Free Economic Zones in Lithuania
ALBERTAS ŠEKŠTELO, FCIArb 20 March 2014
Free Economic Zones (FEZ) in Lithuania
FEZ - territory
designated for the
purpose of
economiccommercial and
financial activities
within which
companies are
provided with
preferential
economic and legal
conditions of
operation.
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FEZ Legal Framework
• The Law on the Fundamentals of FEZ prescribes the procedure and
conditions of establishment, functioning and liquidation of FEZ in
Lithuania.
• Each FEZ is established by a separate law, stipulating the types of
activities in the zone, the boundaries of the zone and other specific
conditions.
• In 1996 two FEZs were established in Lithuania: one in Kaunas and the
other one in Klaipeda. They were established for a period of 49 years.
• Now there are 7 FEZs.
• In order to start activity in FEZ, a company incorporated according to the
laws of Lithuania must get a permit from FEZ management company to
develop activity.
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Tax Incentives in the FEZ
Tax
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% regular rate
Taxes in free (special) economic zones
Corporate profit tax
15
no tax during the first 6 years and only
50% of corporate tax over the next 10
years (if the investments exceed EUR 1 m)
Dividends
15
no tax on dividends for foreign investors
Real estate tax
0.3-3
no real estate tax
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Prohibitions and Restrictions of the Activities
Investment of capital of foreign origin into exploitation of natural resources
is prohibited without a concession.
The following activities are prohibited in the FEZ:
• organizing lotteries, founding and keeping of gambling houses;
• manufacturing of spirits and liquors, tobacco, paper money and coins,
securities, postage stamps;
• production, processing, storage of hazardous and radioactive material;
as well as narcotics, virulent and poisonous substances;
• treatment of patients as well as treatment of animals with serious
diseases;
• publishing activities, except for personal needs.
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The example of Kaunas FEZ
Law estbablishing Kaunas FEZ provides:
• Term of the activities in the zone – 49 years (may be extended only by
amending the law);
• The territory of FEZ – 534 ha;
• The teritory of the FEZ is leased for the company administrating the FEZ
for a 99 year period (maximum lease period under Lithuanian law);
• Activities to be developed in the FEZ – international carriage of goods,
sales, manufacturing and business activities (to be detailed in the FEZ
statute)
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The example of Kaunas FEZ (2)
Administrating the Kaunas FEZ:
• FEZ is administrated by a limited liability company, in this case Belgian
Company „Kauno laisvosios ekonominės zonos UAB“ representing an
International Consortium;
• The company administrating FEZ:
○ Sets the rules of operating in the zone;
○ Subleases the land of the FEZ;
○ Issues permits to establish in the FEZ;
○ Setts the fees for the companies operating in the FEZ, etc.
○ May ask the government to change the boundaries and the territory
of the FEZ.
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The example of Kaunas FEZ (3)
The company administrating the FEZ cooperates with the state and
local government.
• The company must provide state government with information
concerning the activities developed in the FEZ, number of companies
operating in the FEZ, total amount of investments, number of
workplaces, overall results of the companies‘ business, the assimilation
of the FEZ territory;
• There are at least 3 state and local government representatives in the
board of the Company at all times;
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The example of Kaunas FEZ (4)
Kaunas FEZ Current Investments and Plans:
• Kaunas Free Economic Zone (FEZ) has reported its ambitious plans with
largest construction volumes planned in the region.
• There are plans of establishing airpark, bordering with Kaunas
International Airport, which would be convenient for transport, aircraft
service and aviation industry companies.
• Kaunas FEZ has already attracted EUR 350 million of investment from
18 companies, of which 70 per cent are foreign direct investment.
• There are 7 companies operating at Kaunas FEZ and 3 companies are
under construction.
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Plan of Kaunas FEZ
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Klaipėda FEZ
• .The Klaipėda FEZ is a recognised economic project of national
significance.
• The Klaipeda FEZ has signed agreements with 23 foreign and
Lithuanian companies, and 17 of these have already commenced their
activities.
• Since the start of their operation companies have invested more than
493 million EUR in this economic zone.
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Albertas Šekštelo, FCIArb
Senior Associate
albertas.sekstelo@tgslegal.com