Employing in Lithuania

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Expanding into
Lithuania

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

Lithuanian flag with sky background
Lithuanian flag with sky background

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Expanding to countries such as Lithuania – which is characterized by a highly-skilled and educated workforce, comprehensive employment and tax laws, a robust infrastructure network linking to the Baltics and Europe, and leading sectors in tech, manufacturing, ICT, agriculture & tourism – can bring both excitement to the possibilities, but also significant stress to ensuring the entity complies with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework.

This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

Country EOR Guide - Bradford Jacobs

Download our Guide to Lithuania

Learn all about expanding into Lithuania and see what we can do to make your expansion easier.

Download our Guide to Lithuania

Learn all about expanding into Lithuania and see what we can do to make your expansion easier.

Country EOR Guide - Bradford Jacobs

Hiring Staff
in Lithuania

Hiring Staff
in Lithuania

The Main Sectors of the Lithuanian Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

The food processing industry is one of the primary Lithuanian sectors, which accounts for 11% of their total exports. There are about 979 food processing companies registered in Lithuania that produce a wide range of products, including dairy products, meat, fish, vegetables and fruits, baked goods and grains, spices, and herbs.

The food and beverage sector accounts for over 4.5% of the Lithuania’s GDP and employ 4.6% of the total workforce. Another significant manufacturing activity in Lithuania is a chemical product which accounts for over 12.5% of its total export.

Over 80% of the chemicals produced in Lithuania are exported. The furniture production sector employs over 50,000 individuals in Lithuania, with the biggest firms in this industry working together with IKEA.

The tourism sector is a very crucial part of the Lithuanian economy, which contributes around 5% of the GDP and approximately 4.9% of total employment in the country. Over 2 million tourists visited Lithuania in 2020.

A huge number of tourists in Lithuania came from the UK (58,200), Ukraine (84,000), Latvia (143,400), Poland (148,400), Belarus (171,900), Russia (15,600), and Germany (174,800). Bicycle tourism is quite popular in the country, especially in the Seaside cycling routes which are 2,342miles long. Tourists visit some of Lithuania’s big cities (Kaunas, Klaipeda, and Vilnius), seaside resorts (Palanga and Neringa), and Spa towns (Birstonas and Druskininkai).

Farming in Lithuania dates back to the Neolithic era, and it has been one of the most crucial occupations in the country for centuries. The accession to the EU in 2004 resulted in the introduction of a new agricultural era.

The farm sector has employed over 8% of the country’s workforce and supplies raw materials to most of the Lithuanian food processing companies.

Lithuania is a regional center of excellence for global technology companies looking to harness the quality competences the country has to offer – whether it’s in the fields of software engineering, game development, AI-driven solutions, fintech product development or compliance & AML.

The sector is also a hub of innovation, with Lithuania having one of the fastest-growing startup ecosystems in the region. Lithuania is the 2nd largest FinTech hub in Europe, with over 200 Fintech companies operating there. 35 FinTech firms came to the country in 2017 after the Bank of Lithuania and the government simplified the process of obtaining licenses for various activities of payment institutions and e-money.

The sector also employs over 2.60% of the country’s workforce.

This is one of the main sub-sectors in the country that has employed over 37,000 people. There are over 2,000 ICT firms in Lithuania. Lithuania is home to 13 out of the 20 biggest IT firms in the Baltic region.

Some of the most promising subsectors in Lithuania include business process outsourcing and shared services. Some big-name companies that have utilized these services include Western Union, Yara international, and Barclays.

The Main Sectors of the Lithuanian Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Vilnius, Lithuania Bell Tower
The food processing industry is one of the primary Lithuanian sectors, which accounts for 11% of their total exports. There are about 979 food processing companies registered in Lithuania that produce a wide range of products, including dairy products, meat, fish, vegetables and fruits, baked goods and grains, spices, and herbs.

The food and beverage sector accounts for over 4.5% of the Lithuania’s GDP and employ 4.6% of the total workforce. Another significant manufacturing activity in Lithuania is a chemical product which accounts for over 12.5% of its total export.

Over 80% of the chemicals produced in Lithuania are exported. The furniture production sector employs over 50,000 individuals in Lithuania, with the biggest firms in this industry working together with IKEA.

The tourism sector is a very crucial part of the Lithuanian economy, which contributes around 5% of the GDP and approximately 4.9% of total employment in the country. Over 2 million tourists visited Lithuania in 2020.

A huge number of tourists in Lithuania came from the UK (58,200), Ukraine (84,000), Latvia (143,400), Poland (148,400), Belarus (171,900), Russia (15,600), and Germany (174,800). Bicycle tourism is quite popular in the country, especially in the Seaside cycling routes which are 2,342miles long. Tourists visit some of Lithuania’s big cities (Kaunas, Klaipeda, and Vilnius), seaside resorts (Palanga and Neringa), and Spa towns (Birstonas and Druskininkai).

Farming in Lithuania dates back to the Neolithic era, and it has been one of the most crucial occupations in the country for centuries. The accession to the EU in 2004 resulted in the introduction of a new agricultural era.

The farm sector has employed over 8% of the country’s workforce and supplies raw materials to most of the Lithuanian food processing companies.

Lithuania is a regional center of excellence for global technology companies looking to harness the quality competences the country has to offer – whether it’s in the fields of software engineering, game development, AI-driven solutions, fintech product development or compliance & AML.

The sector is also a hub of innovation, with Lithuania having one of the fastest-growing startup ecosystems in the region. Lithuania is the 2nd largest FinTech hub in Europe, with over 200 Fintech companies operating there. 35 FinTech firms came to the country in 2017 after the Bank of Lithuania and the government simplified the process of obtaining licenses for various activities of payment institutions and e-money.

The sector also employs over 2.60% of the country’s workforce.

This is one of the main sub-sectors in the country that has employed over 37,000 people. There are over 2,000 ICT firms in Lithuania. Lithuania is home to 13 out of the 20 biggest IT firms in the Baltic region.

Some of the most promising subsectors in Lithuania include business process outsourcing and shared services. Some big-name companies that have utilized these services include Western Union, Yara international, and Barclays.

Commercial Laws
in Lithuania

  • The State Tax Inspectorate (Valstybinė Mokesčių Inspekcija or VMI) – the tax authority in the Republic of Lithuania. It is an agency under the Ministry of Finance. The main objectives of the agency include:
    • helping the taxpayers with their tax obligations and rights
    •  implementation and enforcement of tax laws, primarily collecting and administering the taxes
    • collection of revenue for the state budget
  • The State Labor Inspectorate – the national institution under the Ministry of Social Security and Labor responsible for the enforcement of labor legislation and safety and health issues as well as overseeing compliance with collective agreements. It also has responsibilities over the prevention of accidents at work and occupational diseases.
In Lithuania, employment contracts must be presented to employees in writing and there are a variety of contract types to choose from, depending on business needs and employment types. An indefinite contract, however, is the standard. Employment law, the Labor Code, and (in some cases) collective agreements govern employment conditions, benefits, and health and safety regulations, and must be adhered to. It is best to confirm with the Labor Inspectorate on what regulation applies, as this may vary according to industry and sector.

Labor law in Lithuania is based on both employer and employee protection. The employment relationship and its terms are hierarchically determined by the Constitution, international treaties, the local labor law, collective employment agreements, employment rules and business practices, with the individual contract being last in the order.

For more information on labour contracts law in Lithuania Download our Lithuania Country Guide…

Income Tax: Any individual earning an income must pay local taxes in Lithuania, regardless of their residential status. Permanent residents are taxed on their worldwide income, whilst foreign nationals living and working in Lithuania are only taxed on the income they receive in Lithuania. Individuals are subject to pay Income Tax (GPM). Income tax can be with-held by the employers and paid to the Tax Inspectorate monthly or paid by the individual in certain cases.

Under tax payment procedure, an individual’s income can be divided into 2 classes – Class A (tax is calculated and withheld by the employer/organization making the payment), and Class B (tax is paid personally through the individual filling a tax return). Income can be divided by class like so:

A non-resident individual (as well as a Lithuanian entity, or a foreign entity through its permanent establishment) that has spent Class B income must submit an annual statement on this income on or before 15th of February of the next calendar year.

For more information on tax contributions and benefits in Lithuania Download our Lithuania Country Guide…

Commercial Laws
in Lithuania

Vilnius Old Town, Lithuania
  • The State Tax Inspectorate (Valstybinė Mokesčių Inspekcija or VMI) – the tax authority in the Republic of Lithuania. It is an agency under the Ministry of Finance. The main objectives of the agency include:
    • helping the taxpayers with their tax obligations and rights
    •  implementation and enforcement of tax laws, primarily collecting and administering the taxes
    • collection of revenue for the state budget
  • The State Labor Inspectorate – the national institution under the Ministry of Social Security and Labor responsible for the enforcement of labor legislation and safety and health issues as well as overseeing compliance with collective agreements. It also has responsibilities over the prevention of accidents at work and occupational diseases.
In Lithuania, employment contracts must be presented to employees in writing and there are a variety of contract types to choose from, depending on business needs and employment types. An indefinite contract, however, is the standard. Employment law, the Labor Code, and (in some cases) collective agreements govern employment conditions, benefits, and health and safety regulations, and must be adhered to. It is best to confirm with the Labor Inspectorate on what regulation applies, as this may vary according to industry and sector.

Labor law in Lithuania is based on both employer and employee protection. The employment relationship and its terms are hierarchically determined by the Constitution, international treaties, the local labor law, collective employment agreements, employment rules and business practices, with the individual contract being last in the order.

For more information on labour contracts law in Lithuania Download our Lithuania Country Guide…

Income Tax: Any individual earning an income must pay local taxes in Lithuania, regardless of their residential status. Permanent residents are taxed on their worldwide income, whilst foreign nationals living and working in Lithuania are only taxed on the income they receive in Lithuania. Individuals are subject to pay Income Tax (GPM). Income tax can be with-held by the employers and paid to the Tax Inspectorate monthly or paid by the individual in certain cases.

Under tax payment procedure, an individual’s income can be divided into 2 classes – Class A (tax is calculated and withheld by the employer/organization making the payment), and Class B (tax is paid personally through the individual filling a tax return). Income can be divided by class like so:

A non-resident individual (as well as a Lithuanian entity, or a foreign entity through its permanent establishment) that has spent Class B income must submit an annual statement on this income on or before 15th of February of the next calendar year.

For more information on tax contributions and benefits in Lithuania Download our Lithuania Country Guide…

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