Starting A Business In Lithuania 2024? Consider This

Lithuania is known for its rich cultural heritage and a strong tradition of folk music and dance. Additionally, the country has a growing technology sector, with Vilnius emerging as a hub for startups and innovation. These characteristics make Lithuania an attractive destination for entrepreneurs.

However, setting up a business in Lithuania requires careful consideration of several factors. Entrepreneurs need to evaluate the country’s economic state, understand the legal and regulatory requirements, and be aware of the taxation policies applicable to businesses. Labour laws also play a crucial role and must be taken into account.

With proper planning and compliance, Lithuania offers a promising environment for business ventures.


Economic Overview


Lithuania’s economy is encountering some challenges after experiencing a robust recovery post-pandemic. Initially driven by exports and global trade integration, the situation has become more complex due to the ongoing war in Ukraine.

Growth has decelerated, and inflation is on the rise, mainly because of high energy and food prices. This is partly a consequence of Lithuania reducing its energy dependence on Russia.

Despite these issues, the economy is still projected to grow, although at a slower rate of around 2% in 2024, according to the European Commission. This anticipated growth is supported by rising domestic consumption and sustained investment. Moreover, Lithuania’s strong integration with the European Union offers a degree of economic stability.

Lithuania’s economic outlook is one of cautious optimism. While the global situation presents challenges, the country’s economic fundamentals remain relatively strong.


Legal And Regulatory Framework


Lithuania is known for its streamlined and business-friendly legal and regulatory framework. Aspiring entrepreneurs will find the process straightforward and efficient.

Lithuania adheres to the EU’s legal code, which ensures transparency and familiarity for those used to European regulations. This makes it easier to navigate permits and licenses. The registration process is designed for efficiency.

To begin, entrepreneurs need to check the availability of their desired company name and prepare the founding documents, such as the articles of association, which outline the company’s structure and operations.

Next, the minimum share capital, typically €2,500, must be deposited into a temporary bank account. Following this, the necessary documents must be notarised and submitted to the Register of Legal Entities, a process that can often be completed online. Once registered, finalising the bank account and registering with tax authorities are the remaining steps.



Taxation And Financial Management


The standard Corporate Income Tax (CIT) rate in Lithuania is a flat 15%, one of the lowest in the EU. This makes Lithuania appealing for businesses aiming to maximise profits.

New businesses can benefit from a 0% CIT rate on their first year’s profit, provided they meet criteria such as employing fewer than 10 people and having an annual revenue under €300,000. Additionally, certain sectors, like agricultural cooperatives and small businesses in specific activities, may qualify for a reduced 5% CIT rate.

The Value Added Tax (VAT) in Lithuania has a standard rate of 21%, applicable to most goods and services. There are exemptions for specific categories like healthcare and education. Businesses are required to register for VAT if their annual turnover exceeds €29,000.

Depending on your business structure and activities, additional taxes such as social security contributions for employees and real estate tax on owned property might apply.


Hiring And Managing Employees


Lithuanian employment law mandates written contracts that clearly outline essential details such as job descriptions, salary, working hours, and vacation days. For non-EU/EEA citizens, work permits may be required, with employers typically assisting in the application process, which requires approval from the Lithuanian Labor Exchange or Labor Inspectorate.

Using an Employer of Record (EOR) service can expedite the setup process. An EOR handles payroll, taxes, and compliance, allowing you to focus on recruitment, although this approach offers less customisation compared to establishing your own legal entity.

Key labour regulations in Lithuania include a standard 40-hour workweek, with specific provisions for overtime pay. The minimum monthly wage is approximately €730, and employees are entitled to at least 28 calendar days of paid annual leave, plus public holidays. Lithuania also provides generous parental leave policies.

Staying compliant with local labour laws is crucial, so consulting with a local HR professional or legal expert is highly recommended for a comprehensive understanding.

To conclude, Lithuania presents a compelling case for business ventures, thanks to its rich cultural heritage and thriving tech sector. Despite economic challenges, the country offers a stable and transparent legal framework, competitive tax rates, and efficient business registration processes.

Entrepreneurs must consider economic conditions, legal requirements, taxation, and labour laws. With careful planning and compliance, Lithuania remains an attractive destination for launching and growing a business.