Lithuania

Ease of Doing Business Rank: 11

Overview 

Geographic location 

Lithuania is a Northern European country on the Baltic Sea. It is a Baltic state, along with Latvia and Estonia to the north.  

Belarus and Poland lie to south, Russia lies to the east, and Denmark and Sweden lie to west. 

Spoken language 

Lithuanian is the official language of Lithuania. It is the native language of 85% of the population and spoken by 96% of inhabitants. 

English is the most popular non-native language spoken by 30% of the total population and 80% of the youth. Russian, Polish, or German are also spoken by a small percentage of the population. 

Population 

The 2019 population is approximately 2.86 million 

The majority of the population lives in small urban centers scattered throughout the country. Only 19 cities have a population of more than 20,000 inhabitants. The largest cities are Vilnius, Kaunas, and Klaipeda. 

Popular industries 

The top industries in Lithuania are petroleum refining, information and communication technology, fertilizer manufacturing, food processing, agriculture, transportation, and logistics and warehousing. 

Education 

The Times Higher Education World Rankings only lists one Lithuanian university in the top 1,000 in the world 

The Legatum Prosperity Index ranks Lithuania’s education system 36th out of 149. 

Popular entity types 

The most common business entities in Lithuania are General PartnershipPrivate Limited Liability Company, Public Liability Company, Individual Enterprise, and Agricultural Company. 

The most commonly incorporated entity in Lithuania is the Limited Liability Company. 

Lithuanian incentives for business 

Lithuania offers reduced taxes on certain foreign-sourced income, with proper notice from the foreign authority. 

They also offer an investment project incentive which may provide up to a 100-percent tax reduction of the acquisition cost of qualified long-term investments.  

The relief applies to machinery and equipment, computers and communication equipment, software and acquired intellectual property rights, trucks, trailers, and semi-trailers. Costs exceeding the tax reduction limit can be carried forward for four years. 

The Lithuanian government also offers tax relief for research and development, upon approval. Expenses, other than depreciation on fixed assets, are allowable as deductions three times in the tax period, providing the work performed relates to ordinary business activities. 

Companies may also enjoy a reduced rate of 5% CIT rate on profits from the commercial exploitation of patented inventions. 

Film production may also qualify for tax reductions if the film is of cultural significance, at least 80% of expenses incur in Lithuania, and the amount exceeds EUR 43,000, for up to a maximum of 20% of total film production expenses. 

Lithuanian Free Economic Zones may offer partial or complete corporate, real estate, and land lease tax.  

History & Features 

 

Main cities for business 

Lithuania’s capital city of Vilnius is the principal center of business and financial center of the country. 

Popular historical & tourist attractions 

Lithuania is not a large country, but it’s packed with history and interest. It has 4 UNESCO heritage sites, including the historic center in Vilnius. It was once the capital city of Europe’s largest medieval state. The area features Baroque churches and noble palaces. 

Gediminas Tower is one of Lithuania’s most loved sites. Legend suggests Duke Gediminas stopped during a hunting trip, dreamt of a wolf howling atop the hill, and founded Vilnius on the spot. 

Just outside Vilnius, you’ll find the Renaissance Trakai Castle, built in the 14th century. It sits on an island in Lake Galvé, and is only accessible by footbridge or rowboat.  

Lithuania also features stunning natural beauty. The Curonian Spit is a 98 km long peninsula with massive sand dunes, pristine pine forests and seaside resorts with amazing ocean views. Aukštaitija National Park, about 100 km from Vilnius, has 126 lakes and many islands and streams. 

Lithuania’s most memorable attraction is the Hill of Crosses. Historians believe people started to add crosses to the hill in the 19th century. Today, more than 100,000 crosses from around the globe cover the green mound. 

The country also has a rich history in the amber trade which began in 1854The Palanga Amber Museum near the Baltic Sea features 4,500 pieces in the restored 19th century Tiškevičiai Palace. Botanical gardens surround this architectural masterpiece. 

History 

Scattered Lithuanian tribes united under Gediminas, the Grand Duke of Lithuania from about 1315. He is credited with establishing a political entity and expanding Lithuania’s territory 

By the end of the 14th century, Lithuania was one of the largest countries in Europe including present-day Belarus, Ukraine, and parts of Poland and Russia. However, the Grand Duchy of Moscow had become their enemy. 

The reigning Grand Duke Jogaila became king of Poland and ruler of Lithuania. He gradually started to introduce Christianity to Lithuania, one of the last pagan areas in Europe. Lithuania and Poland united forces to defeat the German Teutonic knights in 1410 in one of the largest medieval battles in Europe. 

The Lithuanian-Polish alliance waivered, but at the end of the 15th century it strengthened again. The Grand Duchy of Moscow threatened, sparking two wars. 

By 1569, the Treaty of Lublin bound Poland and Lithuania and the states formed a commonwealth. Each state had their own armies and laws, but agreed to only make treaties with foreign nations consensually. They used a common currency and a joint parliament; however Poland dominated the upper classes. 

During the 16th century, Protestantism touched Lithuania, only to be curtailed by the Catholic Counter-reformation. Russia continued to threaten Lithuania and seized the city of Smolensk in 1512. 

In the early 17th century, the Polish-Lithuanian forces occupied Moscow. However the Russians retaliated capturing the eastern part of Lithuania, including Vilnius. 

Poland and Lithuania’s power declined in the 18th century. Russia gradually occupied parts of Lithuania, until both Lithuania and Poland were under Russian rule. 

The Poles rebelled in 1830 and the rebellion spread to Lithuania by 1832. However, Russian forces crushed the uprisings. In 1863Poles and Lithuanians rose again unsuccessfully. 

Russian rule suppressed Catholicism and enforced the Russian language and Cyrillic alphabet in schools. Lithuanian publications were not permitted. Despite these measures, nationalism and an interest in Lithuanian culture and history grew. 

World War I brought many changes to Lithuania. First, the Germans occupied Lithuania in 1915, allowing them to form an assembly. However, in 1920 Poland occupied Vilnius. In 1926, Antanas Smetona began rule as a dictator after an army coup. 

During World War II, Russia occupied Lithuania in 1940 and it became part of the Soviet Union. Germany invaded Russia in June 1941 and later captured Lithuania. However, in 1944 the Russians recaptured the capital city of Vilnius and eventually all of Lithuania. The area was under Communist power again. 

Between 1945 and 1952, Lithuania became industrialized, farms became collectives, and many Lithuanians were executed or deported. It wasn’t until the late 1980s that the Communist grip on the country began to waiver. By 1989 Lithuania had some economic and political autonomy. 

Lithuania tried for independence in the 1990s, but Russia imposed an economic blockade. However, in 1991 a failed Communist coup in Moscow led to Russian recognition of Lithuania as an independent country. The last Russian soldiers left Lithuania in 1993. 

Today, Lithuania is a democratic republic with a successful market economy. They are also a member of the European Union. 

Other relevant facts 

The predominant religion in Lithuania is Catholic (77%), followed by smaller groups of Christians, Protestants, Jews, and Muslims, as well as people of other faiths. 

According to the census conducted in 2001, 83.45% of the population of Lithuania identified themselves as Lithuanians, 6.74% as Poles, 6.31% as Russians, 1.23% as Belarusians, and 2.27% as members of other ethnic groups.  

Additional Information for Business 

According to Forbes’ 2019 Best Countries for Business, Lithuania is the 27th best country in the world for conducting business.  

The 2019 Index of Economic Freedom rates Lithuania 27th globally and states, An improving labor market has spurred private consumption, and investment inflows from the EU have risen.  

World Bank’s “Doing Business” rankings rate Lithuania 14th for ease of doing business in the world. 

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