Economic Overview in Lithuania

The economy of Lithuania is the largest economy among the three Baltic states. Lithuania is a member of the European Union and its GDP per capita is the highest in the Baltic states. Lithu­ania belongs to the group of very high human development countries and is a member of WTO and OECD. Lithuania was the first country to declare independence from the Soviet Union in 1990 and rapidly moved from a centrally planned to a market economy, implementing numer­ous liberal reforms. It enjoyed high growth rates after joining the European Union, along with the other Baltic states, leading to the notion of a Baltic Tiger. Lithuania’s economy (GDP) has grown more than 500 percent since regaining independence in 1990. Half of the workforce in the Baltic states – 2.7 million live in Lithuania – 1.4 million. GDP growth reached its peak in 2008 and is approaching the same levels again in 2018. Similar to the other Baltic States, the Lithuanian economy suffered a deep recession in 2009, with GDP falling by almost 15%. After the severe recession, the country’s economy started to show signs of recovery already in the 3rd quarter of 2009, returned to growth in 2010 with positive 1.3 outcomes and with 6.6 percent growth during the first half of 2011 the country is one of the fastest-growing economies in the EU. GDP growth has resumed in 2010, albeit at a slower pace than before the crisis. The success of the crisis taming is attributed to the austerity policy of the Lithuanian Government. Lithuania is ranked 11th in the world in the Ease of Doing Business Index prepared by the World Bank Group and 19th out of 178 countries in the Index of Economic Freedom, measured by The Heri­tage Foundation On average, more than 95% of all foreign direct investment in Lithuania comes from European Union countries. Sweden is historically the largest investor with 20% – 30% of all FDI in Lithuania. Based on OECD data, Lithuania is among the top 5 countries in the world by postsecondary (tertiary) education attainment. Educated workforce attracted investments, es­pecially in the ICT sector during the past years. The Lithuanian government and the Bank of Lithuania simplified procedures for obtaining licenses for the activities of e-money and payment institutions positioning the country as one of the most attractive for the FinTech initiatives in the EU. Lithuania has an open and mixed economy that is classified as a high-income economy by the World Bank. World Economic Forum’s Global Competitiveness Report ranks Lithuania 41st (of 137 ranked countries). Lithuania joined NATO in 2004, EU in 2004, Schengen in 2007 and OECD in 2018. On 1 January 2015, the euro became the national currency replacing Litas at the rate of EUR 1.00 = LTL 3.45280.

Why Lithuania?

Lithuania is a business-friendly country, not only for young entrepreneurs and skilled profes­sionals but is also trusted by such high caliber companies. This country, full of young people, ambition, energy, skill, and talent, are equipped with Europe’s fastest internet connection and rapidly growing startup ecosystem. Our government understands the benefits of investment and is more than ready to provide you with the support you need, and our modern dynamic business sector is fully EU compatible. What’s more, with tax treaties with 50 major markets including China, Russia, and the USA, our business environment is truly global in its reach.

5 reasons why you should start your business in Lithuania:

1. Competitive tax system
2. Low operating costs
3. Excellent infrastructure
4. Rapidly developing country
5. Best-educated people in Central and Eastern Europe

Get a job or find an employee in Lithuania

In Lithuania, labor relations (both individual and collective) of workers hired under employ­ment contracts are regulated by the Labor Code. The current Labor Code came into force on 1 July 2017. It pursues more flexible work relations between the employees and employers and aims to liberalize work regulation.

If you want to find a job or employ a foreigner in Lithuania:

• The situation of the Lithuanian labor market is monitored by the Labor Exchange Office, which consults both job-seekers as well as job-givers. You’ll receive free information and answers to your questions.
• If you are not a citizen of the European Union and intend to work in Lithuania, you will have to obtain a work permit. This should be done before your arrival in Lithuania. A work permit is issued to foreigners for a period of up to two years.
• If you want to employ a foreigner, you must apply to the local labor exchange and to reg­ister a vacancy. Bear in mind, issuing a work permit might take up to 4 months.
• You are also recommended to check if you need a residence permit. This type of permit is provided by the Migration Department.

Taxes

Lithuania Corporate Tax Rate

The Corporate Tax Rate in Lithuania stands at 15 percent.

Lithuania Personal Income Tax Rate

The Personal Income Tax Rate in Lithuania stands at 20 percent.

Lithuania Sales Tax Rate – VAT

The Sales Tax Rate in Lithuania stands at 21 percent.

Lithuania Social Security Rate

The Social Security Rate in Lithuania stands at 21.27 percent.

Lithuania Social Security Rate for Companies

The Social Security Rate for Companies in Lithuania stands at 1.77 percent.

Lithuania Social Security Rate for Employees

The Social Security Rate for Employees in Lithuania stands at 19.50 percent.

Globally ranked player

11 out of 190 countries evaluated in Ease of Doing Business

39 out of 141 countries evaluated in the Global Competitiveness Index

16 out of 162 countries evaluated in Economic Freedom of the World

29 out of 180 countries evaluated in the Environmental Performance Index

38 out of 180 countries evaluated in the Corruption Perception Index

18 out of 190 countries evaluated in Paying Taxes Ranking

Business Environment

Looking for a location to grow your business that has less red tape, is fast and convenient when it comes to making business happen, and can give you the kind of connectivity you need to suc­ceed. Look no further than Lithuania.

Fast and convenient

EU-wide recognition of Lithuania’s acceleration in e-government solutions offers a one-stop-shop for public information and services for business, a fast-online system for the registration and payment of taxes, allowing the taxpayers file all tax returns electronically. An IT-based tax administration system (“I. MAS”) contributes to an effective and modern tax administration in Lithuania which in addition to 50+ Bilateral double taxation avoidance treaties ensures that the business environment is both convenient and cost-effective.

Free Economic Zones in Lithuania

Investment project incentive

Entities involved in an investment project can reduce their taxable profits by up to 50% of the incurred acquisition costs of long-term assets meeting certain requirements.

R&D incentive

• Expenses incurred for R&D purposes can be deducted three times during the tax period when they are incurred.
• Reduced 5% corporate income tax rate can be applied for the profit deriving from the commercial exploitation of patented inventions.

Free Economic Zone (FEZ) in Lithuania

Located in Lithuania’s core economic centers, the country’s 7 Free Economic Zones offer ev­erything you need to ramp up your productivity and boost your business growth: from ready-to-build industrial sites with all the physical and legal infrastructure in place, through to facilities to lease, plus a range of support services and tax incentives.

1.Klaipėda FEZ

• Available area 277 ha
• Occupied area 60 ha
• County population 371,99
• An unemployment rate 4.9%

2.Kaunas FEZ

• Available area 187 ha
• Occupied area 104 ha
• County population 562,189
• An unemployment rate 5.7%

3. Šiauliai FEZ

• Available area 94 ha
• Occupied area 13 ha
• County population 264,365
• An unemployment rate 8%

4.Kėdainiai FEZ

• Available area 80 ha
• Occupied area 13 ha
• County population 562,189
• An unemployment rate 5.7%

5.Akmenė FEZ

• Available area 24 ha
• Occupied area 61 ha
• County population 264,365
• An unemployment rate 8%

6.Marijampolė FEZ

• Available area 13 ha
• Occupied area 65 ha
• County population 139,980
• An unemployment rate 7.3%

7.Panevėžys FEZ

• Available area 18 ha
• Occupied area 16 ha
• County population 216,766
• An unemployment rate 7.7%

Business sectors

ICT

Lithuania has the largest ICT industry in the Baltic States with outstanding potential both for local as well as foreign expanding businesses. 13 out of the 20 largest IT companies in the Baltic States are based in Lithuania. Pixelmator, currently ranks as the fourth best-selling mobile ap­plication creator on the Mac App Store, trailing only Apple’s applications. The most important export markets for the sector were Germany, the USA, United Kingdom, Denmark, and Sweden. The information and communications sector generates about 3 % of GDP, employing around 2.5 percent of total employment. An annual salary of IT specialists ranks from euro 10k to euro 26k depending on the position and experience.

Life Sciences

Lithuanian life sciences, production is exported to over 100 countries, 16 research centers co­operate with both domestic and foreign biotechnology companies and universities. The current spotlight of research pointed to Bioinformatics. Labor productivity in the pharmaceuticals sec­tor is almost 5 times higher than the overall economy ‘s labor productivity.

Groundbreaking results in the fields of:

• Pharmaceuticals protein
• Chemistry
• Biochemistry of enzymes and nucleic acids
• Molecular biology of prokaryote and eukaryote

Clinical Trials

Clinical trials in Lithuania cover a range of therapeutic areas, such as Endourology, Gastroen­terology, Rheumatology, Pulmonology, Infectiology, Dermatology, Urology, Pediatric, Surgery, Nephrology, Cardiology, Psychiatry, Hematology, Neurology, Oncology, Ophthalmology. There are more than 1200 clinical trials ongoing in the country. Over 90 International pharma and medical companies are conducting clinical trials in Lithuania.

R&D

There are 8300 R&D researchers and scientists in various fields. Expenditures for R&D doubled since the financial crisis. There are favorable tax incentives for investments into R&D, includ­ing:113 Business sectors Economy

• Triple deduction: expenses incurred by companies while carrying out R&D can be de­ducted from taxable income tree times;
• Super-accelerated depreciation: the acquisition price of fixed assets used in the R&D ac­tivities can be written-off within two years;
• Investments in substantial technology improvements: entitle companies to reduce taxable profits by 50%.

Medical devices

Medical Devices export (incl. re-export) more than doubled since 2008. Main export markets: United Kingdom, France, Russia, Spain, USA. Research areas include biomedical diagnostics and monitoring systems, efficiency, research of electronic security systems, analysis and synthe­sis of electronic devices, quality of electronic systems. Industrial electronics, including medical and defense electronics, have been a prevalent application sector in electronics manufacturing with telecommunication equipment.

Metal and plastic processing, machinery and equipment manufacturing

The Lithuanian engineering industry is the country’s largest processing, production sector, generating 4 proc. of Lithuania’s total value-added. The industry consists of over 1.500 com­panies, employing 39700 specialists. Machinery and equipment companies have quality and environmental management systems, most notably ISO 9001:2000 and ISO 14001:2004. Lith­uania is home to the biggest technical university in the Baltic States in which 19,000 students are enrolled. The combination of relatively low labor costs and sophisticated automation sys­tems gives Lithuanian machinery and equipment an attractive price/quality ratio. Rapid industry growth over the past year shows its considerable growth potential in comparison with other processing production sectors. This represents the possibility of the Lithuanian engineering in­dustry to play a greater role in the country’s economic and social spheres. Metal processing is a highly competitive and rapidly growing sector in Lithuania, a country with long-standing traditions in engineering. Many of the Lithuanian companies within the sector have successfully integrated into international markets over the past decade. The success of the Lithuanian metal processing industry has been mostly driven by its flexibility and ability to supply specifically customized products to large foreign and local clients, as well as by the active modernization of production processes. Lithuanian metal processing and transport equipment companies supply various transport components to major international companies, such as Rolls-Royce, Siemens, Volkswagen, Volvo, SAAB, Renault, Yazaki, as well as NATO.

Food and beverages

The food sector produces a major share of the total value created by Lithuanian producers. The most developed food processing subsectors are milk, meat and grain processing.

Transport and logistics

According to the World Bank’s Logistics Performance Index (LPI) since the last index from 2018, Lithuania ranks 54th globally. Hence, Lithuania leads the region for logistics performance. Lithuania is centrally located between three sizeable markets: Western Europe, the Nordic countries, and the Eastern markets of Russia and the Commonwealth of Independent States (CIS). Lithuania has also become one of the EU’s primary transport hubs. Transport services exported to more than 110 countries around the world. Around 60 percent of export revenue is generated by road transport.

Transport and Logistics Services

• Transportation
• Logistics solutions
• Warehousing
• Customs brokerage
• Key Competitive Advantages
• Well-developed logistics infrastructure;
• Business experience in Western Europe and especially CIS countries;
• The excellent geographical location for European distribution centers;
• Innovative and complex logistical solutions.
• High-quality standards which comply with the requirements of EU and Asia

Best Roads in the Region

Though small in size, Lithuania boasts a 21,000-kilometer road system, which is known to be the best in the region. Lithuania is committed to investing 145 million EUR in the Via Baltic international highway system, and 100 million EUR into four public logistics centers.

Ice-Free Seaport at Klaipėda

The northernmost ice-free port on the Baltic Sea is capable of handling over 40 million tons of cargo annually. Klaipėda is a multipurpose, universal, deep-water port with 26 stevedoring companies and an annual handling capacity of 650,000 TEUs. It operates year-round, 24 hours/ day, 7 days/week, and fully complies with ISPS Codes. The port has ample storage facilities and counts Maersk, APL, MSC, and Hapag Lloyd among its major clients.

Trans-European Corridors & Railway Network

Lithuania is well-connected through a network of highways and railways, including the North- South highway, the railway connecting Scandinavia with Central Europe, as well as an East- West route linking the eastern markets with the rest of Europe. According to the EU Commission, these are among the 10 most important in Europe. Lithuanian railways transport approximately 48 million tons of cargo per year, using modern infrastructure and a fully-modernized loco­motive fleet. The Lithuanian railway system has two types of rail gauges – wide gauge (1520 mm) and narrow gauge (1435 mm), allowing the country to serve in transport intermediation services. Lithuania also offers services of the Viking shuttle train, which connects the Black and the Baltic Seas (starting at the Port of Ilyichevsk and going through Kiev, Minsk, and Vilnius, and reaching Klaipeda in 55 hours (1,734 km).

The container train “Sun Train” (Saulė) connects Europe and China and is unique in that car­go arrives in Europe from China in 10 days (by the sea – in 40 days). The train project de­velopment was approved by Lithuania’s and Kazakhstan’s presidents under the cross-border agreements. The train passes through Russia and Belarus, then onward to the Scandinavian and other European countries via the Klaipėda State Seaport. Rail Baltica is one of the priority projects of the European Union: Trans-European Transport Networks (TEN-T). The project is supposed to link Finland, the Baltic States, and Poland and also improves the connection between Central and Northern Europe. The route Tallinn–Riga–Bauska is planned to be finished in 2025 and the connection with Kaunas in 2030.

International Airports

Lithuania has three strategically located international civilian airports located in Vilnius, Kaunas, and Palanga. These airports offer excellent facilities for passenger and cargo traffic. With the longest runway of the three (3,500 meters), Šiauliai International Airport is also involved in significant cargo transport.

Gas transmission system

Lithuania’s natural gas transmission system is interconnected with the natural gas transmission systems of Belarus, Latvia, and Russia. The largest volumes of natural gas are imported via the gas transmission pipeline from Belarus and are transported to customers of Lithuania and in transit to customers of the Kaliningrad Region, Russian Federation. Gas transportation via Lithuania, Latvia cross-border gas interconnector is bi-directional.

Warehousing

Total warehouse space in the country is more than 1,000 000 m2. The largest supply of new, modern warehousing facilities is in the capital city of Vilnius, Kaunas, and Klaipėda.

Environmental protection and renewable energy industry

• Green energy
• Wastewater treatment equipment

In recent years, the development of alternative energy in Lithuania has been rapidly accelerat­ing. The country’s government is focused on promoting the growth of the renewable (hydro, wind, biomass and solar) energy sector. As a result, the Lithuanian clean technology industry is gradually gaining a more significant share of the country’s total exports.

Green Energy

In its pursuit to foster the development of the Clean-tech industry, the Lithuanian government has provided grants for many companies. The grants enable these companies to implement an experimental (c-Si) photovoltaic cell production project and also contribute towards the for­mation of a solar energy cluster in Lithuania. Precizika-MET SC, a part of the Hexagon global measurement technologies group, pioneered the development of the solar industry in Lithuania by starting up an industrial photovoltaic laboratory in Vilnius in 2010. BOD Group, Baltic Solar Energy and Baltic Solar Solutions have also constructed a 25,000 sq. m facility for solar cell and solar module production lines.

Wastewater Treatment Equipment

Water consumption (for non-energy needs) has declined threefold, while wastewater has de­creased by 150% over the last 15 years. Recently, several new wastewater treatment plants have been constructed and some existing ones have been upgraded: 99% of household and industrial waste is treated. Drinking water is supplied to 74% of the Lithuanian population, and wastewa­ter treatment services are available to approximately 635 of the population. A major part of the infrastructure necessary for the management of drinking water supplies and wastewater treat­ment has already been created. A system for the metering of drinking water has been developed.

Construction

The construction sector accounts for about 7.6 % of GDP, employing around 93 thousand work­ers or 10 percent of total employment.

Key Production and Service Branches:

• General construction work
• Aluminum-glass, frameless glass and ventilated facade structures
• Concrete constructions, steel structures
• Electrical systems
• Ventilation, heating and conditioning systems
• Windows and doors
• Roofing
• Ceramic tiles

Furniture industry

The Lithuanian furniture, wood processing has long-standing traditions in producing high-qual­ity products. The industry is well-developed – modern production facilities are utilized and the workforce is highly skilled. Lithuanian companies produce a wide range of furniture and the majority of production (85,2 %) is exported. Lithuania is the fifth biggest IKEA supplier in the world. Moreover, Lithuanian offices of such companies as Swedbank, Barclays, Danske as well as some famous brand stores in Europe are equipped with Lithuanian furniture and installed by local producers.

Electronic and laser industry

Electronics

Lithuania is emerging fast as a key electronics manufacturing hub in the Baltic region. The country is renowned for its electronic, computer and optical products. The country has many electronic manufacturing services (EMS) companies that produce primarily industrial electron­ics and telecom equipment. Niches like defense and medical electronics are expanding as well as high-end consumer electronics and computing storage. Lithuania provides a near-sourcing EMS hub for European firms through contract manufacturers including Kitron and Jotron (Nor­way); Littelfuse (US); Carlo Gavazzi (Switzerland) and Selteka (Lithuania). Medical Electronics and optical instruments are the main focus areas for electronics manufac­turers in Lithuania. Another key area is the manufacture of radio, television, and communica­tions equipment components, which are exported to Scandinavia, Western Europe, and Eastern European countries like Poland and Russia.

Laser technology

Laser technology is a key industry in Lithuania, allowing the country to make its mark in­ternationally. Lithuania accounts for more than half of the global market of picosecond laser spectrometers. These are widely exported to European countries, USA, Australia as well as countries in Asia. At present in the country, there are over 10 companies engaged in the produc­tion of lasers and laser systems based on own research. The export production turnover is about € 20 million a year. 80% of laser production, exports to the international market. Lithuania has several research centers (Vilnius University, Institute of Physics, Semiconductor Physics Institute) carrying out world-class laser research. These centers develop the competence which pro­vides qualified experts for laser technologies. Lithuanian laser researchers have developed a few unique light sources and start performing applied laser research in the field of industrial laser systems. Qualification and experience of specialists guarantee the development of laser products of the highest quality to the international market. The laser manufacturing sector of Lithuania shows a 15–20% growth per year. Lithuania exports its laser products to 100 world countries, among which there are the largest EU, USA and Japanese laboratories and research centers.

Chemicals

Chemicals and plastics, the two closely related sectors, stand out as some of the best-established industrial activities in Lithuania. The production of main chemicals, fertilizers and primary forms of plastics account for over 80 percent of the country’s chemical industry turnover. Key manufacturers within the sector include Lithuanian companies Achema (a leading manufac­turer of nitrogen fertilizers and chemical products in the Baltic States) and Lisa (a producer of nitrogen-phosphorus fertilizer), and foreign-capital companies Neo Group and Orion Global Pet (makers of PET raisin, based in the seaport city Klaipėda). The chemical and plastics sector employs over 5,400 people.

Wood and wood product manufacturing

The wood processing sector accounts for about 2.0 % of GDP, employing around 32.2 thousand workers or 3.5 percent of total employment. Around 2/3 of production is exported to more than 90 countries around the world. European Union countries accounted for almost 70 percent of exports by the wood processing sector.

Key products

• Sawn timber
• Prefabricated buildings
• Practical boards and board of wood
• Wooden windows and doors
• Flooring panels
• Exterior and interior plank