REPUBLIC OF LITHUANIA
LAW
ON FOREIGN INVESTMENT IN THE REPUBLIC OF LITHUANIA
Chapter 1
General Provisions
Article 1. Objective of the Law
The objective of this Law is to promote the investment of
foreign capital, to establish the procedures for the protection
thereof, and the legal order by which such investment is made.
Relations related to the investment of foreign capital in
the Republic of Lithuania shall be regulated by this Law and
other laws, as well as by international agreements whereof the
Republic of Lithuania is a party to. (Amended 11 February 1992)
Article 2. Foreign Investment
Foreign investment shall be financial or material
implementation of intellectual or industrial property rights as
well as other property rights in the economy of Lithuania by a
foreign investor. (Amended 11 February 1992)
Article 3. Foreign Investor
The following legal and natural persons shall be considered
foreign investors:
1) legal persons of other states - corporations (companies),
partnerships, private firms, associations and other organizations
that are formed or in any other manner organized in accordance
with the laws of said state and registered in said state; and
2) citizens of other states or stateless persons who are
permanently residing abroad [outside Lithuania] and who invest
funds in the Republic of Lithuania. (Amended 11 February 1992)
Article 4. Forms of Foreign Investment
This Law establishes the following forms of foreign
investment:
1) ownership interests in a joint venture; and
2) firms with foreign capital. (Amended 11 February 1992)
Article 5. Spheres of Foreign Investment
Foreign investment shall be allowed in all spheres of
activity, with the exception of spheres where foreign investment
is prohibited by the laws of the Republic of Lithuania.
Article 6. Foreign Investment Guarantees
Foreign investments, investor income, and the rights and
legal interests of those in the Republic of Lithuania shall be
protected by the State of Lithuania.
Discrimination against foreign investment in any form shall
be prohibited.
Foreign investments may not be nationalized or
requisitioned.
Property may be appropriated by compensating therefor only
in cases prescribed by the laws of the Republic of Lithuania, and
in accordance with the universally recognized norms of
international law.
Damages sustained as a result of actions of the State
government bodies of the Republic of Lithuania or their officers
must be fully compensated for in accordance with the norms of
international law.
Foreign investors shall be guaranteed the right to transfer
abroad, in the currency agreed upon, sums of money received in
compensation for the actions specified in paragraphs 3 and 4
hereof.
Disputes concerning violations of rights and legal interests
of foreign investors shall fall within the jurisdiction of the
courts of the Republic of Lithuania, or foreign or international
arbitration bodies. (Amended 11 February 1992)
Article 7. Application of Laws of the Republic of
Lithuania and Provisions of International
Agreements to Foreign Investments
Requirements contained in the laws of the Republic of
Lithuania regarding economic entities in Lithuania shall be
applied to the business activity of foreign investors, with the
exception of cases where special rules regulating the activity
thereof under this Law, and provisions and international
agreements whereof Lithuania is a party to, shall apply.
If rules set forth in international agreements whereof the
Republic of Lithuania is a party to contradict the laws of the
Republic of Lithuania, the provisions of the international
agreements shall be applied with provisos made by the Republic of
Lithuania.
Chapter 2
The Order of Making Investments of Foreign Capital
Article 8. License to Make a Foreign Investment
Upon receipt of an application concerning a prospective
foreign investment, the body authorized by the Government of the
Republic of Lithuania shall make a decision thereon no later than
30 days from the date of receipt thereof. If the decision is a
favorable one, said body shall issue a license to make a foreign
investment. A new firm established on the basis of the said
license shall be registered at the Ministry of Economy.
If the Government of the Republic of Lithuania upholds an
unfavorable decision by its authorized body, the applicant shall
be notified thereof and of the reasons based on the laws and
other legislative acts of the Republic of Lithuania, pursuant to
which the decision was made. The applicant, taking into
consideration whatever reasons were given to him, shall have the
right to repeat his application. The newly filed application
shall be considered in the general manner.
Article 9. Introducing the Investment
Foreign investment shall be made no later than 12 months
from the date of the receipt of the license thereto. If the
investment is not made within the fixed period, the license
shall be revoked.
Article 10. Change in the Form and Type of Business of
the Foreign Investment
If the form of the foreign investment is changed, a new
license to make a foreign investment must be obtained, unless the
previous license specifically provides for said form of foreign
investment.
If a new business is started that is not specifically
provided for in the foundation documents of a firm, the
foundation documents of the firm shall be amended in the manner
established by law. (Amended 11 February 1992)
Article 11. The Term of a Joint Venture and of a Firm
with Foreign Capital
The term of a joint venture and of a firm with foreign
capital shall not be limited.
A joint venture or a firm with foreign capital may be
enjoined from operating in accordance with a decision of the
Government of the Republic of Lithuania, if it:
(1) contradicts the laws of the Republic of Lithuania;
(2) is not in conformity with environmental requirements;
or
(3) is not in conformity with the bylaws of the firm.
Chapter 3
Joint Ventures
Article 12. Joint Venture, Its Foundation
An economic entity of the Republic of Lithuania, with a
share of its authorized (ownership) capital belonging to a
foreign investor (investors), shall be considered a joint
venture.(Amended 11 February 1992)
A joint venture shall be founded on the basis of an
agreement.
The agreement and bylaws of the joint venture shall be
considered the instruments establishing the basis for the
functioning of the firm as an economic entity of the Republic of
Lithuania.
Article 13. Contracting Parties in the Joint Venture
Agreement
The agreement on the founding of a joint venture shall be
concluded by a legal or natural person (persons) and a foreign
investor (investors), hereinafter referred to as founders.
Article 14. Agreement on the Founding of a Joint Venture
The agreement on the founding of a joint venture shall
indicate:
14.1 Type of business;
14.2 Name, principal place of activity, legal address of
the legal persons that are founding the firm; full name,
citizenship, principal place of residence of the natural persons
that are founding the firm;
14.3 Sphere of activity and character of the founded
firm;
14.4 The amount of the authorized capital and the shares
of the parties therein; obligations of the founders concerning
the formation of the authorized capital and the term and order of
investments in the joint venture;
14.5 The procedure for changing the amount of the
authorized capital;
14.6 The order of distribution of profit and losses among
the founders;
14.7 The order of the transfer to other entities of
industrial property and rights thereto, and of the commercial use
and protection of said property;
14.8 The term of the agreement;
14.9 The grounds and procedure for winding up and
liquidating the firm;
14.10 The procedure for arbitrating disputes; and
14.11 Accountability for violating the agreement.
Article 15. Types of Joint Ventures
Types of joint ventures shall be established in accordance
with an agreement between the parties, and pursuant to the
Enterprise Law of the Republic of Lithuania.
The foundation of a state stock enterprise, more than 49
percent of the shares at par value whereof belong to foreign
investors, shall be prohibited. In this case, only a stock
corporation, or a close corporation may be founded.
If foreign investors acquire over 49 percent of the shares
of a state stock enterprise at par value, such enterprise must be
reorganized into a stock corporation, or a close corporation.
The rules provided in the 2nd section of paragraph 2 of
Article 3, and the 2nd section of paragraph 2 of Article 4 of the
Law on Stock Corporations of the Republic of Lithuania shall not
apply to stock corporations (close corporations) founded under
paragraphs 2 and 3 hereof.
Article 16. Bylaws of a Joint Venture
The bylaws of a joint venture shall be drawn up in
accordance with the Law on the corresponding type of firm.
Article 17. Transfer of a Share of the Authorized Capital
of a Joint Venture
The founders of a joint venture shall have the right to
transfer to third persons their share contributed to the joint
venture, unless the foundation agreement of the joint venture
provides otherwise. (Amended 11 February 1992)
Chapter 4
Firms with Foreign Capital
Article 18. Firm with Foreign Capital, its Foundation
A firm with foreign capital shall be considered an economic
entity of the Republic of Lithuania, the authorized (ownership)
capital whereof is owned by a foreign investor (investors).
In cases specified by law, firms with foreign capital in the
Republic of Lithuania may be legal persons. Subsidiaries of firms
with foreign capital founded in the Republic of Lithuania shall
have the status of firms with foreign capital from the moment of
their registration in the Republic of Lithuania.
Offices of representatives of foreign firms, institutions
and organizations shall not be considered firms with foreign
capital, and shall not have the status of a legal person. They
shall be founded and shall function in accordance with the
order established by the Government of the Republic of Lithuania.
When subsidiaries of firms with foreign capital or
subsidiaries of joint ventures registered in Lithuania are
founded in the Republic of Lithuania, said subsidiaries shall be
registered in the same manner as firms with foreign capital.
(Amended 11 February 1992)
Article 19. Bylaws of a Firm with Foreign Capital
The bylaws of a firm with foreign capital shall be drawn up
in accordance with the Law on the corresponding type of firm.
Chapter 5
The Order of Functioning of Joint Ventures
and Firms with Foreign Capital
Article 20. The Principles of the Functioning of Joint
Ventures and Firms with Foreign Capital
Joint ventures and firms with foreign capital shall conduct
their business and administer their financial activity
independently.
Article 21. The Right of Foreign Investors to Use
Land Plots and Real Property
Foreign investors shall have the right to rent, in
accordance with the laws of the Republic of Lithuania, buildings
and premises necessary for their commercial-economic activity, as
well as plots of land for the construction of said buildings.
The term of a land lease for foreign investors may be
fixed for up to 99 years, with a right of priority for extensions
of the term of the lease. Unless the lease provides otherwise,
land rent for the plot shall not be changed during the entire
period that the lease is in force. The conditions of land lease
shall be regulated by the Government of the Republic of
Lithuania. (Amended 11 February 1992)
Article 22. Insurance of Joint Ventures and Firms with
Foreign Capital
The property of joint ventures and firms with foreign
capital must be insured by insurance agencies of the Republic of
Lithuania, regardless of whether same is insured in other
localities.
Article 23. The Order of Conducting Financial Operations
for Joint Ventures and Firms with Foreign Capital
Financial operations of joint ventures and firms with
foreign capital shall be conducted through banks registered on
the territory of the Republic of Lithuania and in other
countries.
Article 24. Accounts for Joint Ventures and Firms with
Foreign Capital
Balance sheet and statistical accounting prescribed by the
Law on Accounting of the Republic of Lithuania shall be applied
to joint ventures and firms with foreign capital. Special
principles on the application of balance sheet accounting shall
be established by the Government of the Republic of Lithuania.
Article 25. Interrelation between Joint Ventures and
Firms with Foreign Capital, and Financial and
Control Bodies
Control over the conformance of the business conducted by
joint ventures and firms with foreign capital with the laws of
the Republic of Lithuania shall be exercised by the bodies of
State control and by the financial bodies of the Republic of
Lithuania.
Upon the demand of the bodies of State control or of
financial bodies of the Republic of Lithuania, said firms must,
within the limits established by the laws of the Republic of
Lithuania, submit the necessary information on their activities
for review.
The control bodies must ensure the confidentiality of the
information of the firms reviewed by them, if said information is
considered to be a commercial secret of the firm.
If no violations of the laws of the Republic of Lithuania,
or of the bylaws of joint ventures and of firms with foreign
capital are found during the review of the activities of said
firms, the control body must compensate the firm for the losses
incurred by the suspension of the business.
Article 26. Basic Principles Regulating the Internal
Order of Joint Ventures and of Firms with Foreign
Capital
Working conditions provided for in collective agreements or
employment contracts with joint ventures and firms with foreign
capital shall not be inferior to working conditions provided
under the laws of the Republic of Lithuania.
Chapter 6
Acquisition of Shares of Firms
of the Republic of Lithuania
Article 27. The Right to the Acquisition of Shares of
Firms of the Republic of Lithuania
Foreign investors shall have the right to acquire shares of
firms of the Republic of Lithuania in the manner prescribed by
the laws of the Republic of Lithuania.
If a foreign investor (investors) acquires controlling
interest (in excess of 50 percent of shares) in an firm, said
firm must be re-registered as a joint venture. If a foreign
investor desires to acquire controlling interest (in excess of
50 percent of shares) in firms that are entered on a separate
list by the Government (or by a person authorized by it), the
foreign investor must obtain a license to make an investment. In
this case, the license to make a foreign investment shall be
issued in accordance with the order set forth in Article 8.
Chapter 7
Taxes and Tax Reliefs
Article 28. Taxation of Joint Ventures and of Firms
with Foreign Capital
The manner of taxation of joint ventures and of firms with
foreign capital shall be established by the laws of the Republic
of Lithuania.
The income and expenses of the firms in convertible
currency shall be recalculated in rubles (litas) according to the
commercial exchange rate, and the profit received shall be
calculated.
The tax on the calculated amount of the profit shall be
paid in rubles (litas) and in convertible currency, in proportion
to the firm's income in rubles (litas) and convertible currency.
Article 29. Tax Reliefs and Tax Rates
If a firm is established (registered), or if foreign
capital is invested prior to 31 December 1993, profit (income)
tax levied on the share of its profit (income) (proportionate to
the share of the foreign investment in the authorized [ownership]
capital) due to the foreign investment and not used for workpay,
and also reinvested in the enterprise, shall be reduced by 70
percent for a 5 year period, which period is calculated as from
the date of the receipt of income. On the expiry of the period,
profit (income) tax levied on the share of the profit (income)
due to the foreign investment shall be reduced by 50 percent for
a 3 year period.
In the event that a firm is established (registered) or
foreign capital is invested in the period from 1 January 1994 to
31 December 1995, profit (income) tax levied on the share of its
profit (income) due to the foreign investment shall be reduced by
50 percent for a 6 year period. Other tax reliefs shall be
applied in pursuance of the laws on taxation of the Republic of
Lithuania.
Dividends to foreign investors received in Lithuania shall
be exempt from taxes.
The Supreme Council may adopt other forms of tax relief.
(Amended 11 February 1992)
Article 30. Responsibility for Violating Tax Rules
Joint ventures and firms with foreign capital shall be held
accountable for violations of tax rules in accordance with the
laws of the Republic of Lithuania.
Article 31. Repatriation of Income Derived from Foreign
Investment
The income (profit) of foreign investors which is
repatriated shall be exempt from tax.
Foreign investors may also repatriate all or a portion of
their income in kind, that is, in products or services acquired
on the Lithuanian domestic market, or reinvest said income in the
economy of the Republic of Lithuania. (Amended 11 February 1992)
Chapter 8
Customs Relief
Article 32. Customs Relief
Material contributions by foreign investors to authorized
capital during the period of the formation thereof shall be
exempt from customs duties.
The Government of the Republic of Lithuania shall adopt
decisions relating to customs relief for the importation of raw
materials and other products, and for the exportation of
products.
Vytautas Landsbergis
President
Supreme Council
Republic of Lithuania
Vilnius
29 December 1990
No. I-905