Lithuania Crypto Company Registration

Due to the latest legislative changes, Lithuania can be considered the most economical and affordable option among the EU countries for registering crypto companies. If previously Estonia used to be such an option, now it is no longer. Firstly, registering a crypto business in Estonia will require investing more money (the requirement for the minimum authorized capital amount has increased). Secondly, organizing the activities of these companies has become more complicated - transferring the center of business management to Estonia has become mandatory.

Important! Given the prospects of doing crypto business in Europe, Lithuania can reasonably be considered one of the excellent choices for registering a company.

Advantages of crypto business in Lithuania:

• Treat crypto assets and related activities with a friendly attitude;

• The conditions for obtaining a special license (crypto license) to provide services related to cryptocurrency exchange and storage are clear;

• More flexible cryptocurrency legislation than neighboring Estonia;

• You can register a company, sign up for a company account, and obtain a license remotely;

• An acceptable corporate tax rate (15%) compared to other EU jurisdictions;

• In recent years, Lithuania has been identified as a hub for fintech business;

• There is no residency requirement for company directors and shareholders;

• There are virtually no bureaucratic costs for non-residents to register a business;

• Create the prerequisites for entrepreneurs to start working with crypto projects as soon as possible, taking advantage of favorable market conditions.

The Lithuanian Financial Crime Investigation Service (FCIS) oversees the activities of crypto wallet operators and cryptocurrency service providers. The same company can apply for both types of authorizations for crypto activities, and the average authorization process takes less than a month.

In order to be allowed to offer cryptocurrency and/or wallet services, a limited liability company (UAB) must first be established in the country. The minimum authorized capital required is €2,500. The process of establishing a company can be completed without having to visit in person; it usually takes about ten business days to obtain the necessary documents. A typical interaction begins with an analysis of the target business model, shareholder structure, and CEO biography, which allows a list of documents necessary for an efficient registration process to be drawn up.

Lithuania's Law on the Prevention of Money Laundering and Terrorist Financing (AML/CTF Law) requires PWAs to comply with POD requirements, including customer identification and authentication, monitoring and suspension of transactions, reporting to authorities, etc. Therefore, in order to effectively initiate crypto-related activities, it is recommended to set up POD officers (preferably locals) in-house to ensure proper reporting to the FCIS.

The practical problem facing all VASPs is to establish sustainable banking relationships to ensure seamless transitions between fiat and cryptocurrencies for their clients. Lithuania is also a favorable jurisdiction for this purpose, as it has an ecosystem of nearly 300 fintech companies that can provide modern and advanced financial solutions for blockchain-based businesses.

As the crypto market rapidly develops, VASPs seeking a competitive advantage should explore innovative, user-friendly and sustainable solutions to offer products. Although crypto services are not considered financial services in the strict sense, some products commonly offered by VASPs may resemble the characteristics of traditional financial products and may be subject to licensing. Lithuania's well-established financial services licensing infrastructure and the Bank of Lithuania's proactive attitude have enabled digital businesses to effectively expand their activities by obtaining additional licenses (e.g., EMI, PI, financial broker, etc.). List of legal entities operating virtual currency exchanges in Lithuania.

ICOs/STOs and other forms of capital raising in Lithuania

In 2017, the Bank of Lithuania proposed its attitude towards virtual assets and initial coin offerings (ICOs), which was updated in 2019. Although this attitude of the regulator is quite neutral, it proposes the basic principles of the regulatory regime. For example, depending on the type of offering, ICOs may be exempt from regulatory action or may be subject to the requirements applicable to securities offerings, crowdfunding, collective investments or investment services. In addition, the Bank of Lithuania has published recommendations on the issuance of security tokens (STOs), which provide more detailed regulatory requirements based on the characteristics of the tokens offered (i.e. payment, utility, security). Since these recommendations are mainly aimed at ICOs and STOs.

Taxation of cryptocurrency activities

In terms of taxation, there are two main taxes that businesses should consider, namely: Corporate Income Tax (“CIT”) and Value Added Tax (“VAT”). In certain cases, both taxes may be levied, and the tax regime usually depends on the tax regime. For example, income from cryptocurrency trading and security tokens is not subject to VAT, while other activities performed by cryptocurrency exchanges (e.g., referral fees from other platforms) may be subject to taxation in certain circumstances. VESP profits are subject to a 15% CIT rate, and the taxable amount can be significantly reduced by using special tax credits for software-related R&D activities or investment projects. For MDO/IEO/ILO, the CIT obligation depends on the type of tokens issued – funds raised in the following ways: i) security tokens are not subject to CIT taxation, ii) service tokens are equivalent to prepayments, which are not taxed at the time of issuing the tokens and raising funds, but are taxed when the platform provides services in exchange for service tokens, and iii) other forms of tokens are taxable when the funds are received.

Because there are a variety of business options available, there are many different tax scenarios that may exist. Therefore, we strongly recommend that a thorough tax assessment be performed before beginning work.

The lawyers of our firm are always happy to answer all your questions regarding obtaining a cryptocurrency license in Lithuania and accompany your company throughout the licensing process.

Starting a Crypto Company in Lithuania

If you are looking for a friendly cryptocurrency jurisdiction, then Lithuania is undoubtedly the right choice, not only because of its keen response to the rapidly developing cryptocurrency market, but also because of the proven ease of doing business - Lithuania ranked 11th in the 2020 Ease of Doing Business ranking.

In addition, Lithuania currently ranks sixth in the international tax competitiveness index, which indicates that the tax burden on corporate investments is low and a certain degree of neutrality is ensured by a well-structured tax code framework. In addition, the Central Bank of Lithuania, as the regulator of Lithuanian crypto companies, implements policies that enable them to successfully develop and grow.

If you are a foreign citizen looking to start a crypto company in Lithuania, you will be happy to know that in addition to favorable conditions, you will also enjoy the same rights as Lithuanians, regardless of your citizenship.

Lithuania’s business environment has the following advantages:

• One of the fastest company registrations in the EU, saving you time and money

• The world’s fastest and most reliable internet connections, enabling your crypto business to thrive in a secure, efficient and flexible environment (4th in the international Cybersecurity Index and 5th in Central Europe for Mobile Download Speed/Mbps)

• A wide range of online services allows you to conduct business activities and perform many procedures remotely

• Four international airports make the country easily accessible

• A multilingual, motivated and highly skilled talent pool eager to drive innovative business forward

• The ease of paying taxes to the Lithuanian government gives you the peace of mind you need, which is essential to successfully growing your business.

For AML/CFT purposes, all crypto companies are strictly supervised by the Lithuanian Financial Crime Investigation Service (FCIS). Lithuania ranks ninth in the global AML Basel Index, indicating an almost impeccable performance and being one of the lowest-risk jurisdictions.

Legal Business Structures for Crypto Activities

To obtain a crypto license in Lithuania (you can’t operate without one), you must set up a private limited liability company (UAB). This is a legal business structure that issues shares but is not traded on a stock exchange. As the name suggests, its shareholders are not personally liable for unfulfilled corporate obligations. This means that in the event of business failure, shareholders only risk the assets they provided to the company, thus protecting their personal assets.

If you consider your crypto activities to be high risk, this type of company is for you. Such a company can be formed through the National Corporate Registry’s self-service system either by a representative or online using templates and founding documents.

Key factors to consider before starting the company formation process:

• The company name must be unique and legal (the company name can be reserved through the National Business Registration Center by filling in the JAR-5 form)

• It can be established by one or more natural persons and/or legal persons, with no limit on the number of shareholders.

• The company's owners and directors do not have to be permanent residents of Lithuania

• Minimum share capital – €2,500, at least 25% must be paid up (each shareholder must pay at least 25% of the total nominal value of all his subscribed shares, plus any excess over the total nominal value of all subscribed shares)

• Non-monetary contributions, used to partially pay for company shares, must be appraised by an independent property appraiser before signing the company founding agreement

• The most important decisions are made by shareholders through voting (one vote per share, those who receive the most shares have the most influence on their votes at shareholder meetings)

• Having no criminal record is a prerequisite, which is why the owners and directors of the company must have their background checked

• The owners and directors of the company must demonstrate that they have the appropriate education and sufficient experience to run the company.

• For crypto companies, developing and implementing internal AML/CFT policies and procedures (such as CDD and KYC) is mandatory

• They must also employ a qualified AML Compliance Officer (who can be a member of the Board of Directors) who is responsible for compliance with AML regulations, internal policies and reporting to the FCIS

• Annual audit is mandatory when the company reaches at least two of the following amounts: Total assets – 1.8 million Euros, Sales – 3.5 million Euros and Average number of employees – 50

The disposal of shares allows you to obtain additional funds and to transfer or exit the business. To obtain more funds, the company can issue new shares, and shareholders pay a certain amount when acquiring new shares. If such a company is profitable, its shareholders can receive the profits earned by the company through dividends or receive salaries, in which case a certain amount of tax must be paid.

What you need to do

It is fairly easy to form a new private limited liability company (UAB) in Lithuania if you have all the required documents ready. It only takes a few days to register a new company and open a new corporate bank account, enabling you to apply for a crypto license right away.

Steps to open a private limited liability company (UAB) for crypto activities:

• Prepare a partnership agreement and articles of association

• Book a temporary company name through the Lithuanian National Business Registration Center

• Get a business address in Lithuania

• Open a savings bank account

• Transfer share capital to bank account

• Notarization of the founding documents at the office of the registrar notary (the notary must confirm the accuracy of the data entered in the registration application, the consistency of the articles of association with the legal requirements and the fact that the company can be registered)

• Register your company in the Lithuanian National Business Register

• Converting a savings bank account into a settlement account

• Obtaining an authorized electronic signature in case of online company registration

• Register with the National Tax Service and the National Social Insurance Fund

• Submit crypto license application to the Bank of Lithuania

According to Section 4 of the Company Law, the Articles of Association must include the following information:

• Company Name

• Legal structure of the company

• The company's registered office address

• The purpose of the company, including the specific content of its activities

• A specific amount of the company's authorized capital

• The number of shares and their classification, their par value and the clearly defined rights they confer on the holder

• Powers of shareholders' meeting, procedures for holding meetings

• Other bodies of the company, their powers, and the procedures for their election or removal

• Company announcement release procedures, including specific public channels

• How corporate documents and other information are provided to shareholders

• Decision-making procedure for opening branches and representative offices and for appointing or dismissing heads of company branches and representative offices

• Procedure for amending the Articles of Association

• The term of the company, if it is established as a limited term company

• Date of signing of Articles

There are two types of licenses for conducting crypto activities in Lithuania:

• A crypto wallet exchange license, which enables the license holder to manage crypto wallets owned by its customers

• A crypto exchange license, which enables the license holder to provide cryptocurrency-to-fiat currency exchange services and vice versa, as well as crypto-to-crypto exchange services

It takes less than a month to complete the crypto activity authorization process, provided that all necessary stakeholders are verified and the documents are carefully prepared, and our team at RUE can help you. If your application is successful, the license will be issued by the Lithuanian National Register of Enterprises and you will be able to start conducting crypto activities.

Company registration and licensing applications and related documents must be submitted in Lithuanian. If you are looking for a certified translator, we will be happy to arrange one for you.