Setting up a UAB in Lithuania: the registration term and whether to travel

There is no need to come to Lithuania – neither for the shareholders nor for the future CEO. The documents are signed by an advocate under a power of attorney. It is more convenient for the CEO to come after incorporation, when the bank account has to be dealt with and contracts signed. The law sets the term for the registration itself: Article 2.64(3) of the Civil Code (CK) provides that a legal entity must be registered within three working days of all documents being filed and the registration fee being paid. The law sets no duration for the other stages: it depends on when the documents are prepared and signed, when the initial contributions are paid and when the bank account is opened.

From which day the company exists

Article 2.63(1) CK: a legal entity is deemed to be established from the date of its registration in the Register of Legal Entities. Until that day there is no company, however many documents have been signed.

This has one important practical consequence. Article 8(4) of the Law on Companies (ABĮ) provides that initial contributions for subscribed shares are paid into the accumulation account of the company being established, and the funds held in the accumulation account may be used only after the company has been registered. The money already belongs to the company, but it cannot yet be reached.

For this reason, the memorandum of association settles in advance what will happen to that money if registration does not take place: Article 7(2)(14) ABĮ requires the memorandum of association to set out the procedure for returning the initial contributions if the company is not registered. This is not a formality – it is the document that sets in advance how the money comes back.

The bank account after registration

The law sets no time within which a bank must open an account for a new company. Before entering into a business relationship, a bank must identify the client and the beneficial owner and verify their identity (Article 9(1)(1) of the Law on the Prevention of Money Laundering and Terrorist Financing), so the timing depends on when the bank receives and verifies the required data on the company and its beneficial owners.

The first employee

The time limit for taxpayer registration is set by Article 46(1) of the Law on Tax Administration (MAĮ): a person who is liable to pay a tax under the relevant tax law must submit its registration data to the data controller of the Register of Taxpayers (Mokesčių mokėtojų registras) within 5 working days of the day of its legal registration or, if it starts its activities earlier, no later than on the day those activities begin.

The law does not say who carries out registration with the State Tax Inspectorate (VMI) and with the State Social Insurance Fund Board (Sodra) on the company’s behalf; the company may entrust this to an accountant. That is why it is worth choosing an accountant before incorporation, not after: otherwise hiring the first employee has to wait until there is someone to do it.

VAT: nobody registers you automatically

A newly established company is not registered as a VAT payer automatically. The application is filed once the company has been registered, but a wish to register for VAT voluntarily can also be stated while the company is being registered in the Register of Legal Entities (point 15 of the description approved by VMI order No. 178).

Before applying it is worth having the answers: who will keep the books, where the business will be carried on, who will work there.

Whether registration is mandatory is decided under Article 71(2) of the Law on Value Added Tax (PVMĮ). A newly established Lithuanian taxable person is not required to register if it does not expect to exceed the EUR 45,000 consideration threshold in the current calendar year. Once the threshold is exceeded, VAT starts to be charged from the month in which it was exceeded.

There is also a rule that foreign founders should know in advance. Article 71(7) PVMĮ provides that where the same person controls several legal entities, the consideration of all of them is added together: once the combined threshold is exceeded, all the controlled legal entities must register, even if the turnover of each one on its own is lower, unless they prove that their management bodies do not coincide, their activities are not of the same nature and they do not act for each other’s benefit. When setting up a second or third company in Lithuania, this means the EUR 45,000 threshold is not counted for each company separately.

The steps of incorporation

• Details, name reservation, power of attorney, preparation and signing of documents.
• Accumulation account and initial contributions: they are paid within the time limit set in the memorandum of association or the instrument of incorporation (Article 8(4) ABĮ).
• Filing with the register and registration: within three working days of all documents being filed and the registration fee being paid (Article 2.64(3) CK).
• After registration: the bank account, the accountant and, if needed, VAT.

More on setting up a company

• Establishment of legal entities: service page
• Foreign-owned UAB: bank account, identification and documents
• Can you sign a contract in a UAB’s name before it is registered?
• Registered office: whose consent you need and the risks of a bought address
• UAB articles of association and shareholders’ agreement: what differs
• A foreign company’s branch in Lithuania: the document on which registration can stall
• VAT registration for a new Lithuanian company: when it is required and when to register voluntarily

How to start

Write to us with who the shareholders will be, who will be the CEO and what business is planned. We will send you a list of documents, the text of a power of attorney to sign remotely and a specific timeline for the incorporation.

Tel. +370 5 212 1506, email info@linden.lt

More about this service: establishment of legal entities.