Lithuania is becoming a favourite destination for foreign investment in Europe. It has a positive business environment, low taxes and a quick and mostly digital process of incorporation. The most common entity for foreign companies to create a subsidiary is the UAB, which translates to a private limited liability company and offers flexibility and limited liability. Foreigners can fully own their subsidiary and there is no need for resident directors or shareholders.
Why a UAB subsidiary
UAB or UAB is the Lithuanian abbreviation for private limited companies and is the most common form for foreign investments. It has limited liability, so shareholders’ risk is limited to the value of their shares. The share capital must be at least 2,500 euros, of which at least 25 percent must be paid-up during the registration process, and the remainder can be paid later.
The step-by-step registration process
The first step is to select and reserve a name. It must be new and for a limited liability company, it must end with “UAB”. You reserve a name (usually in Form JAR-5) with the Register of Legal Entities, which takes around one day to process. The fee for name reservation is around 16 euros. Then, you need to have a Lithuanian address. This can be a physical office or an administrative service virtual office. You will need to obtain permission from the property owner to use the address. This will be the address that government agencies use to communicate with you. After the application is notarised, you file it with the Register of Legal Entities. You can do this electronically, via the Centre of Registers portal. The cost of registration is between 30 and 60 euros. The turnaround time is a couple of days but the total time from start to finish is usually 5-15 days for simple cases. Faster processing is available for a fee. Once approved, you will receive the company registration certificate and company code. Your company is now registered.
After registration: Don’t forget the paperwork
You have obtained your registration certificate, this is not the end of the road. You need to register with the State Tax Inspectorate (VMI) for your Tax Identification Number (TIN). This must be done even before your company starts trading. If you are making supplies to other EU member states, you may need to apply for an EU VAT number. Perhaps the most important thing to do after registration is to fill out information on your Ultimate Beneficial Owners in the JADIS system. This should be done within 10 days of being registered, and must be amended within 5 days if there are changes. This is a mandatory requirement and failure to comply with this requirement can lead to fines and even bank account closure. Lastly, you must open a corporate account. This account will be your operating account, as opposed to the temporary account used to invest the share capital. The most popular ones are SEB and Swedbank, but they are strict with non-resident companies. A solid business plan, a local address and economic substance in Lithuania will increase your likelihood of success.
What it costs
The costs associated with the registration of a UAB in Lithuania are relatively affordable in Europe. Legal service packages, which provide legal advice, a registered address for a year and bank introduction, range from 900 euros to 2,500 euros for complete packages . The government registration fee is about 30-60 euros, plus 150-300 euros for certification, if applicable. The share capital deposit of 2,500 euros is not a cost, but you must deposit at least 625 euros up-front. Your annual maintenance expenses (accounting, address renewal) will be around 900-1,500 euros per year.
Tax for your subsidiary
After setting up your subsidiary, you will pay 16 percent corporate income tax (15 percent until 2026) on your Lithuanian business profits. Value-added tax (VAT) is at the standard rate of 21 percent, with lower rates of 9 percent and 5 percent for certain goods and services.
A note on economic substance
A common gotcha for foreign companies is the need for economic substance. The law does not require a certain amount of activity, but the tax authorities and banks require that the business is “real” in Lithuania. This requires a physical address, management structure, regular contracts and invoices, and either employees or subcontractors to provide your services. Paper companies without real operations have trouble obtaining bank accounts and keeping their registrations.
Conclusion
The process of establishing a subsidiary in Lithuania is clear and efficient, and conducive to foreign investment. Select the UAB entity, reserve a name, deposit capital, file your documents, and then register for tax and beneficial ownership. It takes days, not months. The costs are moderate. And the outcome is a compliant EU subsidiary that can operate, employ and trade throughout Europe. With careful local advice and planning, you can have a Lithuanian subsidiary up and running in a few weeks.
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