Combining access to the EU single market, a pragmatic regulator and Eurozone stability, Lithuania has become a preferred jurisdiction for EU entrepreneurs, fintech founders and investors.
The legal framework is predictable, the licensing is based on EU guidelines and the operational infrastructure such as SEPA access is available to non-bank payment institutions via the central bank’s channels. The result is a legal system in which establishment and registration can be carried out efficiently without compromising the regulatory substance.
Choosing the Right Vehicle: UAB vs. AB and Investor Signaling
For most operating companies and fintech platforms, the limited liability company (UAB) is the standard structure. The minimum share capital is 2,500 euros; a sole board model with optional control committees is permitted. Public companies (AB) signal scale and are designed for capital markets or a broader investor base; the minimum share capital is 40,000 euros. Both are independent legal entities under Lithuanian law, which allows the risk to be separated within corporate groups.
From an investor diligence perspective, predictable governance is important. UABs may implement shareholder agreements alongside articles to govern reserved matters, drag/tag and anti-dilution protections. ABs are subject to stricter governance under the Companies Act, including stricter rules on general meetings and disclosures. For cross-border investors, both forms support EU cross-border mergers and freedom of establishment under the Treaty on the Functioning of the EU.
Tax and VAT triggers that impact structuring
The normal corporate tax rate is 15 percent. A reduced rate of 5 percent may apply to small businesses that meet the statutory thresholds for employees and turnover. Careful monitoring is required to avoid accidental loss of privilege. Lithuania has implemented the interest limitation rule of the EU Anti-Tax Avoidance Directive, which generally limits net borrowing costs to 30 percent of EBITDA with a de minimis limit of 3 million euros. This is important for leveraged acquisitions and intra-group financing.
The standard VAT rate is 21 percent. Mandatory VAT registration generally applies if taxable turnover in Lithuania exceeds 45,000 euros within a rolling 12-month period. For cross-border B2C deliveries within the EU, the 10,000 euro one-stop shop threshold can trigger OSS registration even for small quantities. An early assessment of the VAT obligations regarding the place of delivery and the digital platform reduces downstream restructuring costs.
Participation exemption rules based on the EU Parent-Subsidiary Directive can eliminate withholding tax on outgoing dividends to qualified corporate shareholders who have held a significant interest for at least 12 months. Confirm beneficial ownership and substance to avoid problems with treaty shopping.
Fintech Approvals: EMI, PI and Investment Services
As part of the E-Money Directive, e-money institutions require an initial capital of at least 350,000 euros. Payment institutions follow the Payment Services Directive levels with an initial capital of 20,000, 50,000 or 125,000 euros, depending on the services offered. Own funds must be held in accordance with the applicable method and customer funds must be protected by segregation with a credit institution or through an insurance/guarantee mechanism.
The Bank of Lithuania is an active supervisory authority and undertakes pre-application engagement. EU law provides for a decision-making period of three months from the point at which an application is considered complete. In practice, requests for information and governance improvements often extend the calendar period. Authorized institutions can offer services across the EEA as a passport, providing a significant efficiency advantage for scaling payments and e-money models.
Licensing of investment firms follows the EU Investment Firms Regulation and Directive. Classification and initial capital depend on performance and K-factors. Early alignment of the business model, order processing, customer asset protection and regulatory consolidation is essential to avoid mid-process reclassification.
Governance, substance and outsourcing expectations
The manager expects real decision-making in Lithuania. The command and control functions must be effective, independent and appropriately equipped. For fintechs, this typically means an on-site CEO or managing director, heads of compliance and AML, and robust risk and internal audit frameworks appropriate to the size. EU rules on outsourcing and ICT risks require an up-to-date register of outsourcing arrangements, documented exit plans and oversight of critical providers, including cloud.
Anti-money laundering and terrorist financing controls must comply with EU regulations implemented into Lithuanian law, with the Financial Crime Investigation Service acting as the FIU. A risk-based approach, customer due diligence, sanctions screening, transaction monitoring and timely reporting of suspicious transactions are mandatory. Weak AML frameworks are the most common cause of licensing delays and post-licensing fixes.
Operational advantages in payment transactions
Lithuania provides direct access to SEPA through the Central Bank’s infrastructure, allowing EMIs and PIs to process euro payments without routing through correspondent banks. This significantly accelerates the market launch of EU payment offerings. Backup accounts should be diversified and reconciliation processes must be automated and auditable to withstand regulatory scrutiny.
Formation, submissions and deadlines
Registration using standard articles and qualified electronic signatures can be completed in two to three business days, subject to timely verification of documents by the Center of Registers. Non-EEA directors or complex shareholder chains may require notarial certification and apostille, extending deadlines. UBO information must be filed in the register of legal entities and kept up to date. Annual financial statements are filed with the Center of Registers, with statutory audit thresholds tied to size criteria and public interest status.
Founders who require a coordinated setup, including articles, UBO and VAT registrations, and regulatory preparation, should consider the assistance of a specialist when setting up a business in Lithuania.
Cross-border mechanisms and group structuring
The PSD2 and EMD2 passport will enable EEA-wide provision of services once the Lithuanian company is authorized. Corporations often use a Lithuanian UAB as a licensed operating entity with holding companies elsewhere in the EU to accommodate investor rights, tax treaties and equity incentive plans. Cross-border mergers and conversions under EU guidelines facilitate restructuring where scale requires asset relocation or license consolidation. Keep the substance with the licensed entity to avoid mailbox issues and maintain the integrity of the passport.
Common pressure points that need to be resolved early
Regulators focus on financial crime control, protection architecture, IT and cyber risk governance, and board independence. Tax authorities and auditors check the transfer prices, the interest limitation according to ATAD and the place of VAT for platform models. Investors examine shareholder protection and the scalability of governance from the start-up phase to operations in multiple countries. Addressing these areas early shortens the time from inception to sales and reduces the likelihood of conditional approvals limiting commercial adoption.
