Incorporating and Scaling in Lithuania: Governance, Licensing, and Cross‑Border Compliance Essentials for EU-Facing Businesses 

How Does Incorporating and Scaling in Lithuania Work for EU Businesses?

Choosing the Right Vehicle: UAB or AB 

The private limited liability company, UAB, is the standard vehicle for EU entrepreneurs and fintech operators in Lithuania.

It requires a minimum share capital of 2,500 EUR, limited liability for shareholders, and at least one director.

A public limited company, AB, is typically used for capital markets strategies and larger fundraising rounds and requires a minimum share capital of 40,000 EUR.

Both forms are permitted to have non-resident shareholders and directors, which facilitates cross-border group governance and investor syndication without residency constraints. 

Governance can be structured as a single-tier board or a two-tier system with a supervisory council, allowing alignment with investor expectations and internal control frameworks.

Lithuanian company law permits model articles for expedited filing, which keeps formation timelines predictable while leaving room to tailor reserved matters, drag/tag provisions, and board committee mandates as the business scales. 

Corporate Tax and Distributions That Inform Group Design 

Lithuania applies a 15 percent corporate income tax rate as the default. Small companies that meet statutory criteria may be eligible for a 5 percent rate, which is relevant to early-stage ventures consolidating EU activities under a Lithuanian principal.

The standard VAT rate is 21 percent. A domestic VAT registration obligation generally arises once taxable turnover exceeds the national threshold, and the EU-wide 10,000 EUR micro-threshold for cross-border B2C supplies applies for the One‑Stop Shop regime, which can be material for digital and platform businesses selling across the EEA. 

Dividends are subject to 15 percent withholding tax as a default, with broad exemptions under EU rules and domestic participation relief where qualifying holding and duration conditions are met.

Interest and royalties generally carry a 10 percent withholding tax, although exemptions are available under EU directives and treaties.

These rules support holding company structures that pair Lithuanian operational substance with efficient upstream distributions to EU or treaty-protected investors. 

Fintech Licensing Capital, Timelines, and Regulatory Substance 

Payment Institution (PI) initial capital depends on the services: 20,000 EUR for money remittance, 50,000 EUR for payment initiation services, and 125,000 EUR for the broader payment service scope defined under PSD2.

Electronic Money Institutions (EMIs) require at least 350,000 EUR initial capital.

The statutory decision period for authorisation is three months from submission of a complete application; it may be extended to a maximum of six months for complex cases.

In practice, the timeline hinges on applicant readiness, internal control documentation quality, and responsiveness during regulator queries. 

Lithuania’s regime requires robust governance and compliance frameworks from day one.

Applicants must demonstrate effective risk management, safeguarding of client funds (segregated accounts or insurance/guarantees), independent compliance and internal audit proportional to the scale and complexity of operations, and fit and proper management.

An AML compliance officer with sufficient seniority and local knowledge is expected, and beneficial ownership data must be filed in the state register and kept current.

These elements are audited during licensing and continue to be tested through ongoing supervisory engagement once authorised. 

Passporting and Cross-border Operations 

Once licensed as a PI or EMI in Lithuania, firms can passport services across the European Economic Area via notification, allowing centralised compliance, technology, and treasury functions in Vilnius while serving clients across multiple EU markets. 

Passporting notifications are processed under EU law within set timelines, but firms must still meet each host state’s consumer disclosure language rules, local incident reporting requirements, and potential agent registration steps. 

Operational substance is not a box-ticking exercise. The Bank of Lithuania expects decision-making and risk control to be genuinely anchored in Lithuania, with key personnel accessible and accountable.

Outsourcing is permitted but must be captured by contractual controls, exit options, and oversight reporting.

Critical or important functions require careful mapping and board-approved policies that meet EU outsourcing and ICT risk standards, particularly for cloud concentration risk and incident management. 

Practical Incorporation Pathway and Banking 

A UAB using model constitutional documents can typically be registered within about three business days, assuming the name is cleared and the share capital contribution is in place.

Non-resident founders can execute filings electronically using recognised e-signatures.

The statutory registered address must be documented, and accounting policies adopted upon incorporation to support VAT and corporate tax registrations where required by turnover or activity. 

Traditional bank accounts for operating flows are subject to stringent AML onboarding, particularly for fintech or cross-border business models.

EMIs may be used for certain transactional needs, but firms that plan to safeguard client funds for payment or e-money activities must align with the specific safeguarding options recognised by law.

Early engagement with banking partners, clear source-of-funds evidence for founders, and a draft compliance framework materially improve account opening timelines. 

Board Oversight, Reporting Cadence, and Audit Triggers 

Lithuanian companies must maintain statutory registers, timely file annual financial statements, and keep accurate UBO records. 

Fintech licensees add regulatory reporting on safeguarding reconciliations, fraud statistics, complaints handling, major incident notifications, and capital adequacy.

Boards should institute a quarterly compliance attestation cycle that ties regulatory reports to risk appetite metrics and board minutes.

As the company grows, statutory audit obligations may be triggered based on revenue, balance sheet, or headcount thresholds, and financial sector entities must maintain enhanced internal audit independence and scope. 

When to Localise More Substance?

Entrepreneurs often begin with a lean Lithuanian presence and scale local substance as they approach licensing or EU passporting.

The practical signal to localise sooner is when customer acquisition, payment volumes, or outsourcing layers outpace the initial governance and compliance bandwidth.

Adding in-country risk, compliance, and finance leads, tightening vendor oversight, and bolstering independent challenge at the board level helps meet supervisory expectations and lowers time-to-approval risks. 

To initiate the process, plan formation, tax, and licensing workstreams in parallel.

If you are ready to register a UAB and align governance with your regulatory roadmap, you can register a company in Lithuania and map the next steps toward payment or e-money authorisation, VAT registration, and EU passporting in a single coordinated timeline.