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.
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 fromour 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.
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 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.
Call us now at +37061578743to set up an appointment with our lawyers in Vilnius, Lithuania. Alternatively you can incorporate your company without traveling to Lithuania.
As our client, you will beneficiate from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Lithuania.