If you want to open a Lithuanian company operating as a crypto business, you must know that you will need a crypto license. For investors interested in Lithuania cryptocurrency sector, our team of consultants remains at your disposal for legal representation on the registration of the company, as well as on the issuance of the license.
What is the Lithuania cryptocurrency regulation on taxation?
Investors who want to open a company in Lithuaniain the cryptocurrency industry should verify matters concerning to the laws applicable to their selected cryptocurrency activity, the tax obligations, the accounting procedures that they should follow and any other matter that should be a concern for a businessman investing here, including the licenses and permits required for this business activity.
| Quick Facts | |
|---|---|
| Crypto license (yes/no) |
Yes |
|
Main taxes charged |
Corporate income tax, personal income tax, VAT (in certain situations) |
|
Tax exemptions (yes/no) |
Yes |
| When are tax exemptions applied |
For tokens issued as securities |
| Taxes charged to individuals |
The personal income tax |
|
Available crypto licenses in Lithuania |
Lithuania cryptocurrency law regulates 2 types of licenses: cryptocurrency exchange operator license, cryptocurrency depositary wallet operator license |
| Industry regulator | Lithuania cryptocurrency is regulated by the Lithuanian Financial Crime Investigation Service |
|
Legal framework for cryptocurrency |
The main legislation is the Law on the Prevention of Money Laundering and Terrorist Financing. |
| Know Your Client policies (yes/no) | Yes |
| Reporting requirements | Yes |
|
The institution issuing the crypto license |
Lithuania cryptocurrency licenses are issued by the Lithuanian Financial Crime Investigation Service. |
| Rules of law for ICOs and tokens | Depending on their nature, various rules of law will apply, such as the Anti-Money Laundering Law and the Counter Terrorist Financing Law or the Civil Code. |
|
Documents for company incorporation |
• identity documents of the shareholders and directors; • the statutory documents of the company; • a valid corporate bank account; • a registered address for the company. |
| Duration of the license issuance | Minimum 20 days |
| Duration of the company formation process | Maximum 5 working days |
With regards to taxation, investors should be aware that the main taxes refer to the following: the corporate income tax, the value added tax and the personal income tax. The charge of any of these taxes can be done in specific situations. For instance, the exemption on the corporate income tax is applicable to tokens that can be identified as securities, in accordance with the rules of the Civil Code.
The tax exemption is also applicable for tokens that are issued for the usage of products and services, as long as the payment is done in tokens. This is given by the fact that the tokens used for buying products or services are considered transfers of cash, which should not be imposed with the corporate income tax.
It is considered that this particular situation will not generate an income, and this is why the tax exemption is applicable. In other situations where the tokens are recognized as earned income, investors may be required to pay the corporate income tax. If you need information regarding the manner in which the corporate tax can apply to tokens, we invite you to request more details from our team of consultants in company formation in Lithuania.
According to the Lithuanian cryptocurrency regulation, the investors can also be charged with the personal income tax, which is imposed at a standard rate of 15%. There are several ways in which those who obtain income from ICOs and tokens can be charged for their revenues, such as in the case in which an individual obtains an income from the sale-purchase of cryptocurrency.
What are the main Lithuania cryptocurrency licenses?
At the moment, Lithuania provides two types of licenses for cryptocurrency businesses. During the process of company formation in Lithuania, most of the newly founded legal entities will need to have a license or a permit, as this is generally a part of the incorporation process. However, not all economic activities will need a license, but a license for company registration in Lithuania in the field of cryptocurrencies is compulsory.
Currently, the legislation regulating this field of activity provides two main types of Lithuania cryptocurrency licenses: the cryptocurrency exchange operator license and the cryptocurrency depositary wallet operator license. In this article, we will present when it is necessary to apply for either one of the licenses, and more information and legal advice can be obtained from our specialists in company formation in Lithuania. Some basic characteristics are presented below:
- • the legal framework for Lithuania cryptocurrency sector became applicable starting with 2020;
- • those who need the license when opening a Lithuanian company can obtain it after minimum 1 month, after the regulator of this sector, the Lithuanian Financial Crime Investigation Service, will analyze the application;
- • an investor needs a capital of EUR 2,500 when entering the Lithuania cryptocurrency market through a limited liability company;
- • the company needs to have at least 1 shareholder and at least 1 management board member (who can be the same person as the company’s founder);
- • the owners of Lithuania cryptocurrency license are required to pay corporate taxes in Lithuania, charged at the standard rate of 15%;
- • the investors will also be liable for the payment of withholding tax on dividends, applied at rate of 15%.
What are the obligations of Lithuania cryptocurrency license owners?
If, during the process of opening a Lithuanian company, you have obtained a Lithuanian cryptocurrency license, you will need to comply with a set of legal obligations. These obligations are in force regardless if the company was incorporated in Lithuania or if it was incorporated in other European countries, as long as they develop cryptocurrency activities that are regulated in Lithuania.
We invite you to watch the video below on how to obtain a crypto license in Lithuania:
All cryptocurrency companies must have impeccable Know-Your-Client policies and must maintain their records and the information on their clients. They also need to appoint a Lithuanian based officer who will enforce Anti-Money Laundering Policies. They also need to comply with reporting requirements to the Financial Crime Investigation Service.
How long does it take to register a Lithuanian cryptocurrency business?
The process of company formation in Lithuania can be influenced by numerous factors. In the case of a cryptocurrency business, the duration of the incorporation can be prolonged for a longer period of time than in the case of a regular company, as, although the Lithuanian law is very solid in this field, it still represents a new industry, and rules are not very well known by businessmen.
There isn’t a unitary law at a European level, as it is, let’s say, in the case of company types that can be registered in the European Union or in Europe, so that investors who have a long business experience would actually know what to expect. In the cryptocurrency industry, Lithuania is one of the countries that have legalized this activity and that has already made significant progress to promote cryptocurrency operations on this market, compared to other European states, where cryptocurrency is still illegal or unregulated.
Thus, the registration process can be highly influenced by this, and we highly recommend you to address to a team of specialists in company formation in Lithuania, in order to avoid any issues that can appear throughout the process and to avoid various mistakes caused by misunderstandings of the applicable procedures.
From the beginning, it must be noted that the process of company registration in Lithuaniais not a lengthy one, the company can be incorporated from a legal point of view in a period of 2 to maximum 5 working days. However, this refers only to steps through which the company gains legal personality and by this, we mean selecting a trading name, registering it, obtaining a certificate or registration, drawing and signing the statutory documents and obtaining a business address.
These are the main aspects that will be dealt with in the said period. However, for other procedures that are related to the registration of a cryptocurrency company, the time frame will be considerably longer. The company must also have a corporate bank account, and this procedure can take at least 2 weeks, and it can increase to 6 weeks, depending on the procedures of the bank and required documents.
Please mind that given the fact that the company will enter cryptocurrency operations, there are more documents and steps to complete and the financial institutions will require a more complex background check compared to the procedures applicable to regular commercial companies.
Then, the company will need a license, and this can take from 20 days to a month. Our consultants in company registration in Lithuania can offer more information on the documents you need to prepare in order to receive a cryptocurrency license from the Central Bank of Lithuania.
Lithuania cryptocurrency regulation – main rules of law
The legislation concerning the Lithuanian cryptocurrency market is very complex, and it is basically divided between two main categories, that vary based on the rights granted on the issuance of initial coin offerings (ICOs)/tokens. Here, there are two main categories: ICOs or tokens that do not offer governance rights or profits, and ICOs and tokens that do provide the right to obtaining profits and having governance rights.
Further on, the ICOs and tokens that do not offer governing rights and profits are separated into two categories, based on the main rule of law which regulates them. Thus, there are ICOs and tokens that are created solely for the purpose of providing the right to use a product or a service, which are regulated under the Lithuanian Civil Code.
In the same category, there are ICOs and tokens that are used as payment instruments or those that are used for charity purposes, and both categories are directly regulated under the Anti-Money Laundering Law and the Counter Terrorist Financing Law. However, all three categories will be regulated under the laws mentioned earlier, with the difference that the first category will first be regulated under the Civil Code, given its simpler nature.
The Lithuania cryptocurrency regulation for ICOs and tokens that offer the right to governance and to profits are regulated under numerous legal acts, depending on the specific nature of the cryptocurrency. In the list below, our team of consultants in company registration in Lithuania has prepared a short presentation regarding this matter:
- • ICOs and tokens that are created with characteristics of securities are regulated under the Lithuanian Law on Securities;
- • those that fall under the characteristics of crowdfunding, are regulated under the Law on Crowdfunding;
- • ICOs and tokens which can be included in the category of financial instruments will be regulated following the legal framework of Law on Markets in Financial Instruments – the same law applies to companies and other entities that develop token trading operations;
- • companies and other entities that have collected their funds through ICO are regulated by several rules of law – the Law on Collective Investment Subjects, the Law on Collective Investment Undertakings Intended for Informed Investors and the Law on Collective Investment Undertakings Intended for Professional Investors;
- • all the above categories also fall under the regulations of the Counter Terrorist Financing Law and the Anti-Money Laundering Law.
What is the LBCOIN in Lithuania?
For those interested in the cryptocurrency industry in Lithuania, there are very good news regarding investments in this industry. Lithuania has, as presented in this article, a very complex and solid legal framework, which aims at regulating the cryptocurrency operations from any legal matter.
The local financial authorities have already provided the necessary law, the tax procedures, the accounting procedures applicable in this case, the types of licenses that are required and numerous other important matters for running a business in this industry. Investors who want to open a Lithuanian companyin the cryptocurrency market have to know that the Lithuanian market has made further advancements.
Thus, it must be noted that, in 2020, the Bank of Lithuania has issued a digital collector coin, which is the first type of collector coin of its kind registered at a global level. The institution issues 24,000 collector tokens, that were created and distributed using blockchain technology.
The tokens include one of the 20 persons who have signed the country’s Act of Independence, and each personality was issued with a number of 4,000 tokens. The collection is entitled LBCOIN and those interested to acquire tokens from the collection can do so by purchasing a set of 6 tokens, which will randomly include 6 different personalities.
The collection is divided into 6 different categories and only in the case in which the buyers will have a token from each of the 6 categories, they will obtain a special benefit. In this case, if they collect 6 tokens from each of the 6 categories, then they will be able to receive a silver coin, which is a physical silver coin.
However, it must be observed that the LBCOIN is not a new cryptocurrency that is recognized by the central bank institutions, but rather a new cryptocurrency project that was used as a way to celebrate the country’s Act of Independence (signed in 1918), along with offering a further assurance of the fact that the cryptocurrency is a new way of developing financial activities in this country, recognized by the Bank of Lithuania.
What are the documents required for a Lithuania cryptocurrency business?
The Lithuania company formation licensecan be issued if the company’s representatives will provide specific documents to our team. Here, the investors who need a license for a Lithuania cryptocurrency company will have to present the following: a valid passport of each company founder, the power of attorney (which will provide our team with the right to legally represent you) and extensive information on the company’s business model.
Besides these, the investors should offer information on the type of license they need, based on the cryptocurrency activities they will carry out here. The resume of all company’s founders is also required, in order for the local institutions to observe the experience and the capabilities of all the persons involved in the cryptocurrency industry.
The license for Lithuania cryptocurrency can be issued if the founders will provide information on the website where the cryptocurrency operations will be carried out and, equally important, the investors should present a police certificate that shows a clean criminal record of all the persons involved – the company’s founders, the members, the ultimate beneficial owner and the compliance officer.
All the above mentioned documents have to be notarized at a public notary, and the apostille will also be necessary. If these documents are submitted as required, the procedure for the issuance of the Lithuania cryptocurrency license will start; given that this is a more complex procedure, our team of consultants in company formation in Lithuania remains at your disposal, for advice and legal representation.