Law and regulation of industrial and logistics investment in Lithuania

From 1 January 2021, amendments to the laws on Investment, Legal Status of Foreigners, Zoning&Planning, Land and Employment will enter into force in Lithuania. These amendments are aimed at encouraging local and foreign investments in large projects in the fields of manufacturing, data processing and web server services (hosting).

A large project is where an investment agreement is concluded with the state, according to which an investor undertakes to create at least 150 new jobs, or at least 200 in Vilnius; and invest EUR 20 million, or at least EUR 30 million in Vilnius.

The amendments will introduce an exemption from corporate income tax for up to 20 years; relaxed conditions for obtaining temporary residence permits for employees from third-countries; the possibility to lease state-owned land at a lower than market price, and simplified and more expedient planning procedures.

Lithuania offers “TUI Invest LT +” investment support scheme for investors. Under this scheme, investment agreements can be concluded with an investor where the investor’s annual income for at least one financial year (during the last three financial years) was at least EUR 10 million; directly or through related entities, the investor has been engaged in production for at least five years or service activities for at least three years; the investor is a foreign private legal entity that has a patented and innovative technology (product or service) or has filed a patent application to register such technology; and various expenses related to the investor’s activities can be partly financed by the state, for example the rent of premises, salaries, work equipment and other costs .

Furthermore, there are currently seven free economic zones established in Lithuania where trade, production, import and export business, or other activities can be developed. Investors operating in free economic zones are granted these tax benefits: 0% corporate income tax during their initial ten years of operation and 7.5% tax over the following six years; and exemption from taxes on dividend and real estate.

There are also five industrial parks operating in Lithuania. The purpose of establishing the industrial park is to increase the competitiveness of the country’s economy, create jobs and promote activities in the fields of industry, logistics and services that meet the standards and environmental requirements of the European Union.

Local municipalities decide what benefits the industrial parks will offer to the investors. Currently, the prevailing benefits are exemptions from real estate and land taxes.

Lithuania offers several tax incentives in the Industrial&Logistics sector. A taxable profit reduction of up to 100% for entities running technology investment projects is available. This incentive applies to the costs incurred to acquire long-term assets (e.g. machinery and equipment, computers, software, intellectual property rights, vehicles). Companies carrying out scientific R&D are granted a triple deduction of expenses incurred during these activities. As of 1 January 2018, a reduced 5% CIT rate applies to profits deriving from the use, sale or other transfer of assets created as a result of R&D activity.

Apart from those previously described, there are currently no other tax exemptions or preferences for investors in Lithuania.