New Obstacles for Foreigners to Start a Small Business in Lithuania

Triniti

On the 1st of November 2014, the amendments to the Law on the Legal Status of Aliens will enter into force, which would make the launching of a small business in Lithuania more difficult for citizens of foreign countries.

Up until now, Lithuania has been considered as one the most attractive countries for immigrants intending to establish small businesses here. It was because in Lithuania, unlike in most Member States of the European Union, making a minimum investment into his own business had been enough for a foreign citizen for obtaining a residence permit: it was enough to set up a joint stock company and ensure a nominal value of the foreigner’s share in the company’s statutory capital being no less than LTL 50,000. What is more, a minimum statutory capital of LTL 10,000 had been considered sufficient if a foreigner was to become employed as a manager of the company.

Increased minimum amount of the state capital

From the 1st of November, new amendments will enter into force, establishing a twofold increase of the minimum statutory capital of a company. It was established that the minimum amount of the company’s equity must be LTL 100,000, not less than LTL 50,000 of which will have to be the foreigner’s personally invested funds.

New requirements for company’s activities

Another new requirement is that the company established by a foreigner would have to be operational for at least 6 months prior to the foreigner’s application for the issuance of a temporary residence permit as well at least tree Lithuanians would have to be employed by the company on a full-time basis.

Conclusions

The foreigners having launched a business in Lithuania become entitled to residence in the country for a longer period of time, along with a freedom of travel within the Schengen area; this is the reason why there have been fictitious businesses established. However, we have to admit, that the new amendments to the law, albeit providing a solution to this problem, are hindering the establishment of new foreign ventures and business establishment and development, as well as tax collection.

Latvia, for instance, in order to solve the problem of the establishment of fictional companies, have established the obligation to conduct economic activity, introducing the criteria of economic activity, which includes a requirement to have over 10 employees or a turnover of EUR 2 million. This solution is, no doubt, much fairer in respect of the foreigners willing to establish their businesses in the country. It is also much fairer in relation to the country’s economical development, being capable of dealing with the issue of illegal immigration at the same time.

New amendments to the law to enter into force in Lithuania fail to provide any real solution for the issue of limitation of the immigration into the Schengen zone, as there are more straightforward ways of achieving this objective at the moment; for example, in Latvia, a person becomes eligible to a temporary residence permit upon acquisition of a real property of a particular value, whereas in Lithuania having a real property does not render a foreigner eligible to obtain a permit. Furthermore, in such case in Latvia the residence permit is granted not only to the person who has invested into the real estate, but also to the members of his/her family, while in Lithuania the right to bring the family members remains highly restricted.

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