions to the Guarantee Fund. 0.2% from the employees’ gross salary is allocated for such contributions (which are the basis for calculating social insurance contributions).

Real estate taxOn the 1 January 2006 a new Law on Real Estate Tax has entered into force. According to it real estate used by individuals for busi-ness or individual activities with several ex-ceptions or disposed to the legal persons for the period longer than 1 month or termless is subject to 0.3% - 1% real estate tax cal-culated on the value of the real estate. The council of the municipality on the territory where buildings and structures are located determines the exact rate of the tax.

Lithuanian and foreign entities owning buildings and structures located in Lithua-nia are obliged to pay real estate tax as they did before the 1 January 2006. The rate of the real estate tax remains unchanged and is rated at 0.3% - 1% of the taxable value of buildings and structures.

Moreover, the new Law on Real Estate Tax has introduced a conception of the “mass assessment” of the real estate. Mass assess-ment of the real estate is a process of as-sessment of the similar real estate, when the common methodology and technology of the data analysis and assessment are used. Upon the completion of the mass assess-ment only a common assessment report is presented. However, in certain cases a tax payer can apply for the individual assess-ment. If the value of the individually as-sessed real asset differs from the value de-fined in the course of mass assessment morethan 10% the tax payer is allowed to use the individually determined value for the real estate tax base.

The real estate tax return should be submit-ted to the State Tax Authorities within one month after the date of acquisition of the real estate. Legal entities, as apposed to in-dividuals, should pay advance instalments on a quarterly basis. Both individuals and legal entities should provide an annual real estate tax return to the State tax authorities not later than 1 February of the next year.

Land taxesLandowners pay Land tax. The annual tax rate amounts to 1.5% of the value of the land assessed in accordance with the “Land Evaluation Methodology” established by the Government Resolution No 205 of 1999 February 24 and applying the adjustment ra-tions established by the Government. Land rent to be paid by those renting land from 1.5% to 4% of its value assessed in accord-ance with the “Land Evaluation Methodol-ogy” established by the Government Reso-lution No 205 of 1999 February 24.

Excise dutyExcise payers are owners of excisable ware-houses, registered and unregistered traders as well as persons manufacturing or utiliz-ing excise-free energy products, alcohol, al-coholic drinks or tobacco for other purposes than the established one. In the case of im-port, the excises tax is paid by the importer, provided that the imported goods are not brought to a warehouse of excisable goods. The applicable tax base is the tax base of goods produced or imported in Lithuania.

Tax on natural resourcesThe extraction and use of natural resources such as water, minerals as well as water resources are taxed in accordance with the rates established by the Government.

Oil and gas resource taxExtracted oil and gas resources are subject to the basic (up to 20%) and compensatory (up to 9%) rates. The basic rate depends on the start of operation of the deposit oil or gas resources were extracted from (before or after 1 July 2003). The compensatory rate depends on the part of the Government funds used for detection and exploration of the deposit. The taxable value is the last quarter’s average sales price of oil and gas resources per ton at the extraction site. If the tax authorities do not establish the fair aver-age sales price at the site, the tax may be calculated based on the last quarter’s aver-age sales price per ton at the extraction site published by the Department of Statistics under the Government of Lithuania.

Pollution taxThis tax is applied in regard of environ-mental pollution. The object of the tax is emissions from stationary and mobile sources, certain goods (e.g. batteries, mer-

cury lamps, etc.), the finite list of which isprovided in the Law, as well as packaging. The amount of tax depends on the specificpollution-related facts recorded by state in-stitutions. Automobiles equipped with an exhaust emission neutralization system are not subject to pollution tax.

B. 6. Income tax of individuals

IndividualsA natural person is considered to be a per-manent resident of Lithuania if:

• His/her place of residence is in Lithuania, or The centre of his/her personal, social or economic interests is in Lithuania, or

• During a tax year he/she spends 183 days or longer in Lithuania, or

• He/she spends 280 or more days in Lithuania in consecutive years and spends 90 or more days in Lithuania during one of those years.

Income earned by a permanent Lithuanian resident in any country is taxed in Lithuania.

The object of income tax of a non-resident is income earned through his/her perma-nent establishment and other income origi nating in Lithuania: interest, income from distributed profit, rent of real estate locatedin Lithuania, sale of movable and immov-able property located in Lithuania subject to mandatory registration in Lithuania, em-ployment, income of sportspersons and per-formers, royalties, including copyright.

Income is recognized at the moment of its actual receipt.

A permanent Lithuanian resident may de-duct the amount of income tax paid in a for-eign state, if Lithuania has a treaty on the avoidance of double taxation with that state or the state is included in the list below:

• Austria• LuxembourgIncome tax year coincides with the calendar year.

Non-taxable incomeIncome tax is not applied to:

• Death allowances to the spouse, children (adopted children) and parents (foster parents);

• Life insurance payments under agree-ments concluded before 1 January 2003 foratleast 10 years;


• The difference between the income received from the sale of property not requiring legal registration and its ac-quisition price not exceeding 24 month-ly non-taxable income amounts (LTL 7,680 or approx. EUR 2,224) per calen-dar year;

• Income received from the sale of movable property requiring legal registration or immovable property if such property was acquired earlier than three years ago;

• Income from the sale of securities (only in some cases);

• Other income listed in the Law on Income Tax of Individuals.

Income in categories A and BAs a rule, income in category A includes in-come received from Lithuanian enterprises (except for income from sale of assets not subject to registration and certain other ex-ceptions); the tax will have to be calculated and paid by the enterprise. Income in cat-egory B includes all other income not in-cluded in category A; the tax is calculated and paid to the budget by the recipient of such income.

Tax ratesThere are two rates of individual income tax: 15% and 24%.

15% rate is applied to the following income:

• Income from distributed profit;• Interest income;• Royalties, remuneration under copyright

agreements;• Sale or other transfer of non-individual

activity assets;• Income from lease of assets;• Income from individual activities, if the

individual chooses not to deduct allowed deductions there from;

• Other income listed in the Law on Income Tax of Individuals.

• Other income is subject to a 27% rate.

Income received as salary from a Lithuanian sourceNatural persons employed in Lithuanian-registered enterprises are subject to a stand-ard income tax of 24% on their salary.

Salary includes all income related to labour relations, including fringe benefits, minusmonthly non-taxable income amount (cur-rently LTL 320 or EUR 93). Apart from the base salary and bonuses, all kinds of pay-

ments are usually subject to the standard personal income tax rate of 24%. Certain amounts in certain cases are not taxed, e.g. daily allowances for business trips within the set standards.

The employer must withhold income tax from the employee’s salary.

Income received as salary from a foreign sourceNatural persons, whose employers are en-terprises without a residence in Lithuania, must pay income tax on all income, earned in Lithuania by applying a 24% rate. Any additional payments to the employee (ex-cept for certain non-taxable amounts) are added to his/her taxable income and respec-tively taxed.

Expenses deductible from personal income• Cumulative life-insurance premiums paid

on the resident’s own behalf, on behalf of the spouse, minor children;

• Pension contributions to pension funds on own behalf and on behalf of the spouse and minor children;

• Interest on housing construction/acquisi-tion loans;

• Tuition (university education, acquisi-tion of qualification, PhD, postgraduatestudies), including tuition paid for chil-dren under 26. If a loan was taken for that purpose, the amount of loan returned over a tax period is deducted. This incen-tive may also be used by a foster-parent, brother, sister or spouse;

• One personal computer including soft-ware acquired within three years for the amount not exceeding LTL 4,000. If the purchase agreement contains a provi-sion that title to the thing is transferred only subject to final settlement, only theamount actually paid excluding interest may be deductible;

• The total deducted amount may not ex-ceed 25% of the amount calculated by deducting the below sums:

• tax-exempt income;• income received from activities conduct-

ed under a business certificate;• allowable deductions related to the receipt

of income from individual activities;• the acquisition price of property other

than that related to individual activities that is sold or otherwise transferred into ownership during the tax period, as well as expenses related to the sale or other

transfer into ownership of that property;• the tax-exempt amount of income and

additional tax-exempt amount of income for the purpose of calculating the monthly taxable income of the tax period, or the annual tax-exempt amount of income and annual additional taxe xempt amount of income for the purpose of calculating tax-able income for the tax period, or any part thereof from the total income derived in the tax period.

Expenses are deducted only from a perma-nent resident’s personal income while cal-culating income tax for the tax period for the purposes of submitting the annual in-come tax return.

Income from property saleUpon selling or otherwise transferring into ownership non-individual activity property, the property acquisition price, commission, taxes and levies paid that are related to its acquisition may be subtracted from the pro-ceeds received from its sale.

Individual activityIncome from individual activity is subject to a 24% income tax ,if allowed deductions are made. If a person chooses not to reduce income by allowed deductions, income from individual activity is taxed by a 15% income tax. A person engaged in individual activity under a business certificate pays afixed income tax.

Tax returns and termsA permanent resident that received income during a tax period in either category A or category B must submit an annual income tax return by the 1 st of May of the follow-ing year. A permanent resident must pay the difference in income tax between the amount specified in his/her annual incometax return and the amount paid (withhe ld) during the tax period by the 1 st of May of the following year.

The annual income tax return may be chosen not to be filed by a permanent resident who:

• Is not going to exercise his/her right to deduct annual tax exempt amount or ad-ditional tax exempt amount, and

• Is not going to exercise his/her right to deduct incurred expenses from income, and

• Over a tax period received only income in category A.


A non-permanent Lithuanian resident must pay the tax and submit his/her income tax return not later than within 25 days after the receipt of income.

Taxation of inherited propertyInheritance tax is applied to both Lithuanian and non-Lithuanian residents (unless inter-national treaties provide otherwise). The tax object of a Lithuanian permanent resident is inherited property - movable, immov-able, securities and cash. The tax object of a temporary resident is inherited mov-able property requiring legal registration in Lithuania or immovable property located in Lithuania.

The tariff of inheritance tax applied to in-heritors is 5% when the taxable value is less than LTL 0.5 million (approx. EUR 144,810) and 10% when the taxable value exceeds LTL 0.5 million.

Close relatives, such as children, parents, spouses and certain other persons, may be exempt from this tax. Inherited property valued below LTL 10,000 (approx. EUR 2,896) is not subject to tax.

C. IMMIGRATION AND PERMITS

Work permitUsually, a Lithuanian registered enterprise may employ a foreigner if he has a valid work permit issued by the Lithuanian La-bour Exchange. Work permits are not re-quired for citizens of the EU as well as for foreigners holding a permit for permanent residence, foreigners who retained their right to the citizenship of the Republic of

Lithuania, foreigners of the Lithuanian ori-gin and foreigners who married in Lithua-nia. In certain cases the person holding a temporary residence permit is also not re-quired to obtain the work permit. The work permit is also not required for persons who arrive to work as a head of the company reg-istered in Lithuania as well as in other cases established by the legal acts.

Before employing a foreigner, 1 month in advance a Lithuanian registered enterprise must register free working place at the local labour exchange and apply for the issue of a work permit. Only enterprise corresponding to the certain requirements established by the legal acts (not undergoing bankruptcy, solvent, etc.) may apply for a work permit. When the local labour exchange passes a positive decision, its conclusion is submit-ted to the Lithuanian Labour Exchange; the latter following the needs of the Lithuanian labour market passes a final decision and issues a work permit to the foreigner. The consideration of a request for a work permit may take up to 2 months, for the employ-ees possessing high qualification – up to 1month. A foreigner is issued a work permit for a period up to 2 years (as a general rule). Based on the work permit, one may be eligi-ble for a temporary residence in Lithuania.

Residence permitA citizen of the EU may come to Lithuania and be here up to 3 months; in case a citizen of the EU comes for a longer period then 3 months within half of a year and fulfilsthe requirements specified by the legal acts,he should declare his place of residence in Lithuania. His family members who are not the citizens of EU and come to live in Lithuania for over 3 months during a cal-

endar year together with an EU citizen or to him must receive an EU residence permit.

Other foreigner (non EU citizen) intending to work, study or engage in other activi-ties in Lithuania as well as willing to stay in Lithuania longer than it is specified bythe legal acts must apply for and receive a temporary residence permit. Family mem-bers of non EU citizens who are also non EU citizens may apply for a temporary resi-dence permit only on the basis of the family reunification (their family member shouldlive in Lithuania for the recent 2 years, hold temporary residence permit for 1 year or even longer and have a reasonable perspec-tive to get a right for a permanent residence in the Republic of Lithuania). A non EU cit-izen who is granted a temporary residence permit based on studies has a right to work for a limited time (during the time free from fulltime studies, not more than 20 hours within one week and only from a second year of studying).

A foreigner applying for a residence permit for the first time must apply to the Lithua-nian diplomatic or consular missions abroad. However, this regulation is not ap-plicable to non EU citizens not subject to visa regime as well as other persons speci-fied in the legal acts. They may apply fora temporary residence permit to the local migration office according to their future place of residence in Lithuania. A tempo-rary residence permit is issued for a period up to 5 years, depending on the purpose of stay (1 year for the person intending to work or study in Lithuania, etc). Upon expiry of the temporary residence permit, the person has to request a new temporary residence permit.


V. Contract Law

A. CONTRACT LAWA.l. Legal framework

PrinciplesPrinciple of the freedom of contract is rec-ognised in Lithuania. However, the parties may not choose to disregard mandatory le-gal norms upon their agreement. Each party must act in good faith before entering into contractual relations as well as having con-cluded the contract. Contracts have to be implemented in an economical way, in the course of the contractual relations, parties must collaborate and cooperate, and a valid contract concluded in a legislative way has the legal force to its parties. In Lithuania contracts are interpreted, taking into account the actual intentions of the parties and not only the letter of the contract. Moreover, the principles of prudence and justice of the general civil law are applied in contract law.



• Law on Consumer Protection of the Re-public of Lithuania No I-657 of 10 No-vember 1994 (Official Gazette (ValstybėsŽinios), 1994, No 94-1833);

• Law on Product Safety of the Republic of Lithuania No VIII-1206 of 1 June 1999 (Official Gazette (Valstybės Žinios),1999, No 52-1673);

• Law on Competition of the Republic of Lithuania No VIII-1099 of 23 March 1999 (Official Gazette (Valstybės Žinios),1999, No 30-856);

• Law on Land of the Republic of Lithua-nia No I-446 of 26 April 1994 (OfficialGazette (Valstybės Žinios), 1994, No 34-620);

• Law on Real Property Register of the Re-public of Lithuania No 1-1539 of 24 Sep-tember 1996 (Official Gazette (Valstybės

Žinios), 1996, No 100-2261);• Law on Real Property Cadastre of the Re-

public of Lithuania No VIII-1764 of 27 June 2000 (Official Gazette (ValstybėsŽinios), 2000, No 58-1704);

• Law on Construction of the Republic of Lithuania No 1-1240 of 19 March 1996 (Official Gazette (Valstybės Žinios),1996, No 32-788);

• Other relevant legal acts.

Relevant institutions• State Consumer Protection Office• European Consumer Centre• State Food and Veterinary Service• State Non-Food Products Inspectorate• And other relevant institutions.

A.2. Our highlights

The new Lithuanian contract law systemThe new Civil Code (CC) of the Republic of Lithuania of 18 July 2000 introduced important changes in the area of contract law. It established new, modern and ef-fective rules of contract law, which had to correspond to the changed economic situ-ation. The new CC was drafted in accord-ance with the most recent tendencies of the European and worldwide unification andharmonization of contract law. Therefore, the majority of the new rules correspond to the provisions of the well-known interna-tional instruments of contract law, such as the UNIDROIT Principles of International Commercial Contracts and the Principles of the European Contract Law.

The place of contract law in the Lithuanian legal systemThe contract law provisions are divided into two portions in Book 6 of the Civil Code – the General Part (arts. 6.154-6.228) and the Special Part (arts. 6.305-6.1018). How-

ever, due to the systematic nature of the Civil Code, other rules of the 6 book of the Civil Code regulating the law of obligations as well as other books of the Civil Code are also of great importance in contract law. Moreover, contract law provisions often have to be applied in conjunction with the provisions placed in the other law acts such tax law, accounting law, land law, construc-tion law, competition law and other laws.

Definition of contractA contract is an agreement between two or more persons to create, change or termi-nate civil legal relations, when one or few persons undertake towards another person or persons to perform certain actions (or refrain from doing certain actions) and the latter acquire(s) a claim right. In general, the following elements shall be sufficient torender a contract valid: an agreement of le-gally capable parties, and, when prescribed by laws, also a form of a contract. In some specific contracts, additional requirementsmay be prescribed by laws to render a con-tract valid (e.g. price, quantity, quality, type of activity, term etc.)

Conclusion of ContractContract is concluded by submitting an offer (offer) and accepting the offer (acceptance) or by other actions sufficiently provingparties’consensus. Parties enjoy the right to freely embark on negotiations and do not ac-cept responsibility if the parties’ consensus has not been reached. However, farreached negotiations may not be terminated without reason, consequently, parties have to be fair even in precontractual relations. During ne-gotiations parties are obliged to reveal all information that is significant for the con-clusion of the contract, additionally, to keep confidential information that was acquiredabout each other during negotations regard-ing conclusion of contract. If one of the par-ties violated the mentioned duties, the other party may claim for damages.


It should be noted that once the parties have agreed on all essential conditions, contract is valid even though an agreement for sec-ondary conditions is postponed.

Form of contractContracts may be concluded verbally, in writing (in an ordinary written or a nota-rised form) or by conclusive actions. Con-tracts that do not have to be in writing under the laws or agreement between the parties may be concluded verbally. Contracts shall be concluded in an ordinary written form, as well as in a notarised form, in cases it is required by respective legal norms or in case the party is willing to conclude the contract in such form. Contracts to be con-cluded in an ordinary written form may be concluded either by executing one docu-ment or by exchanging letters, telegrams, telephonograms, facsimile messages or oth-er information transmitted by terminal tel-ecommunication means, provided that the transmitted text is secured and the signature of the sender is identifiable.

Content of contractThe content of contracts is regulated by the provisions of the Civil Code on separate types of contracts (sale-purchase, rent, serv-ice provision for a fee, franchise, commis-sioning, distribution, etc.).

The Civil Code also establishes certain general provisions applicable to all types of contracts, i.e. requirements for the types of contract provisions, the quality of the ob-ject, price and term.

It should be noted that, in accordance with the Civil Code, parties may conclude both typical (sale-purchase, rent, etc) and atypi-cal contracts, i.e. own contracts that do not contradict imperative law rules.

Types of contract conditionsTypes of contract conditions may be ei-ther explicitly stated or implied. Implied contractual provisions are established considering the essence and purpose of the contract, the nature of the relations be-tween contractual parties, criteria of fair-ness, prudence and justice. Additionally, essential contract conditions are singled out, in the absence of which the contract is considered as not concluded as well as contract conditions of other type.

Subject of contract and its object’s qualityA subject of contract is considered to be par-ties’ action, that need to be accomplished (or restrained from their accomplishment) by parties under the contract, for instance, to transfer a concrete object-immovable thing.

The quality of the object of a contract shall be in compliance with the quality specifiedin the contract or the laws; if neither the contract nor the laws set any requirements for the quality, it has to be reasonable and not below average quality taking into ac-count specific circumstances of a case.

PricePrice is not the essential condition of the con-tract with the exception of the specific typesof contracts (e.g. contracts of purchase-sale of an immovable thing). The contractual price or the procedure of its establishment is set forth in the contract; if it has not been established and the parties have not agreed otherwise, the parties are considered to have meant the price which is usually charged for such implementation under similar circum-stances in respective business at the mo-ment of concluding the contract, or, if such price does not exist, a reasonable price. In the event contractual price has to be estab-lished by one party and the price established in such a manner is clearly unreasonable, despite any agreements between the parties, the contractual price has to be replaced by a reasonable price. When the price is to be established by a third party that fails to or cannot do that, a reasonable price is consid-ered to be the contractual price. In the event the price is to be established on the grounds of criteria that are non-existent or have dis-appeared, or cannot be set, it shall be based on the closest criteria by meaning.

TermIf an implementation term of obligation is not established in the contract, then the creditor enjoys the right to request its im-plementation. The obligation, the term of which is not defined must be implementedby debtor within seven days after the credi-tor requested its implementation, except for the cases as provided for in the laws and contract. In certain cases, the implementa-tion term of the contract may be established by the court.

Either party upon prior reasonable notifica-tion of the other party may terminate a con-tract concluded for an indefinite period of

time, unless the laws or the contract provide otherwise.

It should be noted that a debtor has the right to implement obligation before the set term if the laws, contract do not prohibit this, the contract or such implementation does not contradict obligation’s essence.

Legal consequences of non-implementation of contractNon-implementation of contract may arise by non-implementation of obligation aris-ing from the contract, including inappropri-ate implementation of contract as well as missing of implementation term. It should be noted that laws establish circumstances for the party that have not implemented the contract and that may avoid responsibility, for instance, subject to force majeure or state and municipal institutions acts.

Termination of contractContract terminates after it has been prop-erly implemented by parties’ consensus, the established term or condition has finishedas determined in the contract; moreover, the contract also terminates, when it unilater-ally, i.e. without applying to court, is termi-nated on the grounds as established in the contracts or law, or it terminates when par-ties apply to court regarding the termination of contract.

It should be noted that, in accordance with cases as established by laws, the contract may be recognised invalid if, for instance, it contradicts imperative law rules, public or-der and good will as well as in other cases.

Consumer protectionConsumers are guaranteed the right to in-formation on the supplied goods and serv-ices. The laws of the Republic of Lithuania also establish requirements for the quality of goods and services. Consumers have the right to apply to court for invalidation of unfair provisions (the sample list of which is established by the laws) of contracts re-lated to the purchase of goods and provision of services. Moreover, the laws regulate the sale of goods and provision of services un-der contracts concluded by using commu-nication means, consumer loans and other issues related to the protection of consum-ers. Obligations of producers, distributors and service providers ensuring the safety of products supplied to the market as well as


restrictions on supply of products are also provided for in the laws.

The legal acts of the Republic of Lithuania not only ensure consumer rights but also provide for their protection mechanism, i.e. the State Consumer Protection Office underthe Government of the Republic of Lithua-

nia, State Food and Veterinary Service, and State Non-Food Products Inspectorate exercise the powers of monitoring the im-plementation of consumer rights and protect them. It should be noted that subsequent to Lithuania’s accession to the EU, legal acts also ensure protection of consumer rights on the EU level, whereas institutions and

organisation of the EU Member States may file a suit in Lithuania in protection of publicconsumer interests. The competency of the State Consumer Protection Office under theGovernment of the Republic of Lithuania has been expanded as regards protection of consumer rights in the EU Member States.


THE PRESIDENT OF THE REPUBLIC OF LITHUANIA

Addendum No 1

USEFUL ADDRESSES AND TELEPHONE NUMBERS

S. Daukanto 3LT-01121 VilniusLithuaniaTel. + 370 5 266 4154Fax + 370 5 266 4145E-mail: [email protected]

THE PARLIAMENT (SEIMAS) OF THE REPUBLIC OF LITHUANIA Gedimino av. 53LT-01109 VilniusLithuaniaTel. + 370 5 239 6068Fax + 370 5 239 6289E-mail: [email protected]

THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA Gedimino av. 11LT-01103 VilniusLithuaniaTel. + 370 5 266 3711Fax + 370 5 266 3895E-mail: [email protected]

THE MINISTRY OF FOREIGN AFFAIRS OF THE REPUBLIC OF LITHUANIA J. Tumo-Vaižganto 2LT-01511 VilniusLithuaniaTel. + 370 5 236 2444Fax + 370 5 231 3090E-mail: [email protected]

THE MINISTRY OF FINANCE OF THE REPUBLIC OF LITHUANIA J. Tumo-Vaižganto 8a/2LT-01512 VilniusLithuaniaTel. + 370 5 239 0000Fax + 370 5 279 1481E-mail: [email protected]

THE MINISTRY OF TRANSPORT OF THE REPUBLIC OF LITHUANIA Gedimino av. 17LT-01505 VilniusLithuaniaTel. + 370 5 261 2363Fax + 370 5 212 4335E-mail: [email protected]


THE MINISTRY OF JUSTICE OF THE REPUBLIC OF LITHUANIA Gedimino av. 30/1LT-01104 VilniusLithuaniaTel. + 370 5 266 2980Fax + 370 5 262 5940E-mail: [email protected]

THE MINISTRY OF ENVIRONMENT OF THE REPUBLIC OF LITHUANIA A. Jakšto 4/9LT-01105 VilniusLithuaniaTel. + 370 5 266 3661Fax + 370 5 266 3663E-mail: [email protected]

THE MINISTRY OF SOCIAL SECURITY AND LABOUR OF THE REPUBLIC OF LITHUANIA

A. Vivulskio 11LT-03610 VilniusLithuaniaTel. + 370 5 266 4201Fax + 370 5 266 4209E-mail: [email protected]

THE MINISTRY OF HEALTH CARE OF THE REPUBLIC OF LITHUANIA Vilniaus 33LT-01506 VilniusLithuaniaTel. + 370 5 268 5110Fax + 370 5 266 1402E-mail: [email protected]

THE MINISTRY OF AGRICULTURE OF THE REPUBLIC OF LITHUANIA Gedimino av.19 (J. Lelevelio 6)LT-01103 VilniusLithuaniaTel. + 370 5 239 1032Fax + 370 5 239 1212E-mail: [email protected]

THE MINISTRY OF ECONOMY OF THE REPUBLIC OF LITHUANIA Gedimino av. 38/2LT-01104 VilniusLietuvaTel. +370 5 262 55 15, 262 65 84Faks. +370 5 262 39 [email protected]

THE MINISTRY OF THE INTERIOR OF THE REPUBLIC OF LITHUANIA Šventaragio 2LT–01510 VilniusLithuaniaTel. + 370 5 271 7130Fax + 370 5 271 8551E–mail: [email protected]

Totorių 25/3LT-01121 VilniusLithuaniaTel. + 370 5 273 5673Fax + 370 5 212 6082E-mail: [email protected]

THE MINISTRY OF NATIONAL DEFENCE OF THE REPUBLIC OF LITHUANIA


J. Basanavičiaus 5LT-01118 VilniusLithuaniaTel. + 370 5 261 9486Fax + 370 5 262 3120E-mail: [email protected]

A. Volano 2/7LT-01516 VilniusLithuaniaTel. + 370 5 274 3080, 219 1190Fax + 370 5 261 2077E-mail: [email protected]

Gedimino av. 6 LT-01103 Vilnius Totorių g. 4LT-01121 Vilnius (for mail)LithuaniaTel. + 370 5 268 0029Fax + 370 5 262 8124E-mail: [email protected]

Gedimino av. 29of Lithuania LT-01500 VilniusLithuaniaTel. + 370 5 236 4800Fax + 370 5 236 4845E–mail: [email protected]

THE MINISTRY OF CULTURE OF THE REPUBLIC OF LITHUANIA

THE MINISTRY OF EDUCATION AND SCIENCE OF THE REPUBLIC OF LITHUANIA

THE BANK OF LITHUANIA

THE DEPARTMENT OF STATISTICS UNDER THE GOVERNMENT OF THE REPUBLIC

Konstitucijos av. 23LT-08105 VilniusLithuaniaTel. + 370 5 272 5091Fax + 370 5 272 5089E-mail: [email protected]

THE SECURITIES COMMISSION OF THE REPUBLIC OF LITHUANIA

VILNIUS STOCK EXCHANGE Konstitucijos av. 7, 15th fl.Business Center EuropeLT-08501 VilniusLithuaniaTel. + 370 5 272 3871Fax + 370 5 272 4894E-mail: [email protected]/vilnius

THE COMPETITION COUNCIL OF THE REPUBLIC OF LITHUANIA A. Vienuolio 8LT-01104 VilniusLithuaniaTel. + 370 5 212 6492Fax + 370 5 212 6492E-mail: [email protected]

INTERNATIONAL CHAMBER OF COMMERCE / LITHUANIA (ICC LIETUVA) Vokiečių 28/17LT-01130 VilniusLithuaniaTel. + 370 5 212 1111Fax + 370 5 212 2621E-mail: [email protected]


2003 2004 2005 2006 2007GDP, million LTL 56804 62587 71380 819051 966761

Inflation (in comparison to December of previous years), % -1,3 2,9 3,0 4,5 8,1Unemployment rate, % 12,4 11,4 8,3 5,7 3,91

Export, billion LTL 21,3 25,8 32,8 38,9 43,22

Import, billion LTL 29,4 34,4 43,2 53,3 61,02

Balance, billion LTL -8,1 -8,6 -10,4 -14,4 -17,82

Foreign direct investment (at the end of the period), million LTL

13184 13699 16193 23896 28925

Foreign debt (at the end of the period), million LTL 8870 7479 78181 86643 112004

Addendum No 2

KEY ECONOMIC INDICATORS

1 Non-final data2 First estimate3 30 September 20064 31 December 2007

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