REPUBLIC OF LITHUANIA
LAW
ON
THE FUNDAMENTALS
OF FREE ECONOMIC ZONES
Chapter 1
General Provisions
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 4. Laws of the Republic of Lithuania Effective
in the Zone
The Constitution of the Republic of Lithuania and this Law
shall be effective in the zone. Other laws and legal acts of the
Republic of Lithuania shall be effective to the extent the legal
relations of activities of the zone and its economic entities are
not regulated by this Law.
Article 5. Administration of the Zone
1. The territory of the zone shall be leased to the zone
administration company in accordance with the procedure
established by law.
2. The economic activities of the zone shall be organised by
the zone administration company.
Article. 6. The Zone Administration Company
1. The zone administration company shall be a legal person.
No less than 51% of capital of the zone administration company
shall belong to natural and legal persons by the right of
private ownership. It shall operate in compliance with the
Company Law. The zone administration company shall be registered
in accordance with the procedure established by the Law on the
Register of Enterprises.
2. The powers of the zone administration company shall be
determined by this Law, as well as by the bylaws of the zone
administration company approved by the Government of the Republic
of Lithuania.
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
by the Chief Registrar of the Register of the Republic of
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.
8. The activities of a zone enterprise may be suspended if
the enterprise violates the terms and conditions of activities
established by this Law, the statute of the zone, the bylaws of
the zone enterprise, or the agreement between the zone
administration company and the economic entity or other laws and
legal acts of the Republic of Lithuania which are in effect in
the zone. On the proposal of the state institution authorised to
conduct state supervision of free economic zones or the zone
administration company, inspections of a zone enterprise may be
carried out in accordance with the procedure established by laws
of the Republic of Lithuania
Work in a zone enterprise may be suspended in accordance
with the procedure established by the Law on Labour Protection.
9. If an enterprise of the zone wishes to carry out its
activities in another location in the territory of the Republic
of Lithuania (outside the free economic zone), it must get
registered as a new enterprise in accordance with the procedure
established by law.
If an enterprise registered in the Republic of Lithuania
wishes to engage in activities in the zone, it must get
registered in the zone in the established manner.
Article 8. Spheres of Capital Investment and Activities
Prohibited and Restricted in the Zone
1. The following spheres of capital investment and
activities shall be prohibited for enterprises in the zone:
economic-commercial activities connected with ensuring state
security and defence, as well as with the production, storage or
sale of arms, ammunition or explosives, or having a harmful
effect on the environment;
production, processing, storage and neutralisation of
hazardous and radioactive materials;
production, sale and storage of narcotics, narcotic,
virulent and poisonous substances;
processing, sale and storage of crops containing narcotic,
virulent and poisonous substances;
manufacture of vodka, liqueur and other liquors;
manufacture of tobacco products;
manufacture of securities, paper money and coins, postage
stamps;
founding and keeping of gambling-houses;
organisation of lotteries;
publishing activities, except for personal needs,
preparation and broadcasting of radio and TV programmes, with the
exception of technical servicing of printing -houses, radio and
television;
treatment of patients who are ill with serious and
especially dangerous infectious diseases, including venereal and
contagious skin diseases, aggressive forms of mental diseases;
treatment of animals ill with especially dangerous diseases;
and
settlement of labour migration issues.
2. A licence issued by the Government of the Republic of
Lithuania or its authorised state institution must be obtained
for licensed activities specified in the Law on Enterprises of
the Republic of Lithuania.
3. Investment of capital of foreign origin into exploitation
of natural resources shall be prohibited without a concession.
Chapter 2
ESTABLISHING A FREE ECONOMIC ZONE
Article. 9. Zone Establishment Procedure
1. The establishment of a zone may be initiated by the
municipalities of the Republic's towns and districts, local or
foreign economic entities registered in the Republic of Lithuania
who present to the Government of the Republic of Lithuania a
proposal to establish a zone. The following must be specified in
the proposal:
type (types) of zone activities;
description of territorial boundaries of the zone and the
plan of its territory; and
the county governor's agreement to lease the territory
allotted to the zone co-ordinated with municipalities.
2. The zone shall be established by a law of the Republic of
Lithuania. The territorial boundaries, the type (types) of the
activities in the zone and the term of zone activities must be
established in the law.
3. After the Seimas of the Republic of Lithuania passes the
law on the establishment of a zone, the Government of the
Republic of Lithuania shall adopt a decision regarding an
international competition for the preparation of the best
business plan for the zone and the zone statute as well as for
choosing the group of founders.
International competitions shall be organised by the
Government of the Republic of Lithuania or the state institution
authorised by it, which shall determine the conditions of the
competition and form the competition commission.
4. The Government of the Republic of Lithuania shall adopt
resolutions on:
1) the decision of the competition commission concerning the
formation of the zone founders' group;
2) the approval of the chairman and members of the zone
administration company;
3) the approval of the zone statute; and
4) the operation of the zone and the conclusion of an
agreement between the Government of the Republic of Lithuania and
the zone administration company regarding the activities.
5. Science and technology parks shall be established in
accordance with the procedure determined by the Government of the
Republic of Lithuania.
Chapter 3
ADMINISTRATION OF A FREE ECONOMIC ZONE
Article 10. Basic Principles of Zone Administration
The structure, functions, powers and responsibility of the
zone administration bodies shall be established by this Law and
by the laws on an individual zone.
Article 11. The Zone Administration Company
The zone administration company shall be formed from the
members appointed by the council of the municipality in the
territory whereof the zone is being established, one member
appointed by the Government of the Republic of Lithuania and
members who initiated the establishment of the zone and are the
winning bidders of the international competition for the best
business plan, statute of the zone and selection of the
founders' group, held in accordance with the procedure
established by the Government of the Republic of Lithuania. The
chairman of the zone administration company shall be nominated by
the members of the zone administration company by open ballot.
Over 50% of members of the zone administration company must be
citizens of the Republic of Lithuania. Changes in the membership
of the zone administration company (with the exception of the
chairman of the zone administration company, who shall be
approved by the Government of the Republic of Lithuania) shall
be approved, on the recommendation of the zone administration
company and municipalities, by the state institution charged by
the Government of the Republic of Lithuania in accordance with
the procedure established by law to carry out state supervision
of the zones.
Article 12. Rights, Duties and Responsibility of the
Zone Administration Company
1. The zone administration company shall have the right:
acting in accordance with the goals of operation of the
zone, its investment business project, statute as well as the
bylaws of the zone administration company, to register in the
zone economic entities in compliance with the Law on the Register
of Enterprises of the Republic of Lithuania and this Law:
to sublease to the zone enterprises registered in the zone
the land and immovable property leased to the zone administration
company;
to determine the internal rules of the zone;
to establish service enterprises in the zone;
to set, in the agreements between the zone enterprises and
the zone administration company, the financial conditions of the
sublease of land and immovable property and provision of mutual
services;
to obtain from the economic entities operating in the zone
statistical report data concerning their activities which is
established by the Government of the Republic of Lithuania;
to register in the zone, in compliance with the procedure
established by Article 17 of this Law, the banks of the Republic
of Lithuania or foreign states, or their subsidiaries, insurance
agencies or their affiliates;
to use resources on a co-operative basis for the common
needs of the infrastructure development and environment
management of the zone; and
to submit proposals to the Government of the Republic of
Lithuania and the state institution which carries out state
supervision of free economic zones on the amendment of the
statute of the zone and changing of its territorial boundaries.
2. Duties of the zone administration company:
to abide by this Law and other laws of the Republic of
Lithuania which are in force in the zone, the statute of the
zone, the bylaws of the zone administration company;
to organise the economic activities of the zone;
to ensure that the economic entities registered in the zone
adhere to the statute of the zone, refrain from engaging in
activities prohibited under the laws of the Republic of
Lithuania, operate in accordance with the terms and conditions
set in the agreement, keep to the requirements of the Law on the
Environmental Protection of the Republic of Lithuania and other
legal acts in the sphere of environmental protection;
to ensure the protection of the zone boundaries and create
conditions for the work of customs of the Republic of Lithuania
at the check posts;
to ensure physical protection of the territory of the zone;
to create conditions for the law enforcement institutions
and international control organisations to perform their
respective functions in the zone; and
to form a commission for resolving disputes between economic
entities.
3. The zone administration company shall be liable under
the laws of the Republic of Lithuania for its activities and
negative effects thereof.
4. The zone administration company shall account to the
Government of the Republic of Lithuania for the activities of the
company and the zone within the time period and according to the
procedure established by the statute of the zone.
Article 13. Zone Enterprises Board
An advisory board of zone enterprises may be formed for
representing the interests of the zone enterprises.. The
procedure of its formation and its powers shall be specified in
the statute of the zone.
Article. 14. State Supervision of Free Economic Zones
State supervision of free economic zones shall be carried
out according to the procedure established by the Government of
the Republic of Lithuania by the state institution authorised by
it or a special institution formed by it. The above institution
shall also resolve all issues related to the establishment,
administration and activities which are common to all zones.
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 2 million USD, the
enterprise shall be exempt from profit (income) tax for 3 years
after the enterprise begins to receive profit. For the next 3
years the enterprise shall pay profit (income) tax at a reduced
rate of 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 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.
2. The customs must inspect all persons and vehicles
entering or leaving the zone as well as goods taken into or out
of zone or placed therein. Goods shall enter and leave the zone
only through entry (exit) points; the procedure for their entry
(leaving) shall be regulated by the Customs Code of the Republic
of Lithuania and decrees of the Government Republic of
Lithuania.
3. The customs infrastructure and projects of customs
buildings that are under construction shall be required for the
designation of the zone; projects of all infrastructure and
other buildings under construction which are required for the
designation of the zone must be co-ordinated with the Customs
Department under the Ministry of Finance in accordance with the
procedure established by the Government of the Republic of
Lithuania.
Article 17. Activities of Banking and Insurance
Institutions in the Zone. Currency and
Financial Conditions
1. The activities of banking and insurance institutions in
the zone shall be regulated by the Law on Commercial Banks and
insurance laws of the Republic of Lithuania.
2. For settlements litas and convertible foreign currency
may be used in the zone.
3. The procedure applied to money that is brought in and
taken out of the zone shall be the same as to money brought in
from abroad or taken out abroad.
Article 18. Keeping of Records and Accounting in the
Zone
Economic entities shall keep records and conduct accounting
in the zone according to the effective laws of the Republic of
Lithuania and other legal acts.
Chapter 5
LABOUR RELATIONS AND USAGE OF LANGUAGES
IN THE FREE ECONOMIC ZONE
Article 19. The Regulation of Labour Relations, Working
Conditions and Social Insurance in the Zone
Issues concerning labour, safety at work, state compulsory
social insurance and other issues related to labour relations
shall be regulated in the zone by the laws of the Republic of
Lithuania and other legal acts.
Article 20. Usage of Languages in the Zone
The official language used in the territory of the zone
shall be the state language of Lithuania (Lithuanian).
Chapter 6
REGULATION OF ECONOMIC RELATIONS WITH INSTITUTIONS
OF THE EXECUTIVE AUTHORITIES AND MUNICIPALITIES
Article 21. Utilisation of Land, Structures, Facilities
of Infrastructure and Natural Resources in
the Zone
1. The relations of the ownership and lease of land shall
be regulated by the Law on Land and the Law on Leasing of Land
of the Republic of Lithuania.
2. Structures and facilities of infrastructure that are
owned by the state (municipality) may be leased or sold in
accordance with the procedure established by laws.
3. Natural resources in the zone may be exploited and
utilised in the manner established by laws of the Republic of
Lithuania.
Article 22. Services Rendered to the Zones by the
State and Municipalities
The state and municipal institutions shall render the same
services to economic entities operating in the zone as to other
economic entities operating in their territory.
Article 23. Activities of Law Enforcement Institutions
in the Zone
Law enforcement institutions of the Republic of Lithuania
shall operate in the zone according to their competence in the
manner established by the laws of the Republic of Lithuania. Zone
administration company shall provide proper working conditions
for these institutions.
Article 24. Activities of Supervision Institutions in
the Zone
The functions of the sanitary and hygiene, environmental
protection, and utilisation of natural resources inspectorates,
fire prevention , labour and other state inspectorates shall be
performed by the state supervision inspectorates of the Republic
of Lithuania or local inspectorates formed by the zone
administration company, the authorisations of which shall be
granted by a respective state inspectorate of the Republic of
Lithuania.
Article 25. Activities of the Parties and NGOs in the
Zone
The activities of the parties and NGOs shall be prohibited
in the zone.
Chapter 7
ENTRY INTO FREE ECONOMIC ZONE
Article 26. Entry Procedure into the Zone
1. Foreign nationals and stateless persons, permanently
residing abroad, who want to enter the zone must obtain an
invitation from the zone administration company and a visa of
the Republic of Lithuania issued in accordance with the procedure
established by the Government of the Republic of Lithuania.
2. Foreign nationals and stateless persons, permanently
residing abroad and having no permanent residence permit in the
Republic of Lithuania may come for temporary employment in the
zone enterprise only when they have an invitation from the
concrete employer of the zone enterprise, who has obtained
licences from the Lithuanian Labour Exchange in the Ministry of
Social Security and Labour to employ a certain number of
foreigners.
3. Permits for temporary employment of foreigners in the
zone enterprises shall be issued by the Lithuanian Labour
Exchange in compliance with the quotas and procedure for the
employment of foreigners, established by the Government of the
Republic of Lithuania. This procedure shall apply to foreigners
who come for temporary employment, if inter-state and inter-
governmental agreements of the Republic of Lithuania do not
provide otherwise.
4. The procedure for the issuing of licences to employ
foreigners, the employment of foreigners, registration of
foreigners, refusal to issue licences to employ a foreigner and
permits to work in the Republic of Lithuania, as well as the
procedure for the cancelling of these permits and licences shall
be established by the Government of the Republic of Lithuania.
5. Requirements set forth in par. 1,2, 3, and 4 of this
Article shall not apply to foreign nationals or stateless persons
who come to the zone on the invitation of the zone administration
company to work as managers of enterprises or members of the zone
administration company, or experts.
6. Upon arrival to the zone, persons must get registered
within 24 hours in accordance with the procedure established by
the Government of the Republic of Lithuania. If such person
fails to get registered within this time limit, he shall be
subject to sanctions provided for in the laws of the Republic of
Lithuania.
7. The zone enterprises or the zone administration company,
which have employed foreigners, must within 3 days inform
migration agency of the local police commissariat.
8. It may be provided in the statutes of the zones that the
zone administration company may act as mediator in issuing visas
to foreigners for going through the territory of the Republic of
Lithuania from the border crossing posts to the territory of the
zone. In such case, the same checking regime as established for
border crossing posts shall be established at the entry point
into the zone.
9. The citizens of the Republic of Lithuania and other
persons shall be allowed entry into the zone upon producing
permits issued in accordance with the procedure established by
the zone administration company.
Persons who entered the zone in violation of the established
procedure shall be liable under the laws of the Republic of
Lithuania.
Chapter 8
STATE GUARANTEES TO INVESTORS
INTO FREE ECONOMIC ZONE
Article 27. State Guarantees for the Functioning of the
Zone
1. Foreign investments, legally earned profit , income,
dividends, rights and legitimate interests of the investors shall
be protected by the laws of the Republic of Lithuania.
2. The system of state guarantees of investment security
shall apply to all economic entities engaged in economic and
commercial activities as well as other activities in the zone.
The state shall guarantee the economic entities the right to
bring in the zone and to take out of the zone and the Republic of
Lithuania capital and profit.
3. Foreigners shall be guaranteed the right to own 100% of
the assets of an enterprise operating in the zone.
The terms and conditions for the investment of capital of
foreign origin or the existence of investments shall not change
for five years from the beginning of investment for those
investors who invested the capital of foreign origin owned by
them by the right of ownership according to the procedure and
conditions established at the time a relevant law was in
effect.
Chapter 9
SETTLEMENT OF DISPUTES CONCERNING THE ACTIVITIES
OF THE ZONE ENTERPRISES OR THE ZONE ADMINISTRATION
COMPANY
Article 28. Procedure for the Settlement of Disputes in
the Zone
Disputes arising between the zone enterprises, the zone
enterprises and the zone administration company, the zone
administration company and state institutions, the zone
administration company and the state institution authorised by
the Government of the Republic of Lithuania to perform state
supervision of the free economic zones, concerning the
compensation for the change of conditions of the activities of
zone enterprises, as well as other disputes shall be settled in
accordance with the procedure established by the Civil Code of
the Republic of Lithuania.
Chapter 10
LIQUIDATION OF THE FREE ECONOMIC ZONE
AND THE ZONE ENTERPRISE
Article 29. Procedure for the Liquidation of the Zone
Enterprise
1. The zone enterprise may be liquidated on the following
grounds:
the decision of the owner of the enterprise to terminate the
activities;
the decision of the court or creditors meeting to recognise
the enterprise as bankrupt;
the decision adopted by relevant state institutions to
revoke the registration of the enterprise for the violation of
law provided for in this Law or other Laws of the Republic of
Lithuania, the statute of the zone, the bylaws of the zone
enterprise, and the agreement with the zone administration
company;
failure to carry out economic-commercial activities in the
zone for more than one year;
the fact established by law enforcement institutions that
illegally acquired capital has been invested in the zone
enterprise, or illegally acquired money is being used in the
activities of the enterprise; and
on other grounds provided for in the laws of the Republic of
Lithuania.
2. The zone enterprise shall be liquidated according to
the procedure established by the Law on Enterprises of the
Republic of Lithuania.
Article 30. The Procedure for the Liquidation of the
Zone
1. Free economic zone shall be deemed liquidated upon the
expiration of the period for which it was established, provided
its activities are not extended by the Seimas of the Republic of
Lithuania.
2. The zone may be liquidated by the Seimas of the Republic
of Lithuania prior to the expiration of the period for which it
was established in cases recognised as international legal
grounds.
3. The Government of the Republic of Lithuania shall form a
liquidation commission for the settlement of property and other
issues related to the liquidation of the zone, and the financial
relations between the economic development and management bodies
of the zone and the subjects of economic activities operating in
the zone, which shall be authorised to administer the zone
until final settlement of all issues concerning the liquidation
of the zone.
4. Disputes over the liquidation of the zone shall be
settled in the courts of law of the Republic of Lithuania.
I promulgate this Law, passed by the Seimas of the Republic
of Lithuania.
Algirdas Brazauskas
President of the Republic
Vilnius
28 June 1995
No. I-976