Lina Siksniute. Doing Business in Lithuania 07.06.2013

The Baltic Law Firm/ www.LEXTAL.eu

Law Firm LEXTAL Tallinn-Riga-Vilnius

DOING BUSINESS IN LITHUANIA June 2013

Attorney at law/ managing partner

Lina-Šikšniutė-Vaitiekūnienė


Estonia Population: 1.34 million

Latvia Population: 2.06 million

Lithuania Population: 2,9 million


THE BALTIC LAW FIRM

Law Firm LEXTAL

• 3 Baltic jurisdictions – Estonia, Latvia, Lithuania.

• ~30 lawyers and 12 working languages.

• Provides full scale of services in all practice areas.

• Acts as one-stop shop for clients in any Baltic country.

• Employs uniform procedures to guarantee the same service standards across the Baltics.


THE MAIN TOPICS OF THE PRESENTATION

• Investing in real estate and what is FEZ

• Mostly used types of companies to be set up in Lithuania

• Taxation;

• Visa, temporary and permanent EU residency permits.

THE MAIN FACTS OF LITHUANIA

Size: 65,300 km2. Lithuania is the largest of the 3 Baltic

States in terms of population, territory, and economy.

Population: 2,98 million

Dominant foreign languages:

English, Russian, German, Polish.

GDP at current prices, EUR mlrd. 2011/2012/2013 (forecast)

2011 – 30,6; 2012- 32,6; 2013 – 34,6

GDP growth (annual), % 2011/2012/2013 (forecast)

2011 – 5,8%; 2012- 3,6%; 2013 – 3%

Annual inflation, % 2011/2012/2013 (forecast)

2011 – 4,1%; 2012- 3,2%; 2013 – 3%


*Source: Lithuanian Department of Statistics

INVESTMENT ENVIRONMENT

• Strategic location. Lithuania is locates on the crossroads of 3 huge markets (Scandinavia, Western Europe, Russia);

• Lithuania is world leading in ICT (infrastructure of information and communication technologies);

• Advanced business infrastructure (business friendly environment);

• Lithuania has made the highest jump in the competitiveness in the EU during the last two years;

• The high economic growth;

• There is a high level of educated, qualified and quite inexpensive workforce.



REAL PROPERTY


INVESTMENT IN REAL PROPERTY OF LITHUANIA

There are no restrictions for foreign investors to

invest into the real property in Lithuania except for the following:

Certain land is under exclusive ownership right of the state and shall not be for sale;

Agricultural and forestry land shall not be for sale for foreign investors until 01/05/2014;

Area of agricultural land acquired by purchase by natural persons or legal entities shall not exceed 500 ha;

Term of lease of privately owned land shall not exceed 100 years and the state land – 99 years.


ACQUISITION OF REAL PROPERTY

Contracts on transfer of title in real property must be concluded before a notary public;

Title in real property is transferred by way of title conveyance, which must be recorded;

Title transfer shall be enforced against third persons only if registered with the real estate register.


ISSUES FOR CONSIDERATION WHEN ACQUIRING REAL PROPERTY

Is the title registered? Are there any restrictions?

What tax implications are attributed to a particular acquisition?

Structure the deal considering tax implications.


REGULATIONS OF FREE ECONOMIC

ZONES (FEZ)


FREE ECONOMIC ZONES IN LITHUANIA

• Free economic zones (FEZ) are the designated areas in which companies are taxed very lightly or not at all in order to encourage economic activity.

• There are seven free economic zones in the Republic of Lithuania (located at Klaipėda, Kaunas, Šiauliai, Kėdainiai, Panevėžys, Akmenė, Marijampolė)

• Prior permit of managing company of FEZ shall be obtained

• Manufacturing, building, wholesale trade, warehousing, transport are allowed.

• The retail trade is permitted only for internal need of the companies in FEZ.


TAX ADVANTAGES IN FREE ECONOMIC ZONES

Zone companies which invest into capital of zone company

1 mln. EUR make use of these tax advantages:

– Relief of profit tax for 6 years;

– After the term of 6 years, profit tax rate is decreased 50% for 10 years;

– No real estate tax;

- 0 VAT on goods imported to or placed to FEZ.


AREAS OF FEZ IN LITHUANIA

FEZ AREA PLANNED TOTAL AREA

Kaunas FEZ 294 ha 534 ha

Klaipėda FEZ 260 ha 412 ha

Šiauliai FEZ 218 ha 218 ha

Kėdainiai FEZ 131 ha 131 ha

Panevėžys FEZ 47 ha 47 ha

Akmenė FEZ 99 ha 99 ha

Marijampolė FEZ 78 ha 78 ha


COMPANY TYPES

Individual activity without incorporation of a legal entity

Individual (personal) Enterprise

General Partnership

Limited Partnership

Small Company

Public Company, Private Company

Permanent establishment

The Co-operative Society

The Agricultural Company

Branch

Representative Office


DIFFERENCES OF PRIVATE AND PUBLIC COMPANIES

Private Public

Statutory capital EUR 2,900 EUR 43,450

Number of Shareholders

Up to 249 Not established

Registration of Shares Not applicable Mandatory

Public sale of securities Prohibited Allowed


TAXATION


TAXATION IN LITHUANIA

Corporate income tax 15% or 5%

VAT 21% (standard rate)

Social security tax 28,5% - 32,6% (varying for different categories of insured persons)

Personal income tax 15%, 20 % for dividends

Land Tax 0.01% - 4% (depending on local municipalities)

Real estate tax 0,3% - 3% for legal entities (depending on local municipalities);

1% from the part of value of property exceeding 1 mln. LTL (for natural persons).

Dividends General rate is 15% for legal entities;

20% for natural persons.

State land rent 0,1% - 4% depends on the average market value of the land.


AVOIDANCE OF DOUBLE TAXATION

Convention between Lithuania- Russia on 01/01/2006

The existing taxes to which this Convention applies are the following:

Lithuania Russia

Corporate income tax Corporate income tax

Personal income tax Personal income tax

Real estate tax Corporate property tax

Interest on state capital usage Personal property tax


MIGRATION ISSUES


SCHENGEN SHORT-STAY VISA

• Prior to entry into Lithuania an alien should receive a visa;

• Schengen short-stay visa entitles to stay in Lithuania for up to 3 months during 6 months period counting from the date of first entry;

• In order to get a Schengen short-stay visa an alien shall fill in the application and present the documents evidencing possession of medical insurance, sufficient financial funds for stay in Lithuania, verified invitation letter and etc.

• The decisions regarding the issuance of visa is made within 15 days after receipt of the application. In special cases the term may be extended to 60 calendar days.


UAB

owner and

director

Owner, whose stay is necessary to attain the aims

of enterprise

director

co-owner, whose stay is necessary to attain the aims

of enterprise

The authorized capital

14 500 EUR

The authorized capital

2900 EUR

Respective part of the authorized capital owned by the alien

14 500 EUR

The authorized Capital

14 500 EUR


TEMPORARY RESIDENCE PERMIT

• Required documents:

• valid travel documents;

• completed application form;

• document proving that an alien has or receives sufficient income for living in Lithuania (290 EUR per month).

• document, proving that an alien has premises for residing or rents premises;

• a valid document confirming possession of medical insurance (5 800 EUR)

• other.

• A temporary residence permit is usually issued for a period of one year.

• The respective decision is adopted not later than within 6 months upon receipt of the application (2 months period is for the replacement of a temporary residence permit).


PERMANENT RESIDENCE PERMIT

• A permanent residence permit grants a foreign individual the right to continuously live in Lithuania.

• A permanent residence permit can be issued if:

– the alien has been residing in the Republic of Lithuania uninterruptedly for the last five years holding a temporary residence permit

– an alien passed an exam of the Lithuanian language and

– passed an exam of the basic principles of the Constitution of the Republic of Lithuania.


THANK YOU

FOR YOUR ATTENTION!

The content of the presentation cannot be applied as legal counselling as this will always be subject to actual and specific knowledge of the client’s situation.

Lina Siksniute. Doing Business in Lithuania 07.06.2013

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Transcript of Lina Siksniute. Doing Business in Lithuania 07.06.2013