Free economic zones in Lithuania
Relocating your business to another country or city is not only an excellent way to expand your company but it is also a great manner to reduce costs. The most common question is: which country (or city) to choose? While Baltic States proved to be popular among Nordic, British and even German investors, the difference between each city also matters. A good example is so-called “free economic zone” which offers a variety of benefits for the investors settled in that area. The information provided below features requirements and tax exemptions of free economic zones in Lithuania.
Locations
Currently there are seven free economic zones in Lithuania: Akmenė, Kaunas, Klaipėda, Kėdainiai, Šiauliai, Panevėžys and Marijampolė.
The Law on Free Economic Zones establish regulations applied in the aforementioned zones. The investors established in free economic zones can take advantage of developed infrastructure as well as favourable economic and legal regime.
Kaunas and Klaipėda ar well regarded because of their location: Kaunas is situated in the middle of Lithuania and offers good access with all the parts of the country while Klaipėda situated on the coast of Baltic sea has a port which facilitates shipping and receipt of goods.
Benefits
The following tax incentives are applied to the companies operating in a free economic zone:
|
Taxes |
Free economic zone |
Usual Tax Rate |
|
Corporate tax |
6 year exemption from corporate income tax and 50% discount for the following 10 years* |
15% |
|
Real estate tax |
No |
0.31 – 1% |
|
Tax on dividends for foreign shareholders |
No |
15 – 20% |
*Investments in long term assets must be at least 1 million EUR
In addition to the above mentioned tax incentives, the free economic zone investors pay 50% less for land rented from the government.
Requirements
In order to be able to take advantage of the above mentioned benefits, the investor shall meet certain requirements:
- Activities of the investor shall comply with the Law on Free Economic Zones and other laws and/or regulations of the respective zone;
- The investor shall have all permissions and licenses required for its activities. The licenses (permits) cannot be suspended or revoked, they shall be valid;
- The investor shall submit a request to be granted a permission to establish in a free economic zone.
Permissions for establishment in a free economic zone are granted by the entity which manages the free economic zone. After receipt of the request of the investor, the entity responsible for management of the free economic zone evaluates the application and grants a permission to establish in the free economic zone or refuses to grant the permission. The investor is refused to grant the permission if the investor does not meet the above mentioned requirements or if the land of the zone is already distributed to other investors and there is no possibility to assign another plot. The decision to refuse to grant a permission to establish in a free economic zone can be appealed.
It shall be noted that certain activities are prohibited in a free economic zone. Activities related to gambling, lotteries, production of alcoholic beverages and tobacco products, in stamps, coins and other similar objects in addition to broadcasting of radio and television shows are prohibited in the free economic zones.
Jovita Valatkaite, attorney at law of the Gencs Valters Law Firm in Vilnius
Practising in fields of Business Law in Latvia, Lithuania and Estonia
T: +370 52 61 10 00
F: +370 52 61 11 00