Why Lithuanian legal system is suitable for a startup?

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1. Leading Through
Our clients lie at the heart of everything we do.
It is our mission to ensure that every client
receives the best service possible.

2. 2
Elena Vėgėlyte, Tax Associate at Law firm COBALT 10
th
March, 2016
From a Garage to
aGlobal Business
WhyLithuanian legal system
is suitable for a startup?

3. 3
Migration
Requirements, timing and expenses •
Visa <90 DAYS during 180 days period
•
Temporary residence permit
•
Worker, highly-skilled worker, business
owner

4. 4
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 labour
demand
•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)

5. 5
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

6. 6
•
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)
EstablishYourOwnCompany 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

7. 7
ManagementStructure
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

8. 8
•
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

9. 9
•
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

10. 10
Taxation: levelof 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%

11. 11
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
Invoice
Price € 100
VAT € 19
€ 119
VAT € 19
Consumer
Tax office
Company

12. 12
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

13. 13
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

14. Estonia
Niguliste 4
10130 Tallinn
Tel. [phone]
[email protected]
Latvia Valdemara
20
LV
-1010 Riga
Tel. [phone] [email protected]
Lithuania
Lvovo 25
LT-09320 Vilnius
Tel. [phone]
[email protected]
Belarus Pobediteley
ave. 100-207
220020 Minsk Tel. [phone] [email protected]