The goal of attracting foreign investment was set by Lithuania shortly after it
regained its independence. The first law on foreign investment was adopted on
29 December 1990. In mid-1995, the Seimas (Parliament) enacted an updated
version - the Law on Foreign Capital Investment in the Republic of Lithuania.
The latter was later replaced with the 7 July 1999 Law on Investments.
Foreign investment in Lithuania is regulated and protected by numerous
bilateral Agreements on Promotion and Protection of Investments. Currently,
there are about 26 agreements in place with most of the Member States of the
EU, the USA and many Central and Eastern European countries. Such agreements
prevail over the provisions of the laws of the Republic of Lithuania and
usually provide for more favourable treatment of reciprocal investments.
The 18 July 2000 Civil Code of the Republic of Lithuania;
The 7 July 1999 Law No. VIII-1312 of the Republic of Lithuania "On Investments"
("the Investments Law");
The 8 May 1990 Law No. I-196 of the Republic of Lithuania "On Enterprises";
The 31 July 1990 Law No. I-440 of the Republic of Lithuania "On Enterprise
The 16 January 1996 Law No. I-1169 of the Republic of Lithuania "On Securities
The 10 September 1996 Law No. I-1510 of the Republic of Lithuania "On
The 13 July 2000 Law No. VIII-1835 of the Republic of Lithuania "On Companies"
("the Company Law");
The 28 June 1995 Law No. I-976 of the Republic of Lithuania "On the
Fundamentals of Free Economic Zones".
Investment in Lithuania is widely supported by State institutions and various
organisations, both governmental and non-governmental. The most significant
organisation promoting investment in Lithuania is the Lithuanian Development
Agency (LDA) (www.lda.lt). LDA supplies general information on the business
climate and assists foreign investors in the gathering of specific information.
LDA also provides a variety of investor services and helps to collectively
protect and promote the interests of foreign investors through direct contact
with the Government. Other organisations involved in the promotion of foreign
investment in Lithuania are the Lithuanian Free Market Institute
(www.lrinka.lt), Investors' Forum (www.investorsforum.lt), various trade
missions of foreign embassies and other governmental and non-governmental
agencies. The Lithuanian International Chamber of Commerce (www.tprl.lt) is
also active in promoting bilateral investment opportunities.
Enterprises with foreign capital, branches and representative offices of foreign
enterprises are registered by the Ministry of Economy which also consults
investors on investment issues. From time to time, foreign investors are also
invited to direct consultations with the Government of the Republic of
Principles of Foreign Investment
The Investments Law contains the fundamental principles defining the treatment
of foreign investments in Lithuania. Notably, this law also applies to domestic
Principle of Equal Protection
The Investments Law expressly establishes that rights and lawful interests of
Lithuanian and foreign investors shall be protected by the laws of the Republic
Principle of Equal Treatment
The Investments Law establishes the principle of equal treatment, under which
foreign investors enjoy the same rights and obligations relating to commercial
activities as Lithuanian domestic investors, including the State and
municipalities, and the economic conditions are the same for all investors.
Principle of Free Access to All Sectors of Economy
Generally, foreign investors have free access to all sectors of the economy,
however, some exceptions are provided for in the Investments Law and other
laws. According to Article 8 of the Investments Law, investment of capital of
foreign origin is prohibited in the following instances:
According to Article 8 of the Investments Law, a license must be obtained by an
entity into which the investment is made when such licence is required for the
activities to be carried out by such entity. The Law on Enterprises provides
for a general principle that areas of commercial activity which require prior
permission or license include those activities which are related to the
increased danger to the human life, health, environment, manufacturing or
acquisition of munitions, also commercial activities which respectively are
related to such goods or services for which a special procedure of sale or
providing may be established by the laws. The specific activities that are
licensed are listed in the laws regulating the activities in question.
sectors relating to the security and defence of the State (with some
the organisation of lotteries.
Forms of Investment
The Investments Law provides for the following forms of foreign investment in
Foreign entities may establish branches or representative offices which do not
have the status of legal persons (for more details see chapter Enterprise Law
the establishment of an enterprise or the acquisition of a part or whole
authorised (ownership) capital in an operating enterprise registered in
the acquisition of securities of all types;
the creation, acquisition and increase of the value of long-term assets;
the lending of funds or other assets to enterprises in which the investor owns
a stake allowing to control such enterprise or influence it considerably;
the conclusion of concession or leasing agreements.
Under the Investments Law, investments are considered to be monetary funds and
other tangible, intangible and financial assets, appraised under applicable
procedures, which are invested for the purposes of generating profit (income),
social results (educational, cultural, scientific, health, social security and
in other similar spheres) or to ensure the implementation of State functions.
Investment Protection and Guarantees
The Investments Law emphasises protection of investments, rights and lawful
interests of the investors. The Investments Law expressly mentions that State
institutions or officers have no right to prohibit or restrict the possessing,
use and disposal of the investment by the investor. Any damage suffered by the
investor due to unlawful practices of the State or municipal institutions or
officials are to be compensated under the procedure established in the laws.
Expropriation of the investment may take place only for the public need and
only in cases and under the procedures established in the laws of the Republic
of Lithuania, provided the investor is adequately compensated pursuant to the
rules established by the Government of the Republic of Lithuania. The investor
must be compensated at the market value of the assets deprived that existed
immediately prior to expropriation or upon the notice of expropriation,
whichever is earlier. The value of the expropriated assets and amount of
compensation must be appraised according to the Law on Principles of Appraisal
of Assets and Business and other legal acts. The compensation must be paid
within three months after the day of expropriation in the currency requested by
the foreign investor (if the appraisal is in Litas, the conversion is performed
to applicable foreign currency according to the official exchange rate
applicable on the date of appraisal). The compensation must include interest
from the moment of publication of the notice of expropriation until the payment
of compensation (the interest rate is determined on the basis of the LIBOR rate
of the relevant currency). The compensation may be transferred abroad without
Investors have the right, after having paid taxes, to transfer abroad their
profit (income) without restrictions.
Disputes concerning the rights and lawful interests of a foreign investor are
settled according to the agreement between the parties, by the courts of
Lithuania, international arbitration or by other institutions. In case of
investment disputes, foreign investors also have the right to apply to the
International Centre for Settlement of Investment Disputes because Lithuania is
a member of the 18 March 1965 Washington Convention on the Settlement of
Investment Disputes Between States and Nationals of Other States. The disputes
shall be resolved under the provisions of Lithuanian legislation and applicable
Investments Related to Real Estate
Enterprises with foreign capital are entitled to own, lease or use real
property according to the laws of Lithuania. Generally, there are no material
limitations on the ownership or use of buildings, however, special buildings
with cultural or historical value may have particular requirements or
regulations concerning their use or renovation.
Based on the Civil Code, enterprises are allowed to lease land plots owned by
the State for a maximum period of 99 years. Privately owned land may be leased
for any term mutually agreed by the parties.
In contrast, limitations are placed on the ownership of land. Following the
amendments of the Constitution of the Republic of Lithuania, municipalities,
foreign citizens and foreign entities engaged in commercial activity in
Lithuania and complying with certain criteria determined by the law are allowed
to purchase non-agricultural land plots.
In conjunction with the adoption of the amendment to the Constitution, the
Constitutional Law defining the procedures, conditions and limitations of
acquisition of the land was adopted on 20 June 1996 and came into effect as of
2 February 1998.
Under the provisions of the said Constitutional Law: (1) foreign citizens
performing registered commercial activities in Lithuania; (2) entities owned or
controlled by foreign enterprises or foreign citizens; (3) foreign legal
entities having established, for business purposes, affiliates or subdivisions
without the status of a legal person in Lithuania; and (4) Lithuanian
enterprises with the rights of a legal person are entitled to acquire land
plots necessary for usage of the existing buildings and manufacturing
facilities or for the construction and operation of such buildings and
manufacturing facilities, provided the following conditions are met:
The 9 March 1999 Resolution No. 260 of the Government of the Republic of
Lithuania on Sale and Lease of Land Owned by the State for Non-Agricultural
Purposes (Activities) provides for the procedure for the sale or lease of
State-owned land plots to be used by the above-mentioned individuals or
enterprises for non-agricultural purposes (activities).
foreign natural person is a citizen of, or the foreign enterprise is registered
in, a Member State of the EU, or in a State that has concluded a European
Agreement with the EU and the Member States thereof, or in a State which at the
moment of the adoption of the Constitutional Law is a member of the
Organisation for Economic Cooperation and Development (OECD) or a member of the
North Atlantic Treaty Organisation (NATO);
respective foreign State provides equal rights to Lithuanian citizens or
enterprises i.e. the rights are applied on a mutual basis;
respective foreign enterprise has had its main business location in the State
of registration for at least the last five years; and
the Government of the Republic of Lithuania or an institution authorised
thereby gives a permission for the acquisition (in accordance with the
procedure established in the 10 December 1998 Resolution No. 1423 of the
Government of the Republic of Lithuania).
National and foreign entities are entitled to acquire State-owned land plots
only in proximity to the buildings or new construction they already own.
Entities or citizens involved in commercial activities in Lithuania may also
lease the land plots necessary for their activities and use or construct the
buildings or manufacturing facilities related to their business activities on
such leased land plots. Land lease may be the only option to use it in cases
when either the entities willing to use the land plots or the land plots
themselves do not conform to the requirements of the Constitutional Law
allowing for the acquisition of the specified land plots.
Payment for the purchase of State-owned land for non-agricultural purposes may
be made in instalments. Payment by instalment, however, is only allowed for
Lithuanian and foreign citizens. Legal entities, either national or foreign,
must purchase the land plot with a single payment made at the moment of
purchase (with the exception of entities that meet the requirements of the
Constitutional Law when the price of the land plot exceeds LTL 2 million
(approximately EUR 0.58 million)).
Point of Interest
The procedure for calculation of the value of land is different for lease and sale purposes. Thus, lease value, which is used for calculation of the land rent, should not be compared with the sale value.
Concessions are regulated by the Law on Concessions which defines the concession
as the right to use the existing or future State-owned or municipal property
(such as the continental shelf, the economic zone in the Baltic Sea; the
underground or its resources, internal waters, roads; buildings, structures,
installations, transport not to be privatised within the term of the concession
etc.) which can be granted under a concession contract for the performance of
certain business activities. Concession may be granted to any of the following
A public tender must be held for the granting of a concession. The concession
contract is concluded with the successful bidder.
Lithuanian enterprises i.e. those established and functioning in accordance
with the laws of the Republic of Lithuania; and
foreign enterprises i.e. entities or organisations whether with or without the
rights of a legal person, established and functioning in accordance with the
laws of a foreign State and domiciled therein (however, such foreign
enterprises have to establish subsidiaries in Lithuania for the performance of
the concession contract).
Income received pursuant to a concession contract belongs to the
Point of Interest
The Law on Concessions has not been applied in practice yet due to its limited scope and other shortcomings. Other legal forms of transactions necessary to ensure the provision of public services were used by the State and the municipalities instead. Currently, the Law on Concessions is under revision with a view to making concessions a more attractive and practicable form of investment.
Currently, there are no laws establishing special incentives for foreign
investments, although significant tax incentives may still apply to foreign
investments that were made during 1993-1997. The Investments Law provides that
tax incentives for investments are to be provided by respective tax laws. The
Investments Law also establishes other possible incentives for investments,
such as compensation of the portion of interest payments for the loans taken
for financing of the investment, the issuance of State (municipal) guarantees,
the insurance of loans at the expense of the State, and others. The application
of such incentives is, however, subject to discretion of respective State or
Some specific incentives are provided to strategic investors i.e. investors
with whom the Government of the Republic of Lithuania or any institution
authorised by it may execute investment agreements. The investment agreements
may be entered into by the Government of the Republic of Lithuania or
institutions authorised thereby for investments of more than LTL 200 million
(approximately EUR 57.9 million) and complying with certain other criteria.
Such agreements may establish special investment and business conditions. Tax
incentives in such agreements may only be established according to the
provisions of the Law on Tax Administration of the Republic of Lithuania.
Presently, the Law on Tax Administration does not provide for any new tax
incentives available to the strategic investors. With respect to incentives
established previously, the Law on Tax Administration provides that if the
Government of the Republic of Lithuania prior to 1 January 2000 concluded an
investment agreement with an investor who subsequently invested at least LTL
200 million (approximately EUR 57.9 million) in a Lithuanian enterprise, and
the agreement provides for no increase in direct taxes for 5 years from the
moment the investment reaches LTL 200 million and the Government undertook to
extend the term up to 10 years, the respective tax rates valid on the day of
conclusion of the agreement will not be increased during such specified term.
With respect to investments into municipal infrastructure, manufacturing and
services, the municipality is also entitled to enter into investment agreements
that meet the criteria established by the Council of the Municipality. Special
investment, business and land plot selection conditions may be established in
accordance with the competence of the municipality.
Free Economic Zones
Lithuania is continuing to enhance its appeal to foreign investors through the
development of a network of free economic zones ("FEZs"). The Law on the
Fundamentals of Free Economic Zones provides for the establishment of FEZs in
Lithuania. Lithuanian and foreign enterprises, corporations and associations
are eligible to participate in FEZs. FEZs offer considerable benefits only for
the companies registered and operating within their boundaries. These benefits
Three FEZs were established in the cities of Šiauliai, Klaipėda and Kaunas.
However, Šiauliai FEZ is likely to be soon liquidated.
80% corporate profit tax reduction for the first 5 years, 50% - for the next 5
years. If a foreign investor has established an enterprise in the FEZ or has
acquired at least 30% of the shares of an enterprise registered and operating
in the FEZ and has invested more than USD 1 million into such enterprise, it is
subject to no corporate profit tax during the first 5 years of operation and
enjoys a 50% tax reduction for the subsequent 10 years;
no customs taxes. Customs duties and taxes do not apply to the goods imported
from a foreign country into free areas (parts of FEZ territory separated from
it and from customs territory of Lithuania which does not belong to FEZ) and
exported from the free areas into foreign countries. Customs also do not apply
to the goods stored, destroyed in or used for functioning of free areas;
no VAT and excise tax on goods which are placed in the FEZ enterprises
operating in the free areas;
no taxes on dividends for foreign investors;
50% discount on land lease taxes for FEZ management enterprise;
the portion of the income of a FEZ enterprise that is re-invested (i.e. used
for the acquisition of material assets, scientific research and acquisition of
new technologies) is not included into its taxable income; and
FEZ companies receive the same legal guarantees as those operating outside the
Point of Interest
FEZs are still in the process of formation in Lithuania. Klaipėda FEZ is in the most advanced stage of commencement of actual activities.