Company formation in brief
The law of Lithuania provides for the establishing of companies of various organizational and legal forms. Given that Lithuania is a member of the European Union, we may suppose that the registration and administering of local companies may change over time. Therefore, we will focus only on basic points that may be of interest to a foreign investor in organizing business in Lithuania.
Public company limited by shares (Akcine Bendrove) may be established in Lithuania by one person, and the maximum number of shareholders (individuals and legal entities, residents and non-residents of Lithuania) is not limited. Minimum charter capital is € 43’500. At least 25% of the capital must be paid at the time of registration, and the remaining part may be paid both in cash and in non-monetary assets. Both registered and bearer shares may be issued by the company. Company’s shares may be freely transferred to third parties. The company is managed by the Board of Directors (composed of at least 3 members) and by the Supervisory Board (composed of from 3 to 15 members) which should include an auditor. The Board of Directors appoints the General Director for managing the company's business activity. Each public company is required to be registered with the Lithuanian Securities Commission.
Private company limited by shares (Uzdaroji Akcine Bendrove) may be established by one person and is characterised as follows:
• minimum charter capital is € 2’900. At least 25% of the capital must be paid at the time of registration, and the remaining part may be paid both in cash and in non-monetary assets. • maximum number of shareholders is 100; • shareholders may be physical persons and legal entities, residents and non-residents of Lithuania; • only registered shares which may not be freely transferred to third parties without the other shareholders’ prior approval may be issued; • one director may manage the company; • the company has to appoint an auditor if one of the following conditions are met: its annual turnover exceeds €1’400’000 or it has more than 50 employees, or its total assets exceed €720’000.
Both unlimited partnership (Tikroji Ukine Bendrija Handelsbolag) and limited partnership (Komanditine Ukine Bendrija) may be established in Lithuania without the need to pay any minimum capital. Minimum number of partners is 2 (foreigners may be 100% owners of the company).
There is no fundamental difference between unlimited and limited partnerships in Lithuania, except that:
• unlimited partnership members are general partners who bear unlimited liability for the partnership’s debts and obligations;
• limited partnership members are both general unlimited partners and partners whose liability is limited by the amount determined between the partners in advance.
Both types of partnerships are managed by general partners. Agricultural limited liability company (Zemes Ukio Bendrove) may be established by two shareholders (physical and legal persons, residents and non-residents of Lithuania) without a need for them to pay any minimum capital, and is characterised as follows:
• maximum number of shareholders is not limited; At least 50% of the company's income must be generated through production, sales or other services related to agricultural products.
• only registered shares that may not be freely transferred to third parties without the other shareholders’ approval may be issued; • one director may manage the company.
All Lithuanian companies are required to be registered and to obtain a VAT number if within a year from the date of registration, the company's profit exceeded €29’000.
All companies (except agricultural) in Lithuania pay income tax at the same standard rate.
Small businesses where the staff number does not exceed 10 and the annual income is less than €150’000 are subject to a reduced income tax rate.
Agricultural companies in Lithuania are exempt from income tax.
Dividends received by companies in Lithuania, unless otherwise provided for in the double taxation agreements, are subject to withholding tax provided that their recipient has been holding at least 10% share of the company paying the dividend for no less than one calendar year.
Interests, royalties and income from real estate items are subject to income tax at the 10% rate.
Lithuania is not a tax heaven or offshore jurisdiction, and a concept of Lithuanian tax exempt company (and/or Lithuanian offshore company, International Business Company (IBC), offshore trust, foundation etc. registration) does not exist in Lithuania as such. A company formation in Lithuania could be arranged with a professional registered agent providing incorporation, virtual office and other corporate services in Lithuania. To set up a company in Lithuania is possible by correspondence, but to open a bank account in Lithuania will, most probably, require a personal visit.
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