Country Profile

State structure

Lithuania is an independent democratic republic. The State structure is based upon the Constitution of the Republic of Lithuania (adopted in 1992). The State power is exercised by the Seimas (Parliament), the President, the Government and the Courts.

The Seimas is the supreme body of the state power of the Republic of Lithuania. It is composed of 141 deputies elected for a period of four years.

The President of the Republic of Lithuania is the highest official of the state. Citizens elect the President for a term of five years on the basis of the universal, equal and direct suffrage by a secret ballot. Valdas Adamkus is the President of the Republic of Lithuania (elected in 1998).

The Government of the Republic of Lithuania is composed of the Prime Minister and Ministers. The Prime Minister is appointed or dismissed by the President with the approval of the Seimas. Ministers are appointed and dismissed by the President upon the recommendation of the Prime Minister.

Geography

Territory: Covering 65.000 sq. km Lithuania is the largest of the three Baltic countries, twice the size of Belgium and a tad smaller than Ireland. North to south, the greatest distance is 276 km, east to west – 373km.

Borders: Inland borders with Latvia, Belarus, Poland and Russia (the Kaliningrad Region) total 1747 km. The Belarussian border is the longest, at 724 km. Coastline totals 99 km.

Longest rivers: the Nemunas - 937 km (475 km in Lithuania), and the Neris - 510 km (235 km in Lithuania). Lakes: more than 3000.

Climate: The climate is midway between maritime and continental: wet winters and summers. The average temperature in January is –4,9oC, in July is +17oC. The growing season varies between 169 and 202.

Language

The Lithuanian language is the official language of the Republic of Lithuania. Lithuanian is the oldest of the living Baltic tongues and belongs to the family of Indo-European languages.

Lithuanian is spoken approximately by three million people in Lithuania and by a million people in other countries.

Population

The population of the country is 3,5 million, 68% is urban population. 

The ethnic composition of the population is represented by 81,6% of Lithuanians, 8,2% of Russians and  other minorities. Vilnius, the capital of the Republic of Lithuania, is one of the oldest Baltic cities. 

Other major cities are: Kaunas (409 thous. inhabitants), Klaipėda (250 thous. inhabitants), Šiauliai (150 thous. inhabitants), Panevėžys (132 thous. inhabitants).

Territorial division

Lithuania is administratively divided into 10 counties which, in their turn, are subdivided into 44 districts.

Currency

Local payments are made in the national currency – Litas (LTL = 100 cents), 1 EUR = 3,4528 LTL.

Other information

Car speed limits (km/h): highways 100-130, roads 90, cities 60. Alcohol limit: 0.4 promiles.

Setting up a business in Lithuania

According to the Law on Foreign Investment, foreigners have the right to invest capital of the foreign origin in Lithuania:

• to establish an enterprise, to acquire all or a part of the capital of an economic entity established in Lithuania;

• to acquire various kind of securities;

• develop and increase the permanent assest;

• to perform concession and leasing agreements;

• to rent means and other type of assets for economic entities, a part of which belongs to an investor, controlling or influencing the economic subject.

Investor's rights

• equal rights for business as for Lithuanian entrepreneurs;

• foreign investors are protected by the Lithuanian legislation;

• the right to manage, to exploit the investment object legally;

• the right to transfer the gained profit to foreign currency or to transfer it abroad, having paid all the taxes foreseen by the Lithuanian Law;

• foreign enterprises have the right to establish subsidiaries, acquiring the status of a legal person and the right to perform business operations;

• foreign capital can be invested to a personal enterprise, an agricultural enterprise, a public joint stock company, and a limited liability company;

• the right to personally purchase any kind of realty;

• the State creates favorable conditions for private investors, by providing tax incentives.

For a public joint stock company the required minimum authorised share capital is 100000 LTL (28962 EUR).

A closed joint stock company must have at least 1 shareholder and not more than 50. The minimum authorized capital is 10000 LTL (2896,20 EUR).

Dividends gained from shares by foreign investors are not tax levied if the Lithuanian legal and physical persons are exempted from these taxes.

The respective laws on taxes at the State level regulate the taxes in Lithuania. Municipalities have no power to impose taxes with the exception of some local fees.

The main direct taxes include:
profit tax - 15 %,
income tax of natural persons - 24 %,
contributions to social security - 30.98 % for the employer and 3% for the employee,
guarantee fund - 0.2 %, from July 12th 2008 - 0.1 %,
tax on the real estate of an enterprise (the applicable tariff is 1%) and road tax (the applicable tariff is 0.1 % of the company's turnover).

The main indirect taxes are the following: value added tax (standard tariff is 18% and 0% for export goods), excise taxes (tariff range from 1% to 50%) and custom duties.

Tax breaks are available to small enterprises (up to 50 employees). The dividends and interest for bank deposits are not taxable in Lithuania.

The procedure of starting up a company is regulated by the State Companies Register and other regulations. Joint ventures and foreign capital enterprises are registered at the Ministry of Foreign Affairs of the Republic of Lithuania.

Investments

Reinforcing its political and economic independence as well as integrating into the European Union, is attractive to foreign investors due to the following attributes:

•  The private sector is under the intensive growth with its share of about 68% of the GDP. In the, so-called, 1996 the second round of privatisation, commercial privatization, is underway.

• A relatively cheap and highly qualified labour force able to adapt and to learn new production management and organization methods.

•  The well developed systems of transport and communications.

•  Adopted Laws provide incentives to foreign investors.

•  Compared to its neighbours eastward, there is a well developed infrastructure of service sectors.

•  Because of its geopolitical situation it gives investors the opportunity for access to potential Western markets.

•  Both foreign and Lithuanian economic entities are treated on equal terms in Lithuania.

Tax incentives

• Profit (income) for investments is not taxable.

• Contributions by foreign investors to form or to increase the authorized capital (equity capital) are used as fixed assets not liable to customs (import) duties.

• Legally received profit, income or dividends belong to foreign investors by the ownership right.

• There are no restrictions to transferring abroad profit, income or dividends, provided a foreign investors has paid all obligatory taxes.

• Share dividends received by foreign investors cannot be taxable, if Lithuanian legal and natural persons are also released from this tax.

Lithuanian economy: fact bits

During the second quarter of 2001, the GDP increased up to 5,7% and reached 2530.7 million USD (01-07-2001).

The largest foreign investors to Lithuania are the following: Denmark (19%), Sweden (14.9%), USA (9.7%), Germany (8.9%) and Estonia (8%).

The main sectors of investments: processing industry (28%), trade (20.3%), financing-credit institutions (17.7%), and telecommunication (16.3%). During the first half of 2001 more investments have been made to such sectors as transport and warehousing and financial intermediation services.

Direct foreign investment increased up to 8.4% during the first half of 2001.

In August 2001, the inflation rate was 2.4%.

The average gross salary calculated during the second quarter of 2001 made 1066.7 Litas; in the state sector – 1105.5 Litas, in a private sector – 1028.2 Litas.

The main Lithuanian export partners: Great Britain (15.2%), Latvia (14.7%), Germany (13.2%), and Russia (9%). The main Lithuanian import countries are: Russia (28%), Germany (13.2%), Poland (4.6%) and Italy (4.1%).