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Lithuania: Law of Offshore

Law on Free Zones

Extracts from the law:

Article 1. General Part

The Law establishes the procedure and terms and conditions of the establishment, operation and liquidation of free economic zones in the Republic of Lithuania as well as the legal status of the economic entities operating in the free economic zone. The purpose of the Law is to create in the free economic zone favourable taxation, customs duties, currency and financial, legal and other preferential conditions of economic-commercial activities for the establishment within them by foreign and local economic entities of enterprises and organisations of international trade, production and export, which develop and introduce technical-scientific progress, as well as to stimulate foreign investments and create new jobs. 

Article 2. Free Economic Zone

  1. Free economic zone (hereinafter referred to as “zone”) means a territory designated for the purpose of economic-commercial and financial activities within which economic entities are provided with special economic and legal conditions of operation as established by this Law. The territory must have no permanent residents.
  2. The goods within the zone shall be considered as being outside the customs territory of the Republic of Lithuania with respect to import and export duties and charges, as well as other prohibitions and restrictions of economic character.

Article 3. Types of Activities of Free Economic Zones

  1. Commercial, production and export, business, banking or other activities may be developed in a zone established in the Republic of Lithuania. The types of activities shall be determined by a separate law on the establishment of a specific zone.
  2. Scientific-technological parks may be established in the Republic of Lithuania. The parks shall be established with the purpose of creating favourable conditions for foreign and national production enterprises to carry out scientific research, tests and construction work, which would be performed by local skilled workers, as well as to develop the export of technologically qualified and competitive products.

Article 7. The Zone Enterprise

  1. The zone enterprise shall be an enterprise of any form and type of ownership situated within the zone and registered by the zone administration company in accordance with the requirements of the Law on the Register of Enterprises of the Republic of Lithuania, to which the terms and conditions of activities established by this Law and state guarantees for its activities within the zone shall apply.
  2. The procedure for establishing zone enterprises shall be established by the statute of the zone.
  3. The zone enterprise shall operate in compliance with this Law, the statute of the zone, its bylaws and the founding documents, as well as the agreement with the zone administration company concerning the terms and conditions of activities in the zone.
  4. The economic-commercial activities specified in the founding documents, to which restrictions imposed by the Law on Enterprises of the Republic of Lithuania and laws on the appropriate types of enterprises shall not apply, shall be permitted in the zone. Retail trade shall be permitted only to the extent it serves to satisfy the internal needs of the zone.
  5. An economic entity which wishes to be registered in the zone shall submit an application and other documents provided for by the Law on the Register of Enterprises and the statute of the zone to the zone administration company.
  6. A decision concerning the registration of an economic entity shall be adopted by the zone administration company.
  7. All enterprises of the zone shall be registered by the zone administration company in accordance with the enterprise registration procedure established by the laws of the Republic of Lithuania. The zone administration company shall issue a registered enterprise with a certificate in the form established in Lithuania. The zone administration company shall inform the Chief Registrar of the Register of the Republic of Lithuania and the state institution authorised to conduct state supervision of free economic zones of the enterprises registered in a month by the 10th day of the next month.

CHAPTER 4: TAXES, CUSTOMS DUTIES, CURRENCY AND FINANCIAL CONDITIONS IN FREE ECONOMIC ZONES 

Article 15. Taxes in the Zone

  1. The enterprises registered in the zone and their employees shall pay the following taxes and charges: tax on profits of legal persons; income tax of natural persons; land lease tax; pollution tax and tax on the use of natural resources; and state compulsory insurance contributions. 
  2. Enterprises registered and operating in the zone which are engaged in production activities shall pay land lease tax at a reduced rate of 50%. 
  3. If a foreign investor (investors) acquires at least 30% of the authorised (ownership) capital of an enterprise which is registered and operating in the zone and invests capital of foreign origin in the amount of no less than USD2 million, the enterprise shall be exempt from profit (income) tax for three years after the enterprise begins to receive profit. For the next three years the enterprise shall pay profit (income) tax at a rate reduced by 50%.

    In order to implement the right to preferential taxation as provided for by this part, an enterprise must present to the Tax Inspectorate documents determined by the Government of the Republic of Lithuania which confirm the origin of foreign capital and investment thereof, and the findings of an independent audit concerning the foreign capital investment. 
  4. The share of the enterprise's profit used for the acquisition of required fixed assets, for the carrying out of research and for the introduction of new technology, as well as for investment in the zone, shall not be included in the taxable profit.
  5. VAT shall not be calculated and shall not be paid into the state budget. 
  6. Dividends received by foreign investors in the free economic zone shall be exempt from taxation. 
  7. Other tax privileges shall be applied in accordance with the laws of the Republic of Lithuania. 
  8. The zone administration company shall pay taxes imposed on corresponding enterprises by the laws of the Republic of Lithuania. Land tax collected from the zone enterprises shall be paid by the zone administration company. 

Article 16. Customs Privileges and Characteristics of Customs Inspection Activity

  1. Goods brought into the zone shall be considered as being outside the customs territory of the Republic of Lithuania with respect to import duties and charges, as well as other prohibitions and restrictions of economic character. When goods are transported from the customs territory of the Republic of Lithuania into the zone, laws and other legal acts of the Republic of Lithuania which regulate the exportation of goods abroad as well as export duties and taxes levied on the goods, and other prohibitions and restrictions of economic type, shall apply.

    When goods are brought into the customs territory of the Republic of Lithuania from the zone, laws and other legal acts of the Republic of Lithuania which regulate the importation of goods from abroad as well as import duties and taxes levied on the goods and other prohibitions and restrictions of economic type shall apply. Goods taken out of the zone abroad shall be considered as being outside the customs territory of the Republic of Lithuania with respect to export duties and charges, as well as other prohibitions and restrictions of economic character.

    Foreign investors shall have the right to transfer abroad without restrictions their lawfully received income (profit). Foreign investors may take out of the country their income (profit) or a part thereof in goods purchased on the domestic market or reinvest it in the economy of the Republic of Lithuania. 

 

 

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