Business opportunities in Lithuania Relations between Lithuania and Turkey





1. Geography;

2. Population;

3. Language;

4. Currency;


1. A limited liability companies;

2. Establishment procedures.

2.1. Establishment procedures of limited liability companies;

2.2. Establishment procedures of a branch of foreign company;


1. Value added tax;

2. Corporate profit tax;

3. Land tax;

4. Excise duty;

5. Immovable property tax;

6. Personal income tax;



Often referred to as ?the country between west and east?, Lithuania together with other Baltic countries has always been of interest to potential investors and international businesses due to its location and comparatively easy access to its neighboring territories. In addition, as a member of the EU since 2004 implementing EU Law and developing investment friendly environment, Lithuania becomes even more attractive country for local and foreign investors.

This article aims to introduce Lithuania as one of the European Union member, to review the relations between Lithuania and Turkey and to provide a comparative insight into the legal environment of Lithuania in order to assist both foreign investors and local businesses in understanding the major aspects of doing business in Lithuania.


1. Geography.

Lithuania is one of the three Baltic countries along Baltic Sea, it shares borders with Latvia, Poland, Belarus and the Kaliningrad Region of the Russian Federation. Lithuania extends over an area of 65300 square kilometers and is the largest of the three Baltic States. The largest city and the capital of Lithuania is Vilnius. Other major cities include: Kaunas, Klaipeda, Siauliai, Panevezys.

2. Population.

Lithuania has an estimated population of 3,535,547 million as of 2011.

3. Language.

The official language of Lithuania is Lithuanian.

4. Currency.

Lithuania?s currency is the Litas, abbreviated as ?.LTL?. Since 2 February, 2002, the Litas was re-pegged to the Euro and the official exchange rate is LTL 3.4528 for EUR 1. In accordance with the acceding to the European Union, Lithuania planned to adopt the Euro from 1 January 2007, but the average annual inflation in Lithuania was slightly higher than the reference value established by the Maastricht Treaty. On 25 April, 2007 the Government of the Republic of Lithuania has confirmed the new National Plan on the Establishment of Euro that doesn?t estimate any exact date of joining the Euro zone.


Foreign investors interested in starting commercial operations in Lithuania have three main possibilities to conduct cross border business:

1. Establishing a local subsidiary:

· The individual enterprise;

· Partnerships;

· Limited liability companies: public limited liability (AB) and private limited liability companies (UAB);

· Cooperative societies;

· Agricultural company;

· EU entities.

2. Establishing a representative office or a branch of foreign company;

3. Providing cross- border services;

1. A limited liability company.

The type of a legal entity which is commonly used for doing business in Lithuania is a private limited liability company (?UAB?) or a public limited liability company (?AB?).


Type of business entities

Type of entity

Public limited company (AB)

Private limited company (UAB)

Minimum authorized (share) capital

150,000 LTL (43,400 EUR)

10,000 LTL (2,900 EUR)

Maximum number of shareholders



Minimum number of shareholders



Liability of shareholders

Shareholders are not personally liable, except in limited cases causing damage to the company by unfair or intentional actions.

Formation of authorized capital

Contributions may be in monetary or in kind.

System of corporate bodies

Obligatory corporate bodies are:

·         The general meeting of shareholders;

·         The supervisory board is an optional corporate body;

·         The head of the company (CEO). The management board is an optional corporate body.

According to the Corporate Governance Code of Lithuania, it is advisable for public limited to have at least one of the optional corporate bodies (supervisory or management board).

Obligatory corporate bodies are:

·         The general meeting of shareholders;

·         The head of a company (CEO);

The optional corporate bodies are:

·         The supervisory board;

·         The board of directors.


2. Establishment procedures.

All companies together with all other legal persons are registered with a unified Register of Legal Entities of the Republic of Lithuania administrated by the State Enterprise Center of Registers. The date of establishment of legal person is the date of the registration with the Register of Legal Entities of the Republic of Lithuania. All enterprises with foreign capital invested, as well as branches and representative offices of foreign enterprises are registered with the Ministry of Economy of the Republic of Lithuania. A company registered with the Register of Legal Entities is issued a certificate of legal person of an established form and allocated a legal person?s code.

2.1. Establishment procedures of limited liability companies.

The process of registration includes such steps:

Necessary steps




1. Choosing a business name

The name is not registered separately and is protected from the moment of company?s registration. Before application for registration in the company, it is possibly to apply to the Register of Legal Entities for temporary registration and protection of the name (for a period of six months). The business name must not violate public order or mislead the public.

Application to the Register of Legal Entities in case of temporary registration and protection of the name.

Stamp tax for preliminary registration of a company?s name 56 LTL/ 16 EUR.

2. Execution of the formation documents

In order to incorporate the company, the incorporators have to execute the Incorporation Agreement (in case of sole incorporator ? the Act of Incorporation) and sign the Articles of Association of the company. The company must be registered with the register of Legal Entities within 6 months following the signing day of the Articles of Association and the approval by the notary public, otherwise- the company will be deemed not to have been incorporated.

The documents must be signed by all incorporators.

The cost of legal advisors (if any).

3. Opening a start- up account

An accumulative account has to be opened with one of the Lithuanian banks. After signing of the Incorporation Agreement (Act of Incorporation), the accumulative account is opened solely for the purpose of collecting initial monetary funds to the authorized (share) capital of a company, and the funds in this account may not be used prior to the registration of the company.

An accumulative account can be opened by the incorporator or an authorized representative under the Power of Attorney.

Usually there is no cost, but some banks apply charges of LTL 20-30 for issuing a bank certificate which evidences the payment of initial contributions to the company?s authorized (share) capital.

4. Payment of share capital

If the minimum authorized capital is formed, the total amount of LTL 10,000 in case of a private limited company and 150,000 LTL in case of a public limited company has to be paid in cash.

Non- pecuniary contributions have to be evaluated by experts certified under the Lithuanian law.

Evaluation fees in case of non-pecuniary contributions depending on a concrete case.

5. Registration in the Commercial register

The incorporators must file the application for registration with a number of supporting documents. After the notary public examines the documents and certifies the, the documents must be submitted to the Register of Legal Entities. A decision on registration must be issued of Legal entities no later than within 5 business days from the date the documents were submitted.

All documents in foreign language must be translated by an authorized translator into Lithuanian before submission to the notary public. The incorporators should submit incorporation documents to the notary public for verification and approval and subsequent submission for registration to the Register of Legal Entities.

Notary fees for examination:

·Incorporation documents of the private limited Company varies from 250 LTL to 800 LTL

·Incorporation documents of the public limited Company varies from 250 LTL to 900 LTL

· Stamp tax to register the company- 198 LTL


2.2. Establishment procedures of a branch of foreign company.

One way of investing in Lithuania is through establishment of a company branch. A Lithuanian branch is not considered a separate legal entity from the parent foreign company. The liability of the branch is attributed to the parent company which is responsible for the branch's debts and obligations. The process of incorporation for a Lithuanian branch does not differ much from establishing a regular Lithuanian company, however it requires more documentation.

A Lithuanian company branch is required to register with the Company Register of Lithuania before commencing its activities. However there are a few steps that need to be completed before submitting the application for registration. The managing board of the foreign company wishing to incorporate a Lithuanian branch must appoint a representative to carry out the registration procedures. The individual should be authorized through power of attorney. Also the foundation documents of the company must be prepared and notarized, as well as the by-laws of the parent company. The company must open a bank account for future transactions and obtain a bank certificate.

In order for the company to engage in commercial activities it must register with the Company Register of Lithuania, a procedure that is mandatory for all business entities. The founders or representative must submit an application containing the notarized articles of association of the Lithuanian branch, the object of activity and a list of names and addresses of the managing board. Also a proof of existence of the foreign parent company is required and this usually consists of a certificate of registration from the relevant institution of the foreign country. The registration certificate is usually issued in three days.
Simultaneously with the submission of the registration application, the Lithuanian branch can be registered for tax purposes also at the Company Register. The institution automatically forwards the notice to the Tax Office and the representative must file a single form.

Even though the process of incorporation for a Lithuanian company branch is straightforward and does not require complex procedures, the time period required varies a lot. Opening a bank account and preparing the required documentation is finished in one day each. In three days the registration certificate is obtained. However, registering for tax purposes may take up to 15 days. Usually a company branch is registered in three weeks.


New tax laws drafted following the general taxation principles and harmonized with EU tax legislation were adopted and came into force in Lithuania with the aim of developing a sustainable up-to-date taxation system enabling rapid economic growth and ensuring stable budgetary income, fair and proportional tax distribution, and fair competition.

Legal entities and private persons in Lithuania are obligated to pay such taxes:

· Value added tax;

· Corporate profit tax;

· Land tax;

· Excise duty;

· Immovable property tax;

· Personal income tax;

1. Value added tax.

The subject to VAT is the supply of goods and services by a taxable person in the performance of his/its economic activities within the territory of the country that are affected for consideration. In addition, the subject to VAT is acquisition of goods for consideration within the territory of the country from another Member State. The Standard VAT rate is 21%. A reduced 9% VAT rate is applicable to books and not periodical informational publication.

Subject of the tax ? both natural and legal residents must register for VAT in Lithuania if their income from economic activities over a period of 12 months exceeds 100 000 LTL (approx. 28 985 EUR)


2. Corporate profit tax.

The subjects of corporate profit tax are both Lithuanian and foreign legal entities. Income of foreign entities sourced in the Republic of Lithuania, received otherwise than through its permanent establishments in the Republic of Lithuania, is taxed as follows:

· royalties, including the cases specified LoCIT Article 4(5); compensations for infringement of copyright or related rights are taxed without deductions at a rate of 10 per cent; royalties, including the cases specified LoCIT Article 4(5), paid to recipients in the EU are exempt from 1 July 2011 (certain requirements are stated for recipients and for the payment in the LoCIT Article 37-1).

· income from the sale, other transfer into ownership or lease of property immovable by nature located in the territory of the Republic of Lithuania; income from performing activities and sports activities carried out in the Republic of Lithuania; annual bonuses to members of the Supervisory Board, and income from distributed profits is taxed at a rate of 15 per cent, unless otherwise provided for in this Law;

· Interest of foreign entities, registered or otherwise organized in a state of the European Economic Area or in a state with which a treaty for the avoidance of double taxation has been concluded, is non-taxable;

· Interest of foreign entities, not registered or otherwise organized in a state of the European Economic Area or in a state with which a treaty for the avoidance of double taxation has been concluded, except for interest on government securities, interest accrued and paid on deposits and interest on subordinated loans which meet the criteria laid down by the legal acts of the Bank of Lithuania, is taxed without deductions at a rate of 10 per cent.

3. Land tax.

The object of land tax is private land. Land tax must be paid by owners of private land (both natural and legal persons). The annual tax rate is 1.5% of the land price (the price of standing timber is excluded when calculating the price for forest land).

4. Excise duty.

The following goods are subject to excise duties:

· Ethyl alcohol and alcoholic beverages;

· Manufactured tobacco;

· Energy products;

· Electricity;

· Coal, coke and lignite.

The tax rates are very various depending on the current object of tax.

5. Immovable property tax.

The subjects of immovable property tax are both Lithuanian and foreign natural persons and legal entities. The tax is imposed on immovable property located in the Republic of Lithuania. The tax rate in the range from 0.3 percent to 1 percent of the taxable value of immovable property is determined by municipalities with regard to one or several following criteria: purpose of immovable property, use, legal status, technical features, maintenance condition thereof, categories of taxpayers (size or legal form or social status) or the location of immovable property in the territory of the municipality (according to the priorities set forth in strategic and land-use planning documents).

6. Personal income tax.

With certain exceptions, all income received by a Lithuanian tax resident is subject to personal income tax. In general, individuals are deemed to be tax residents of Lithuania, if:

? their permanent place of residence during the tax period is in Lithuania, or

? the location of their personal, social or economic interests during the tax period is in Lithuania rather than in a foreign country.

Other criteria for deciding the existence of tax residence are also applicable.

The general personal income tax (PIT) rate is 15%. PIT rate of 5% is applied to income from individual activities (with certain exceptions). PIT rate of 20% is applied to income from distributed profits (dividends, etc.).

Also, some more taxes as Petroleum and natural gas resources tax; Consular fees; Stamp duty; Inheritance tax; Compulsory health insurance contributions; Contributions to the Guarantee Fund; State-imposed fees and charges; Lottery and gaming Tax; Fees for the registration of industrial property objects; Customs Duties; Deductions from income under the Law of the Republic of Lithuania on Forestry; Tax on the use of state property by the right of trust; Social Tax; Tax on environment pollution can be applied.


Political and economic relations between Turkey and Lithuania have a positive course and are developing steadily. The Friendship Agreement signed between the two countries on 17 September 1930 remains valid. After the collapse of the Soviet Union, diplomatic relations were re-established on 3 September 1991. It should be also noted that Lithuania strongly supports Turkey?s membership to the European Union. Taking into consideration economic relations between Turkey and Lithuania, number of important agreements were signed:

· Agreement on Economic and Commercial Cooperation between the Republic of Lithuania and the Republic of Turkey;

· Agreement between the Government of the Republic of Lithuania and the Government of the Republic of Turkey on cooperation in the field of tourism; 

· Agreement between the Republic of Lithuania and the Republic of Turkey concerning the reciprocal promotion and protection of investments; 

· Agreement between the Government of the Republic of Lithuania and the Government of the Republic of Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. 

· Maritime Agreement between the Government of the Republic of Lithuania and the Government of the Republic of Turkey;

The trade volume between the two countries in 2010 reached the level of 327.3 million USD. Turkey?s exports to Lithuania in the same year were 208.2 million USD; meanwhile its imports amounted to 119.1 million USD. In 2010, 54.148 Lithuanian tourists visited Turkey.

As Lithuania is in the center of geological European continent, and Turkey is in the center of Europe, Asia and Middle East junction, these two countries could be used as bases for trade and business purposes for each country. Turkish business people can locate in Lithuania for dealing with business in Eastern-Central Europe, Russia and the Scandinavia, and the same purpose for Lithuanian business people to take place in the Balkans, the Middle East and Caucasus.

 It is important to mention that these two countries have strong points in world trade, as Turkey is very strong in food and textile and Lithuania is very strong in high-tech like laser technology and internet based IT solutions. Two countries can combine strong parts of their trade industries to create a more powerful cooperation.

Laura Slezeviciute 
Legal Counsel at Özgün Law