Company Formation and Fintech Licensing in Lithuania: A Practical Entry Point to the EU

Getting a fintech license and starting a business in Lithuania is a good way to get into the EU.

Lithuania has become a gateway to the EU for fintech founders and investors who want simple rules and not much trouble in the last few years. Lithuania’s use of euros for payments and legal services, as well as its experienced legal and financial regulators, make it a unique place where things move quickly and with certainty in both the business and legal worlds.

Most teams will want to know how to improve Lithuania’s structures so that they can create cross-border business and licensing processes.

Choosing how the company will be set up

In the case of founders pursuing company formation in Lithuania, the most straightforward option is to set up a private limited liability company, or UAB.

For most strip operating use cases, a private limited liability company (UAB) is the best choice. It needs at least 2500 euros in equity capital, lets one shareholder and one director, and limits liability. This is great for new businesses and fintech licensing prep companies that are already doing well.

Lithuanian public limited companies, or ABs, are only for bigger businesses that want to get money from banks or go public. They need more money—40,000 euros—and a more formal way to run the business. Lithuania does have partnership entities for small businesses, but these aren’t always good enough for regulated financial services or growth that is backed by venture capital.

Ownership and management are very open-ended. People who own shares and directors can live outside the EU. But the substance is what matters when it comes to licensing. Supervisory authorities want Lithuania to have real control over operations. The head of compliance, senior management, and the people in charge of operations must all be in Lithuania.

Lithuania’s Rules for Payment and E-Money Licensing

Lithuania is a country that follows the law, and it strictly follows EU rules about money. For e-money issuers, the Electronic Money Directive is for them. For payment institutions, PSD2 is for them. Lithuania’s capital requirements for institutions are the same as what the directives say they should be. Depending on the services they offer, payment institutions must have between 20,000 and 125,000 euros in capital. On the other hand, e-money companies need at least 350,000 euros in capital.

To keep client money safe, there are strict rules that must be followed. Institutions must either keep client funds separate, insure them, or offer other similar protections. The EU’s rules for capital requirements look at how many transactions a company does or how much money clients still owe. Businesses that grow need to be ready for regular reports, an outside audit, and a lot of attention.

If they have the right licenses, businesses can offer services to the whole European Economic Area. The rules in Europe say that an authorized supervisor has 90 days to look over an application. However, the real time depends a lot on how good the application is. Good results usually come from having a clear organizational structure, strong risk management frameworks, and experience working with regulators.

Ready for business and able to use SEPA

Lithuania’s central bank can connect to the SEPA system because of where it is. Payment institutions and e-money institutions can handle euro payments once they have a license and have followed all the required supervisory and operational steps. This includes hiring compliance staff, making a plan for how the business will keep going, and properly managing vendors.

There is a lot of attention paid to how technology and data are set up. Supervisors want the school to be in charge of everything that is done outside of the school, even cloud services. Contracts must follow EU rules about ICT and outsourcing risks. They also need to give the right to audit, get data, and leave on good terms. Real control is not the same as control on paper.

Following the rules for local governance and substances

It is against the law for UABs to have more than one director. But when things are regulated, people expect more. There are usually rules for having a local CEO or head of operations, a separate compliance function, an AML officer who can talk to management directly, and a strong operating model.

Fit-and-proper checks look at more than just the resume. Supervisors are worried that the person isn’t honest, doesn’t have the right experience, or can’t do the job. Board minutes, risk appetite, and compensation policies are all signs of real and meaningful oversight and should be seen as such.

If you own 25% or more of the shares or have control over them, your records must clearly show who owns the shares. AML responsibilities follow EU rules and include policies, management, and reporting that support customer due diligence, transaction monitoring, and sanctions screening based on risk.

Tax problems and cross-border efficiency

In Lithuania, the corporate income tax rate is 15%. But small businesses that meet certain requirements may be able to get a lower rate of 5% or even 0% for the first year of operation. The VAT rate is 21%, and businesses in Lithuania have to register for VAT when their sales reach 45,000 euros a year. The EU One-Stop Shop rules may also apply to a business that sells goods to customers in other countries.

Tax planning is very important when it comes to paying taxes on dividends. The standard withholding tax is 15%, but it can be lowered or even eliminated through participation exemption, EU directive application, or double tax treaties. You may need to set up holding companies and make sure that there is a real presence while keeping the anti-abuse rule in mind. To stay in compliance, this needs to be done sooner rather than later.

A useful way to follow through on the plan

The best setups start with the most detailed description of the activities that are allowed under the PSD2 or e-money rules. After that, they talk about the best corporate structure for the planned capital raise. When starting a business, it’s important to include AML, protection, and risk management from the start, not after the business is already running.

Lithuania has a regulated market that rewards founders and investors who want to quickly and sustainably enter the EU by carefully planning. Lithuania is a great place for fintech to grow in the European single market because it has good governance, structured capital, and compliance built into its day-one operational plan.