Dateline: Trakai, Lithuania
For many, living in Europe — with its charming Old Towns steeped in centuries of history — is the ultimate dream.
For business owners, there are a number of European countries that offer entrepreneur visas as well as investment visas. It’s simple: make an investment in the country, get a residency visa in return.
If you have the desire to start a business or invest money into a country, it can be a straightforward way to get a second residency. And, of course, residencies in the European Union are considered highly desirable by most of the world.
Getting a second residence visa in Lithuania is one of the easiest in Europe. And unlike most of the European Union and Western Europe, Lithuania isn’t on the verge of collapse, nor do they treat their citizens like milk cows to be wrung dry with an endless number of high taxes.
In fact, even though Lithuania has joined Europe in imposing (much more reasonable) social contribution taxes on employers, its income tax rates are some of the lowest in Europe at just 15%. Plus, if you’re in “grittier” businesses, like selling scrap metal, tax rates can be as low as 5%.
That means Lithuania’s corporate tax rates are rather comparable to those of Ireland, whose 12.5% corporate tax rate is frequently considered the best in Western Europe.
I can’t say that Lithuania is the most happening place on the planet. Go into one of the numerous quaint or upscale bars and cafes in Old Town Vilnius on a Tuesday night — especially now in the winter and early spring — and you might be the only person there.
While I was pleasantly surprised to find that almost every restaurant I ate at had excellent food (even those with cheap “business lunches” or happy hours) I had to wonder why some of these places even bothered to open on certain nights.
The best businesses to start in Lithuania
If your idea is to move to Lithuania and start a company, you should carefully examine what type of business you want to start. This isn’t Cambodia where you could put up a hot dog cart and do alright if you have any business skills at all.
For example, most businesses outside of the Vilnius area — in Klaipeda, for instance — are notable throughout the country for their horrible service.
So, while I might open a restaurant in Asia with the goal of expansion, I don’t see that potential in Lithuania.
Besides, labor costs for the service industry are markedly higher than they are in the United States, which is part of why you see so few waiters in many European restaurants.
If you consider getting a second residency in Lithuania, you will likely want to think regionally or globally.
I think you’d be much more successful offering a professional, business-to-business service to companies in the Baltic region or other parts of Europe than you would running something with a storefront.
Of course, if you run a location independent business, the Lithuanian authorities would be more than happy for you to start a Lithuanian company and pay the tax on your activities. If you’re just starting out, this wouldn’t be a bad way to go in order to get residency in the European Union (and the potential of a Lithuanian passport in the future).
While Latvia requires that your business generate tens of thousands of dollars in taxes every year to keep your residence permit active, Lithuania is much more flexible. If your business has a few thousand dollars in profit, you’ll pay several hundred dollars and be good.
If you have a global business that could be incorporated anywhere, you could always start in Lithuania, pay the tax, and then start a second offshore corporation to own your Lithuanian company and mitigate tax. For instance, Estonia is only a few hours away and only taxes distributed earnings.
How to get second residency in Lithuania
The process is actually very simple. In fact, all you need is to set up a local company and deposit some money in a local bank account. There are any number of lawyers who can set up the corporation on your behalf for a relatively standard fee, and others who can process your residency application.
In order to qualify for residency, your Lithuanian corporation must have paid-up capital of 3,000 euros. Compare this low entry requirement to other European and similarly wealthy countries:
- Ireland has favorable corporate tax laws but requires a bare minimum of 75,000 euros (about US$105,000) in capital, and must approve your business plan as being beneficial to Ireland. Some micro-businesses, like hawker stalls, will not qualify without a much larger investment.
- The United Kingdom allows entrepreneurs to set up a business and live there if they have or can raise, 200,000 pounds (about US $330,000).
- Singapore’s EntrePass entrepreneur visa program is practically impossible these days, requiring you to have ties to venture capital firms or state universities. Citizenship in Singapore is getting harder to obtain, too. Another downside, Singapore has the highest cost of living in the world.
Lithuania’s position in the European Union means that if you are running a more “serious” businesses with customers who require that you be located in a non-tax haven, you will be well-equipped to serve them, especially those customers that are located in Europe.
The one caveat of getting residency in Lithuania is that you must have some “center of life” in Lithuania. Some will say this requires you to live in Lithuania, but the policy is a bit flexible in many cases.
For instance, you must present a lease agreement to the government in order to keep up your residency. This is a formality, however, and you can easily rent dirt cheap apartments for the purpose of meeting the policy.
Technically, you should be present in Lithuania once every six months so they don’t cancel your residency visa.
If you make Lithuania your “center of life” and learn about 500 words of the Lithuanian language (you can get a certificate from a local language school), you have a decent chance of qualifying for naturalization in five years. Lithuania has changed its policy on dual citizenship over the years, however, and often disallows dual citizenship.
Nevertheless, EU citizenship is rather valuable to have.
Living in Lithuania is a straightforward process if you’re willing to invest a little money and run some form of active business (even if it is to invest in cash flowing property, or just a hobby business that makes a little money on the side). And having access to a second residency in Europe isn’t a bad strategy by any means.