From a financial point of view and taxes, Lithuania is very profitable for several reasons. In general, the tax imposition for a company in Lithuania is 5% for a turnover less than 300 thousand euro, by 15% otherwise. This level of taxation is one of the lowest EU rate. In any case it is much lower than in Italy. That’s why opening a company here, from this point of view, could be a good choice.
For information, from 1 October 2016 the taxpayers will have to file all tax returns electronically. The level of VAT in Lithuania is 21%. So, for instance, for importing goods from China it will be applied to that level of taxation. While keeping the base for reduced VAT rates (9%,5%) quite narrow, Lithuania allows a variety of VAT exemptions, which help business to keep their administrative costs lower and save their cash flows.
The VAT rate is set to even zero (0%) when it comes to moving goods within the European Union. This means that the products can be transported from Lithuania to Italy without any kind of taxation with regard to VAT.
Another advantage is that capital and dividends can pass in other countries without any kind of limitation. Moreover, the following exemptions from taxes are available when investing in a Lithuanian subsidiary. First of all, there is no capital duty on acquisition of shares and on increase in the share capital. Neither the reduction of share capital, that was formed from shareholders’ contributions, nor the one that was formed from reserves and retained earnings and paid to corporate residents, are not subject to tax.
Between Italy and Lithuania, it has also solved the problem of double taxation following the agreement signed in Vilnius on April 4, 1996 and rectified on the law number 31 of February 9, 1999 in force since June 3 of that year.
Free Economic Zones
In Lithuania there are six Free Economic Zones (FEZ) fully tax exempt. The pourpose of FEZs is exactly to exalt economic, commercial and financial activities, being territories where companies enjoy preferential economic and legal conditions for their operations. An association uniting all six FEZs operating in Lithuania was established at the end of 2015. Its goal is to create 2,000 new jobs and attract investments of more than EUR 400 million.
If in the near future your company should decide to hire employees in Lithuania, the choice would be good for both the level of preparedness of the Lithuanian workers and the point of view of their behaviour at work. As a matter of fact, Lithuanian labour force is generally high-skilled, while labour costs and the unemployment rate are both among the lowest in Europe.
A separate analysis deserves the Lithuanian infrastructure system. The period of deep crisis for the air transport of this country now seems to have been overcome. The sector is still attractive opportunities that may merit a deepening by Italian airlines.
Moreover, thanks to EU assistance, is expected the renewal of the railway network and also the road network of Lithuania is undergoing further improvements. In Specifically, it is worth mentioning the Rail Baltica project. The infrastructure will be able to connect Berlin to Helsinki in about seven to eight hours. The EBRD and EIB funds will finance the development of infrastructure linked to maritime transport.
From the analysis carried out we can see that Lithuania, even if of course it is not the perfect country, could be a good nation where build subsidiary in particular with regard to workers and the level of taxation as well as good connection to all Eastern Europe countries, especially Russia which could easily become the market of the future.
Tupponi, De Marinis, Russo & Partners International Business Law Firm is able to support both the project’s feasibility and the relative legal and fiscal implementations.
Anna Maria Biserni