Why entrepreneurs are starting up in Lithuania?

Lithuania is fast becoming a country that holds huge benefits for international entrepreneurs with either tech backgrounds or import and export interests. The low tax rates and the ease of doing business in the country, plus the country’s location on the Baltic sea which connects to Scandinavia, are just some of the reasons global business people are choosing Lithuania to start up their European business. 

Edgaras Margevičius, the founder and managing partner of the innovative law firm Prevence, together with Gintarė Viduolytė, a commercial law expert, took us through all the advantages and benefits of opening a company in Lithuania, including detailing the company formation process step by step. 

Lithuania provides an extremely engaging business environment. As a country, Lithuania has reached various global ranks such as: 11th for ease of doing business, 2nd for procedures to start a business and 3rd as lowest profit taxer. Currently, Lithuania is among the fastest growing fintech centres in Europe in terms of the highest number of licences issued and holds 4th place in international fintech rankings. 

In 2020, there were 230 FinTech start-ups operating in Lithuania, employing over 4,000 people. According to data published by Invest Lithuania in 2021, Lithuania has the highest number of licensed FinTech companies in the EU. The largest community of this sector is concentrated in Vilnius city, which currently hosts more than 20 business hubs and accelerators. 

Our country is also a perfect mix of infrastructure solutions for start-ups, enabling them to develop their growth by profiting from an environment that values science and innovation, while also providing technology parks, business accelerators and incubators, co-working spaces and hubs. Lithuania is known for the fastest WIFI speed in the world and the highest internet bandwidth in the CEE. Our country has constantly developed an ecosystem for start-ups and their participants, therefore offering plenty of opportunities for investments and funds for innovative businesses, a few examples being venture capital funds, accelerators, angel investors support, grant programs and other supporting programs. Lithuania is also known for a highly skilled and multilingual talent pool, a vital asset for any business that aims to succeed in a dynamic environment. 

In recent years, Lithuania has set a focus on making the country more attractive for investors. Strong arguments for potential investments lie in the ideal environment for the set-up of service and data centers. Lithuania is also home to start-ups with incredible success stories such as Vinted, Trafi, Tesonet, and Genus AI The business environment in Lithuania is also a great for international careers and successful collaborations with global companies. More than 150 international companies currently operate in Lithuania, including global giants like Google, Uber, Revolut, and Thermo Fisher. 

Most of the country’s population is fluent English and/or Russian, making it easy for people from abroad to communicate with locals. The internet in Lithuania is cheap, reliable, fast, and accessible all over the country, and locals are proud of the fact that such a small country manages to be an incredibly efficient provider when it comes to the web. The internet is well developed in all forms of public transport (regional and national), so it is easy to work and travel to other cities in Lithuania. 

According to the data of the Department of Statistics, Lithuania exported goods worth 31.2 billion euros in 2021 between the months of January to November. During the same period, exports of goods of Lithuanian origin amounted to EUR 19.3 billion euros. Moreover, the export of Lithuanian goods on the whole increased by 25%. The chemical and allied industries constitute the largest export group, followed by miscellaneous manufactured articles, petroleum products, prepared foodstuffs, non-alcoholic and alcoholic products, beverages, tobacco and manufactured tobacco substitutes. 

The largest share regarding exported goods of Lithuanian origin went to Germany (10.2%), followed by the United States (9.1%), Poland (7.3%), Latvia (7%) and the Netherlands (6.2%). The strategic goals of Lithuania’s export industry is to increase the export share of goods and services in gross domestic products, including: 

• To promote the competitiveness of goods and services of Lithuanian origin in foreign markets.
• Maintain existing trade positions, seek successful entry of Lithuanian companies into new markets, especially in regard to developing countries.
• Encourage the development of exports in the high value-added goods and services sector.

Lithuania’s textile and clothing industry, maintaining its centuries-old traditions, is also actively investing in creating unique brands and contemporary designs. In 2019 the textiles, clothing, and leather industries accounted for about 1.5 % of the GDP. At the beginning of 2021, this industry employed around 24,000 workers, making up 2.5 % of the total employment. 

Lithuania also has many companies specialised in electronic manufacturing services (EMS) that produce industrial electronics and telecom equipment. Niches like defence and medical electronics are expanding as well, as are high-end consumer electronics and computing storage. Lithuania provides an EMS hub for European firms through contract manufacturers including Kitron and Jotron (Norway); LittleFuse (US); Carlo Gavazzi (Switzerland) and Selteka (Lithuania). 

In terms of imports, most goods were imported last year from Poland (13%), Germany (12.9%), Russia (8.8%), and Latvia (7.8%). 

The basic rate of corporate tax in Lithuania is 15%. It applies to types of income such as commercial activities, capital gains, investment income and other active or passive types of income. A reduced rate of 5% applies to small companies with a turnover of less than 290,000 euros per year, which have no more than 10 employees. The tax is applied to the amount of income from which all expenses and non-taxable income are deducted. 

The main VAT rate in Lithuania lies at 21%. The company must be registered for VAT if: 

1. i) the remuneration of a company from the supply of goods or services subject to VAT that are pursued in Lithuania exceeds EUR 45,000 during the last 12 months;
2. ii) a company purchases goods in Lithuania from other European Union member states for an amount of more than 14,000 euros per calendar year;

iii) a company is controlled by a person that controls several legal entities and whose total amount of income from the supply of goods or services in Lithuania during the last 12 months exceeds 45,000 euros, or purchases goods in Lithuania from other European Union member states for an amount of more than 14,000 euros per calendar year.