Private limited company (UAB) Accounting in Lithuania

How is accounting for a limited liability company different from accounting for an MB or an IDV?

The main difference between an LLC, a small partnership and a sole proprietorship is the strictness of the regulations and the procedure for withdrawing funds.

The accounts of an LLC are the most complex, as they must be double-entry and the manager must be employed on a contract basis. This means that each month there is an obligation to calculate salaries and related taxes. In addition, the funds of the LLC are strictly separated from personal funds – profits can only be paid out to shareholders in the form of dividends after the end of the financial year and the approval of the accounts.

Accounting for small partnerships offers more flexibility. Members of an LLP can work under civil service contracts and can withdraw funds for personal use as advance profits at any time of the year. Accounting for a sole proprietorship is the simplest – it is cash-income based, there is no need to prepare financial statements for the Centre of Registers, and the owner can use the money earned right away.

What are the accounting terms for an LLC?

The financial calendar of an LLC is strictly defined by law. Delays in filing tax returns or paying taxes can lead to penalties, so it is important to keep to these key dates:

What taxes apply to LLCs?

A private limited company pays several types of tax in the course of its business, depending on its turnover, the number of employees it employs and the expenses it incurs:

• Corporate income tax. The standard rate is 15%, but small businesses with up to 10 employees and an annual turnover of less than €300,000 can benefit from a reduced rate of 5% or 0% for the first year.

• Value added tax. The standard rate in Lithuania is 21%. It is calculated on the value of the goods or services sold.

• Personal income tax (GPT) and social security contributions on salaries. These taxes are calculated each month on employees’ salaries. The rate of GPT for employment is 20%, while the rate of social security contributions depends on whether the worker is saving extra for retirement.

• Dividend tax. When a company distributes profits to its shareholders, 15 % of the amount of dividends paid is subject to withholding tax.

When must a UAB register for VAT?

A company is obliged to register for VAT in two situations. The first is when the total amount of consideration received for goods or services supplied in the territory of the country during the last 12 months exceeds the threshold of €45 000. The second is when the value of the acquisition of goods from other Member States of the European Union in a calendar year exceeds EUR 14 000.

A business can also become VAT-registered voluntarily, without waiting until these thresholds are reached, if it makes economic sense to do so (e.g. where the majority of its customers are VAT-registered from another business or where a large investment is planned). For detailed information on this process and help with the paperwork, please see our services under VAT code.