Starting an IT Company in Lithuania: Legal and Tax Considerations

Legal Framework

• Company Forms: Most foreign IT entrepreneurs choose a Private Limited Liability Company (UAB) due to its simplicity, limited shareholder liability, and flexibility in management. Alternatives such as MB (Small Partnership), individual activity (for freelancers), or operating as a branch of a foreign company are also possible.

• Share Capital: UAB requires a minimum share capital of €1,000. MBs have no mandatory minimum.

• Establishment: A UAB can be established by one founder (person or company), and offers straightforward online or in-person registration procedures.

• Liability: Shareholders’ risk is limited to their capital contributions.

Tax Environment for IT Companies

• Corporate Income Tax: Standard CIT rate is 15%. Small businesses with annual revenue under €300,000 and fewer than 10 employees may qualify for a reduced 5% CIT rate.

• VAT: Companies exceeding €45,000 annual turnover must register for VAT (21% rate). There are exemptions and favorable VAT rules for small or cross-border businesses.

• Social Security: Employers contribute to social security on behalf of employees. Remote or contract-based work structures are supported.

• Other Incentives: Special tax relief schemes are available in certain economic zones and for startups in the IT sector.

• Compliance: All companies must file annual reports, maintain accurate financial records, and comply with labor laws if employing staff.

Why Lithuania is a Hub for Fintech Companies

• Regulatory Innovation: The Bank of Lithuania is known for progressive, streamlined licensing—attracting fintechs seeking e-money and specialized banking licenses. Over 270 licensed fintech companies operate locally, making Lithuania the EU’s largest fintech hub by firm count.

• EU Market Access: As an EU member, Lithuania grants fintechs immediate access to the European market and Single Euro Payments Area (SEPA), facilitating cross-border transactions.

• Skilled Workforce: Lithuania boasts a digitally skilled, multilingual talent pool, essential for software, cybersecurity, and AI-related fintech applications.

• Infrastructure: Vilnius has rapid internet, robust IT infrastructure, and a business environment geared to encourage innovation and international investment.

Legal Essentials for E-commerce in Lithuania

• Consumer Protection: E-commerce law in Lithuania aligns with EU regulations. Buyers have a right to cancel purchases within 14 days if goods are unused and undamaged.

• Data Protection: Providers must comply with GDPR for customer data handling.

• Obligations on Marketplaces: The new Digital Services Act (in force from February 2025) requires e-platforms to verify trader information, remove illegal goods, allow consumer redress, and publish compliance reports.

• Tax Requirements: VAT registration is mandatory if turnover exceeds thresholds, and remote sales to other EU countries are subject to specific rules.

• Contracts & Transparency: Contracts and T&Cs must reflect Lithuanian law and inform the consumer about rights, returns, and dispute procedures.