Lithuania, one of the three Baltic countries, became an attractive destination for foreign business investors in the recent years. Due to the country’s key business advantages, such as convenient geographical location, low corporate tax rates, highly educated population, developed logistics, and labor costs that are four times lower than the EU average, an increasing number of foreign investors choose Lithuania for outsourcing their businesses.
In order to improve the business environment in the country, the Lithuanian government has recently adopted changes in the Lithuanian immigration Law. The amendments aim at restricting the incorporation of fictitious companies by foreign investors who plan to obtain a Lithuanian residence permit without carrying out any real business activities in the country. The amendment entered into force on the 1st of November 2014.
Conditions for receiving a residence permit in exchange for investment
According to the current Lithuanian immigration law, non-EU citizens can receive a Lithuanian residence permit in exchange for investment if they meet all of the below-mentioned six requirements, namely:
- The investor should run a Lithuanian company for at least 6 months before applying for a residence permit;
- The Lithuanian company should employ at least 3 Lithuanian residents and pay their social security contributions. The average amount of a monthly social security contribution in Lithuania is approximately 160 EUR for one person;
- Investing a share capital of 28.000 EUR into the Lithuanian company;
- At least 14.000 EUR of the share capital should be investor’s own capital;
- The investor should have a leading position in the Lithuanian company;
- The investor is requested to prove having a place of residence (an apartment or a house) in Lithuania that meets hygienic requirements (e.g., minimum 7 m2 for each person who is declared to live in that place).
Buying a shelf company
In order to minimize the burden of establishing a company, a foreign investor can buy a shelf company (i.e. a company that has already been legally formed) in Lithuania. The property rights of such a shelf company can be transferred to the investor at any time. The shelf companies are usually completely prepared for transferring: they have 3 employed Lithuanian residents, fully paid equity capital and other necessary taxes. The investor who buys such a shelf company is liable for Lithuanian tax payments after the submission of residency documents to the Lithuanian Migration Department.
The fees for buying a Lithuanian shelf company may vary depending on the number of shareholders in the company:
- A company having a sole shareholder (i.e. one person) costs approximately 7.500 EUR;
- A company having two shareholders costs approximately 6500 EUR per shareholder;
- A company having three shareholders costs approximately 5500 EUR per shareholder.
Extension of a residence permit
If a non-EU investor meets all the aforementioned requirements, the Lithuanian Migration Department will issue a residence permit which is valid for one year. After the expiration of the one-year residence permit, the investor can extend the permit every two years if all of the aforementioned requirements are met. However, if a foreign person invests more than 260.000 EUR into a company in Lithuania and employs at least 5 Lithuanian residents, he/she can receive an initial residence permit for 3 years. Such a residence permit can be extended every 3 years.
Furthermore, in order to be entitled to a residence permit, the investor is requested to physically reside in Lithuania for not less than 6 months per year. Also, at any time the investor can be requested to provide evidence that the business running by him/her is not fictitious.