Lithuania is one of the top and most suitable countries to start a business in Europe. For several years, Lithuania has been ranked highest among other Baltic Countries and has become a benefits center for most international entrepreneurs. According to ” Doing Business” in 2020, Lithuania was ranked 11th in the world and 3rd as the lowest profit-taxer country.
However, as a start-up or an entrepreneur interested in starting a business in Lithuania, there are step-by-step guides you must follow, information you must gather, and helps you must get to have a successful business. Thence, you don’t have to worry; in this article, you will get all the necessary information you need to know for your business to succeed in Lithuania.
How to start a business in Lithuania
Starting a business in Lithuania is not hard at all; it’s what you can do online in a few days. You must ensure you have all the required documents and follow the step-by-step processes involved. However, before you start applying, make sure you have all these set:
- Choose the type of business you want to do.
- Choose a name for your business.
- Set a focus for your business.
- Check all the requirements and documents you need for registration.
Now, after the above points are duly observed, you can move on with these procedures:
#Step 1: Prepare Articles Of Association
The first thing you must do is to prepare the article of association form for your business. It must contain the operation, purpose, rules, and regulations of your business. Moreover, it must also include the rights of shareholders, the duties of management, the name of the company, the founding agreement and act, and so on.
#Step 2: Reserve A Temporary Company Name
This step is optional, but most businesses that are yet to be incorporated prefer to reserve their business name before somebody else uses the same name. However, if another business has used the name in Lithuania, your foundation documents will be rejected, and you will be asked to choose another name. Hence, to reserve your business name, you must submit an appointment to the Register of Legal Entities, and your name will be reserved for 6 months.
#Step 3: Open An Accumulative Bank Account
Now, you can open an accumulative bank account for the business to deposit the share capital; as you know that the most suitable account for depositing share capital is an accumulative bank account. Opening the bank account can take you 2 business days or less.
However, once the account is ready, you can transfer the share capital into the account. At least 25% of the €2500 share capital must be transferred into the account.
#Step 4: Notarize The Founding Documents
To establish a legal business, you need to notarize your company documents at any Lithuania notary’s office. Nonetheless, this can be done online, but you must have Lithuania ID, electronic signature, and so on.
However, your documents need to be certified by an Apostille if your country has joined the 1961 Hague Convention. Also, legalization or certification by Apostille is not required for documents issued in Ukraine, Russia, Belarus, Moldova, Estonia, or Laruia (See Legalization of documents)
#Step 5: Register The Business
This can only be done after you have notarized your business documents. All you have to do is to submit the required documents to the register of Legal Entities and wait for business days or more for it to process.
Additionally, you must be able to submit essential documents, including a memorandum of association, a list of shareholders, an annual financial statement, and so on ( See Legal Entities )
#Step 6: Consult Business Accounting Services
This is one of the essential aspects that most start-ups and entrepreneurs don’t consider when setting up a business in a particular location, especially in Lithuania. Proper accounting services are necessary for keeping a business on track and improving growth possibilities.
Therefore, you need reliable and professional business accounting services in Lithuania. For business advice, bookkeeping, auditing, tax preparation, etc. One of the most recommended and reliable business accounting companies you can use as a start-up or developing company in Lithuania is StartBusiness. The company has a remarkable track record in Lithuania.
Taxes In Lithuania For Businesses
As mentioned above, according to the doing business of 2020, Lithuania is the 3rd lowest profit taxer and one of the most favorable countries for international business. Its tax system is convenient for start-ups and adapted to the legislation of the European Union.
However, there are eight major (8) taxes in Lithuania, including corporate income tax, income tax on the population, property tax, land tax, inheritance and donation tax, value added tax, excises, lottery, and gambling tax. Notwithstanding, as a business owner, the main taxes you should be paying include:
- Corporate profit tax ( CPT)
- Value-added tax ( VAT)
- Dividends ( withholding tax)
Corporate Profit Tax
Corporate profit tax is also known as CPT. It’s the tax levied on a company’s taxable income after necessary expenses have been removed, including general and administrative expenses, selling and marketing, research and development depreciation, etc.
The rate for this tax can either be 5% or 15% based on a few conditions. For example, it’s 5% if a business meets the following criteria:
- The sales revenue does not exceed €300000 per year
- The number of employees is not more than 10
- If shareholders hold more than 50% of the shares.
On the other hand, 15% is applicable for companies that do not meet these criteria.
Value-Added Tax (VAT)
Value-added tax (VAT) is also known as goods and services tax (GST) in some countries. It’s a tax on sales goods and services within the territory of the European Union’s member states, of which Lithuania is part. The tax is levied at each distribution stage from the manufacturing to the point of sale, especially where value is added.
However, the standard rate for Lithuania VAT is 21%. In contrast, other categories will either pay 9% or 5%.
9% VAT Ratepayers:
5% VAT Ratepayers:
Persons entitled to compensation under the Health Insurance Acts.
These are taxes levied on dividends paid by a company to its shareholders. The standard rate for this tax is 15%. However, if the recipient is a resident of the EU or a state with which a tax convention has been concluded.
Finally, Lithuania is a suitable country for you to start your business as an entrepreneur. Nonetheless, you need to understand the basic step-by-step guides mentioned in this article for the rapid development of your business.
Moreover, to have a successful business in Lithuania, you must seek advice and support from experts and professionals in business accounting services, including StartBusiness.