Lithuania has a favorable tax system. There are four main types of taxes: personal income tax (15% + 6% health insurance contribution); value added tax (21%); corporate profit tax (15%); and social security tax on employers (31% + employee's contribution of 3%). 5% corporate tax for small business was introduced on 1 January 2010. Additional taxes are tax on dividends (0-15% - dividends paid or received are not taxed when an investor controls at least 10% of voting shares in the enterprise for the period of at least 12 months), real estate tax (0.3–1.0%) and a land tax of 1.5% on businesses. The overall tax burden in Lithuania is one of the smallest among all EU countries.
Lithuania attracts foreign investors not only because of small tax burden but also because of a skilled workforce, a well-developed infrastructure and a bigger domestic market than the other two Baltic states combined. Cumulative foreign direct investment (FDI) at the beginning of the year 2009 was LTL 31.6 billion (EUR 9.2 billion). The manufacturing sector constituted 28% of total FDI, real estate and business activity sector received 20% of total FDI, and financial intermediation a little bit less – 19%. 4/5 of FDI came from the EU countries. Top countries-investors are Sweden (17% of total FDI), Germany (10%) and Denmark (9%).
Lithuania has an ambitious plan to become a Northern European innovation centre by 2020. To reach this goal, it is putting its efforts into attracting FDI to added-value sectors, especially IT services, software development, and consulting services, as well as finance or logistics. Well-known international companies, such as Microsoft, IBM, Transcom, Barclays, Siemens, SEB, TeliaSonera, Paroc, Philip Morris and others, have already established a presence in Lithuania.
Lithuania has prepared an attractive environment for business start-ups in two free economic zones (FEZ) in Kaunas and Klaipėda. FEZs offer not only developed infrastructure for investments and service support but also tax incentives: a FEZ is free from the corporate tax for the first six years, as well as free from tax on dividends and real estate tax. There are nine industrial sites in Lithuania, which can also provide additional advantages by having a well-developed infrastructure, offering consultancy service and some tax incentives.
The transport infrastructure inherited from the Soviet period is adequate and has been generally well maintained since independence. Its single port in Klaipėda is ice-free and supplies ferry services to German, Swedish, and Danish ports. There are a few commercial airports; scheduled international services use the facilities at Vilnius, Kaunas, and Klaipėda. The road system is well developed, including the Via Baltica highway passing through Kaunas.
Border facilities at checkpoints with Poland were significantly improved with the help of EU funds, but long waits had been a frequent phenomenon until 21 December 2007 when the Schengen Agreement came in force in both countries. Telecommunications have improved greatly since independence as a result of heavy investment. There are currently three large companies providing mobile phone services. .
Read more about this topic: Economy Of Lithuania
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