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Leading ThroughOur clients lie at the heart of everything we do. It is our mission to ensure that every client receives the best service possible.
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Elena Vėgėlyte, Tax Associate at Law firm COBALT10th March, 2016
From a Garage to a Global Business
Why Lithuanian legal system is suitable for a startup?
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Migration
Requirements, timing and expenses
• Visa <90 DAYS during 180 days period
• Temporary residence permit
• Worker, highly-skilled worker, business owner
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Requirements
Worker Highly-skilled worker Business owner
Requirements
• Work permit
• No university diploma
• Contract with a local employer for > 6 m.
• Worker has a qualification and >1 year experience
• There is labourdemand
• University diploma
• Contract with a local employer for > 1 year
• Salary > 1.470 EUR (2 x average salary)
• There is a labour demand unless salary > 2.205 EUR (3 x average salary)
• Evidence of possession of sufficient funds (350 EUR / month)
• 1/3 shareholder of LT Co carrying activity for > 6 months
• LT Co employs > 3 employees
• Equity 28k EUR, from which 14k EUR invested buy foreigner
• 1/3 shareholder of LT Co carrying activity for > 6 months
• LT Co employs > 5 employees
• Foreigner’s investment into equity of LT Co > 260k EUR
Duration Max 2 years Max 3 years Max 1 year Max 3 years
Timing 3 + 4 months 1.5 + 2 months 4 months 4 months
Family After 2 years No limitations After 2 years No limitations
Expenses State fee 100 EUR; rent 300 EUR / month; health insurance costs (approx. 90 EUR / month)
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Migration. Practical Ways out
Establishing a group company and sending to long-term trip:
• Management or specialist
• 1 year working experience in the foreign company
• Don’t need a work permit – save 4 months
• Can stay for 2 years and extend for 1 year
Coming to work with a blue card for salary > 2.205 EUR (3 x average salary):
• Don’t need labour demand inquiry – save 4 months
• Can stay for 3 years
More info:http://www.migracija.lt/index.php?-1045199246
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• Limited liability – you don’t risk your personal wealth that is not in the company
• 2.500 EUR – minimum share capital (once company is established, you can use these funds as you want)
• CEO – obligatory body, while management board can be formed (if needed)
Establish Your Own Company in LT
• As many business partners as you want (from 1 to 250)
• Easy profit distribution (1% of shares –1% profit, 20% of shares – 20% profit)
• Suitable form to attract investors and receive investment
• Takes 5-10 days to establish
5-10 days
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Management Structure
Obligatory bodies:
• General Meeting of Shareholders
• CEO
Not obligatory bodies:
• Management Board
• Supervisory Board (formed mostly in the state owned enterprises)
• Several shareholders and investors in the company – Board is needed
• Supervision via board members appointed by investors/shareholders
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• More than 1 shareholder in the company –advised to have a SHA
• Third party investor will always require to sign the SHA
• Parties in the SHA agree on:
• election of the CEO and the Board members procedure
• profit distribution
• disposition of shares (tag along, drag along, exit clauses)
• investment in the company
• employees incentives etc.
Shareholders’ Agreement
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• Lithuanian laws & European Union laws
• Rule of law guarantees effective protection of IP
• IP rights can be transferred, pledged or disposed in any other way
• Make an IP due diligence:
• to attract investments
• owners of IP rights, what are the sources of IP rights, are IP rights protected, have other persons any possible claims to IP rights and etc.
Intellectual Property
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Taxation: level of business
Human capital taxation VAT
Profit tax
• Local supply 21%
• Supplies exceeding 45.000 EUR threshold are taxable with VAT
• Standard 15% and small, businesses 5%
• Incentives: R&D triple deduction from income; Reduction of profit (up to 50%) by investment expenses• Personal income
tax is 15%
• SSC at the total rate of 39.98%
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Cross-Boarder Digital E-commerce Transactions
Intra-EU supply for e-commerce:
• B2B no VAT charged (reverse charge)
• B2C VAT in the country where customer belongs
Ouside EU:
• no EU VAT, if effectively used outside EU
InvoicePrice € 100VAT € 19
€ 119
VAT € 19
Consumer
Tax office
Company
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Taxation: Level of Investor
Finance of business:
• Debt to equity ratio 1:4
• Arm’s length principle
Participation exemption rules:
• Dividend income is non-taxable, if > 1 year >10% in EU/non-EU countries
• Capital gains are non-taxable, if >2 years, >25% in EU/DAIS countries
Dividend income: 15%Board bonuses: 15%Sale of shares: 15%Interest income: 15%
Dividend income: non-taxable*Sale of shares: non-taxable*Interest income: 15%
* If participation exemption rule applies
Holding
Company
Natural person
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Transfer of Assets / Business to Lithuania
BY Co
LT Co
2) Loan capitalization
1) Sale of assets/business
• Transfer of business alternatives:
• Contribution into the share capital
• Sale of business / assets
• BY Co sells assets/business to LT Co with deferred payment and BY Co capitalizes receivables to LT Co shares
• Taxation of sale of assets/business from BY perspective
• Transfer pricing requirements in Lithuania and BY
EstoniaNiguliste 410130 TallinnTel. +372 630 [email protected]
LatviaValdemara 20LV-1010 RigaTel. +371 6724 [email protected]
LithuaniaLvovo 25LT-09320 VilniusTel. +370 5250 [email protected]
BelarusPobediteley ave. 100-207220020 MinskTel. +375 17 336 [email protected]