HomeReportsBureau of Economic and Business Affairs2017 Investment Climate Statements...Lithuania

# 					2017 Investment Climate Statements: Lithuania			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Lithuania is strategically situated at the crossroads of Europe and Eurasia. It offers investors a diversified economy, EU rules and norms, a well-educated multilingual workforce, advanced IT infrastructure, low inflation, and a stable democratic government. The Lithuanian economy is one of the fastest growing in the EU. The country joined the Eurozone in January 2015, and has started the accession process to join the Organization for Economic Cooperation and Development (OECD). Lithuania’s income levels still lag behind the rest of the EU, with per capita GDP (at purchasing power parity) of approximately 38.7 percent of the EU average. According to preliminary data from the Lithuanian Statistics Department, at the end of 2016, the United States was Lithuania’s 17th largest investor, with cumulative investments totaling USD 182 million (1.4 percent of total FDI).

Following its election at the end of 2016, the current Lithuanian government started to focus on lowering barriers to investment, partnering with the private sector, and offering financial incentives for investors. In 2013, the government passed legislation which streamlined land-use planning, saving investors both time and money.

The government provides equal treatment to foreign and domestic investors, and sets few limitations on their activities. Foreign investors have the right to repatriate or reinvest profits without restriction, and can bring disputes to the International Center for the Settlement of Investment Disputes. Lithuania offers special incentives, such as tax concessions, to both small companies and strategic investors. Incentives are also available in seven Special Economic Zones located throughout the country.

The business community in Lithuania advocates for greater flexibility in the labor code, including access to foreign labor. U.S. executives report burdensome procedures to obtain business and residence permits, as well as some instances of low-level corruption in government. Transportation barriers, especially insufficient air links with European cities, remain a hindrance to investment, as does the lack of access to open, transparent information on tax collections and government procurement. Energy costs in Lithuania are declining as a result of diversification projects and lower global oil prices.

*Table 1*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Toward Foreign Direct Investment**

Lithuania’s laws assure equal protection for both foreign and domestic investors. No special permit is required from government authorities to invest foreign capital in Lithuania. State institutions have no right to interfere with the legal possession of foreign investors’ property. In the event of justified expropriation, investors are entitled to compensation equivalent to the market value of the property expropriated. The law obligates state institutions and officials to keep commercial secrets confidential and requires compensation for any loss or damage caused by illegal disclosure. As a member of European Union, Lithuania is subject to WTO investment requirements. “Invest Lithuania” is the government’s principal institution dedicated to attracting foreign investment. It serves a one-stop-shop to provide information on business costs, labor, tax & legal settings and other business areas; facilitate the set up and launch of a company, provide help in accessing government financial support; and advocate on behalf of investors for more business friendly laws. In addition to its offices in Vilnius and major Lithuanian cities, Invest Lithuania has representative offices in Belgium, Kazakhstan, and the United States (Chicago).

Every year the Government cabinet holds a conference with foreign investors to discuss their concerns and ways to improve investment climate in Lithuania.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Foreign investors have the right to repatriate profits, income, or dividends, in cash or otherwise, or to reinvest the income without any limitation, after paying taxes. The law establishes no limits on foreign ownership or control. Foreign investors have free access to all sectors of the economy with some limited exceptions:

- The Law on Investment prohibits investment of foreign capital in sectors related to the security and defense of the State.
- The Law on Investment also requires government permission and licensing for commercial activities that may pose risks to human life, health, or the environment, including the manufacturing of, or trade in, weapons.
- As of May 2014, non-Lithuanians are allowed to buy agricultural or forest land.

The Law on Investment specifically permits the following forms of investment in Lithuania:

- establishment of an enterprise or acquisition of a part or whole of the authorized capital of an operating enterprise registered in Lithuania;
- acquisition of securities of any type;
- creation, acquisition, and increase in the value of long-term assets;
- lending of funds or other assets to business entities in which the investor owns a stake, allowing control or considerable influence over the company;
- performance of concession or leasing agreements.

Foreign entities are allowed to establish branches or representative offices. There are no limits on foreign ownership or control. Foreign investors can contribute capital in the form of money, assets, or intellectual or industrial property**.**The State Property Bank screens the performance record and size of companies bidding on state or municipal property and has halted privatizations when it determined that the bidders were not suitable, i.e., for criminal or other reasons.

**Other Investment Policy Reviews**

In 2016 OECD conducted an Economic Survey of Lithuania.

http://www.oecd.org/countries/lithuania/launch-of-the-2016-economic-survey-of-lithuania.htm 

**Business Facilitation**

The process of company registration in Lithuania in general is quite straight forward and involves the following steps that can be accomplished online at http://www.registrucentras.lt/en/ :

1. Check and reserve the name of the company (limited liability company). It takes about one day and costs approximately EUR 16.

2. Register at the Company Register, including registration with State Tax Inspectorate (the Lithuanian Revenue Authority) for corporate tax, VAT, and State Social Insurance Fund Board (SODRA). It takes one day and costs approximately EUR 57.

3. Complete VAT registration. It takes three days to complete at no charge.

**Outward Investment**

The Lithuanian Government neither incentivizes nor restricts outward investment.

							2. Bilateral Investment Agreements and Taxation Treaties					

The Republic of Lithuania has concluded 50 bilateral treaties concerning promotion and mutual protection of investments. Usually such treaties establish a more favorable investment treatment on a mutual basis. Most of the treaties on investment promotion and protection do not provide for Lithuania to expand treatment, incentives, or privileges relating to regulated investments provided for in a common market, customs union, economic union, free trade zone or a regional economic development agreement that the country belongs to or may belong in the future, or to expand the provisions of a current or future agreement regarding double taxation with a third country. The U.S. has had a bilateral investment treaty (BIT) with Lithuania since 2001.

Lithuania has also concluded around 50 bilateral tax treaties, including with the U.S., to avoid double taxation of income and capital and prevent tax evasion. These treaties provide certain tax benefits for foreign investment in Lithuania. More information on the treaties is available at: http://investmentpolicyhub.unctad.org/IIA/CountryBits/121  ; http://taxguide.lt/double-tax-avoidance-treaties-network/ 

							3. Legal Regime					

**Transparency of the Regulatory System**

The regulatory system remains a challenge for some investors. Local business leaders report that bureaucratic procedures often are not user-friendly and that the interpretation of regulations is inconsistent and unclear. Businesses and private individuals complain of low-level corruption, including in the process of awarding government contracts and the granting of licenses and permits. Businesses also note that they would like to have more opportunity to consult with lawmakers regarding new legislation and that new legislation sometimes appears with little advance notice.

However, the government is making efforts to improve transparency using technology. For example, the parliament’s (Seimas) website contains all draft legislation, and public tenders must be published electronically in a central database. Ministries also post many, but not all, draft laws under consideration. All government procurement tenders are required to be posted on-line on a centralized database. In March 2014, Transparency International released a report which recommended adopting laws aimed at protecting whistle-blowers, encouraging lobbying transparency, preventing and controlling conflicts of interest, and increasing transparency in political party funding, little of which has the Seimas addressed. The World Bank’s Doing Business Report ranked Lithuania 21st out of 190 in 2017. Lithuania scored especially high in the categories of Registering Property (2nd) and Starting a Business (29th). It did less well in the categories of Getting Electricity (55th) and Resolving Insolvency (66th).

**International Regulatory Considerations**

In accordance with its European Union membership since 1 May 2004, Lithuania applies the European Union trade policy such as antidumping or anti-subsidy measures. The European Union import regime applies to Lithuania. The country is a member of the WTO and it notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.

**Legal System and Judicial Independence**

The Lithuanian legal system stems from the legal traditions of continental Europe and is in accordance with the EU’s *acquis communautaire*. New laws enter into force upon promulgation by the President (or in some cases the Chairman of the Seimas) and publication in the official gazette, *Valstybes Zinios* (State News). Several possibilities exist for commercial dispute resolution. Parties can settle disputes in local courts or in the increasingly popular independent, i.e., non-governmental, Commercial Court of Arbitration. Lithuania also recognizes arbitration judgments by foreign courts. Domestic courts generally operate independently of government influence. Lithuania’s EU membership has given foreign firms the additional right to appeal adverse court rulings to the European Court of Justice.

The Lithuanian court system consists of general jurisdiction courts dealing with civil and criminal matters, and includes the Supreme Court, the Court of Appeals, district courts, and local courts. In 1999, Lithuania established a system of administrative courts to adjudicate administrative cases, which generally involve disputes between government regulatory agencies and individuals or organizations. The administrative court system consists of the High Administrative Court and District Administrative Courts.

The Constitutional Court of Lithuania is a separate, independent judicial body that determines whether laws and legal acts adopted by the Seimas, President, and the Government conform to the Constitution.

**Laws and Regulations on Foreign Direct Investment**

Lithuanian law provides for foreign entities to establish branches or representatives offices, and there are no limits on foreign ownership or control. A foreign majority holding interest in the capital of a local company is legal in Lithuania. There are no particular regulations or obligations to declare for foreign investment. However, there are some areas of the economy where investment is limited, such as investment in sectors related to the security and defense of the State, and licensing is necessary for activities related to human life, health and which are potentially risky. State investment promotion agency Invest Lithuania provides a detailed overview of the relevant laws regulations on foreign investment. https://investlithuania.com/why-lithuania/business-environment/ 

**Competition and Anti-Trust Laws**

There is a domestic Competition Council, which is responsible for the prevention of competition law violations. For more information: http://kt.gov.lt/en/index.php

**Expropriation and Compensation**

Lithuanian law permits expropriation on the basis of public need, but requires compensation at fair market value in a convertible currency. The law requires payment of compensation within three months of the date of expropriation in the currency the foreign investor requests. The compensation must include interest calculated from the date of publication of the notice of expropriation until the payment of compensation. The recipient may transfer this compensation abroad without any restrictions. There have been no cases of expropriation of private property by the Lithuanian government since 1991. There is an ongoing process to return property expropriated in the World War II and Soviet periods. While the Lithuanian government has returned most of this property, including Jewish communal property, in 2011, private property restitution remains incomplete.

**Dispute Settlement**

*ICSID Convention and New York Convention*

Lithuania is a member state to the International Centre for the Settlement of Investment Disputes (ICSID) Convention. It is also a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Lithuania law recognizes and enforces arbitral body decisions.

*Investor-State Dispute Settlement*

According to Lithuanian law, SOEs have no privileges in conducting business, competing for supply, and/or in implementing projects, enforcing contracts, and accessing finance. While 2013 Baltic Institute for Corporate Governance (BICG) report suggested that there have been cases of SOE executives extracting benefits for their own personal gain by way of guided tenders, exercising favoritism when selecting providers of goods or services, or giving business to friends and family members, the Embassy has no records of complaints from either foreign or domestic companies regarding the outcome of dispute settlement cases with state companies.

*International Commercial Arbitration and Foreign Courts*

According to the Lithuanian Arbitration Court, the trial process takes up to six months, but depending on a complexity of a case and with agreement of both parties, it can be extended. Also, before the legal proceedings start, the Arbitration Court has 30 days to decide if it will accept the case and three months to prepare all the needed materials for the trial process. If parties are not satisfied with the decision of Lithuanian Arbitration Court, they can appeal to international institutions.

**Bankruptcy Regulations**

Lithuania passed the current Enterprise Bankruptcy Law in 2001. This law applies to all enterprises, public establishments, commercial banks, and other credit institutions registered in Lithuania. The law provides a mechanism to override the provisions of other laws regulating enterprise activities, assuring protection of creditors’ rights, recovery of debts, and payment of taxes and other mandatory contributions to the State. This law establishes the following order of creditors’ claims: claims by creditors that are secured by a mortgage/pledge of debtor; claims related to employment; tax, social insurance, and state medical insurance claims; claims arising from loans guaranteed or issued on behalf of the Republic of Lithuania or its Government; and other claims. Bankruptcy can be criminalized in cases of intentional bankruptcy.

							4. Industrial Policies					

**Investment Incentives**

The Lithuanian government taxes corporate income, personal income, and capital gains at 15 percent. The value added tax is 21 percent and the annual real estate tax ranges from 0.3 to three percent, depending on the market value of a property. For more details, please visit https://investlithuania.com/ .

Lithuanian municipalities provide special incentives to investors who create jobs or invest in infrastructure. Municipalities may tie designation criteria to additional factors, such as the number of jobs created or environmental benefits. Strategic investors’ benefits could include favorable tax incentives for up to ten years. Municipalities may grant special incentives to induce investments in municipal infrastructure, manufacturing, and services.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

Lithuania has seven Free Economic Zones (FEZs) located near the cities of Kaunas, Klaipeda, Siauliai, Kedainiai, Panevezys, Akmene, and Marijampole. The FEZs in Kaunas and Klaipeda have attracted the most business; there are 15 businesses operating in the Klaipeda FEZ, and 20 in the Kaunas FEZ. Companies operating in FEZs must follow the same accounting and reporting rules as companies operating in the rest of the country.

Companies that invest or are operating within the zones enjoy:

- following 10 years, if the company invests more than USD 1.2 million;
- exemption from real estate tax;
- no tax on dividends (if the company is foreign).

**Performance and Data Localization Requirements**

In January 2017, the Seimas passed new legislation providing for a Startup Visa, designed for non-EU entrepreneurs wishing to start or expand information technology, biotech, nanotech, mechatronics, electronics, or laser technology businesses. For more information on the new Startup Visa, visit: https://startupvisalithuania.com/ .

Lithuania also participates in the EU BlueCard program, which simplifies the residency and work permit application process for highly-skilled non-EU citizens. Once secured, the BlueCard is valid for up to three years and can be extended for an additional three years. BlueCard holders are also eligible to apply for permanent residency after five years. For more information on the BlueCard program, visit: http://www.eubluecard.lt/ .

Nevertheless, foreign investors that do not qualify for these programs, including U.S. citizens, may face difficulties obtaining and renewing residency permits. U.S. citizens can stay in Lithuania no more than 90 days without a visa (and no more than 90 days in any six-month period). Those who stay longer face fines and deportation. However, foreigners may only submit residency permit applications after they arrive in Lithuania. Therefore, the Embassy recommends applicants work with Lithuanian embassies and consulates to review documentation required for a permit well in advance of their first visit to Lithuania. For more information on the various types of visas and their requirements, visit: http://www.migracija.lt/index.php?-1488882078 .

							5. Protection of Property Rights					

**Real Property**

Lithuanian law protects foreign investments and the rights of investors in several ways:

- The Constitution and the Law on Foreign Capital Investment protect all forms of private property against nationalization or requisition.

- International agreements, such as the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards, offer protection.

- Bilateral agreements with the United States and other western countries on the mutual protection and encouragement of investments reinforce these protections. The U.S. and Lithuania BIT has been in effect since 2001.

- The Law on Capital Investment in Lithuania and other acts regulate customs duties, taxes, and relationships with financial and inspection authorities. This law also establishes dispute settlement procedures.

- In the event of justified expropriation, applicable law entitles investors to compensation equivalent to the fair market value of the expropriated property.

- Foreign investors may defend their rights under the Washington Convention of 1965 by applying to either Lithuanian courts or directly to the International Center for the Settlement of Investment Disputes. To date, Lithuania has not been involved in any major investment disputes with American or other foreign investors.

- State institutions and officials are obligated to keep commercial secrets confidential and must pay compensation for any loss or damage caused by illegal disclosure. Lithuania legalized the possibility of hiring private bailiffs to enforce court judgments in 2003.

Lithuania’s commercial laws conform to EU requirements, and include the principles of the free establishment of companies, protection of shareholders’ and creditors’ rights, free access to information, and registration procedures. Relevant laws include: the Company Law and Law on Partnerships (2004), the Law on Personal Enterprises (2004), the Law on Investments (1999), the Law on Bankruptcy of Enterprises (2001), and the Law on Restructuring of Enterprises (2001). The Civil Code of 2000 governs commercial guarantees and security instruments. It provides for the following types of guarantee and security instruments to secure fulfillment of contractual obligations: forfeiture, surety, guarantee, earnest money, pledge, and mortgage.

**Intellectual Property Rights**

Lithuania has significantly improved IPR protection in recent years; members of the innovation community report that there is less frequency of IPR infringements and theft. Lithuania joined the World Intellectual Property Organization (WIPO) in 2002 and the World Trade Organization (WTO) in 2001. Lithuania, as a member of the EU, has ratified WIPO’s Internet treaties (Copyright Treaty and the Performances and Phonograms Treaty) as listed below. It is also a signatory to the following IPR-related treaties and conventions:

- The Paris Convention for the Protection of Industrial Property in 1990 (effective May 22,
- 1994)
- The Berne Convention for the Protection of Literary and Artistic Works of 1886 (effective
- December 14, 1994)
- The Rome Convention for the Protection of Performers, Producers of Phonograms and
- Broadcasting Organizations of 1961 (effective July 22, 1999)
- The Nice Agreement Concerning International Classification of Goods and Services of 1957
- (effective February 22, 1997)
- The Madrid Protocol of 1989 (effective November 15, 1997)
- The Patent Cooperation Treaty of 1970 under the auspices of WIPO (effective July 5, 1994)
- The Conventions on the Grant of European Patents (December 1 2004)
- The WIPO Copyright Treaty of 1996 (effective March 6, 2002)
- The WIPO Performances and Phonograms Treaty of 1996 (effective May 20, 2002)
- The Trademark Law Treaty of 1994 (effective April 27, 1998)

Lithuania enacted regulations in 2002 to protect confidential test data submitted by pharmaceutical firms for patent and trademark registration. Following EU accession, Lithuania extended protection to member states’ trademarks, designs, and applications. Lithuania brought its national law protecting biological inventions into compliance with EU Directive 98/44 in June 2005. In 2008 it was removed from the Special 301 Watch List. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

The State Patent Bureau provides a list of patent attorneys at the following link: https://vpb.lrv.lt/en/structure-and-contacts-1/patent-attorneys 

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

Government policies do not interfere with the free flow of financial resources or allocation of credit. In 1994, Lithuania accepted the requirements of Article VIII of the Articles of Agreement of the International Monetary Fund to liberalize all current payments and to establish non-discriminatory currency agreements. Lithuania ensures free movement of capital and does not plan to impose any restrictions. The government imposes no restrictions on credits related to commercial transactions or the provision of services, nor on financial loans and credits. There are no restrictions on non-residents opening accounts with commercial banks.

**Money and Banking System**

The banking system is stable, well-regulated, and conforms to EU standards. Currently there are seven commercial banks holding a license from the Bank of Lithuania, eight foreign bank branches, two foreign banks representative offices, the Central Credit Union of Lithuania and 75 credit unions. Two hundred-eighty EU banks provide cross-border services in Lithuania without a branch operating in the country, and three financial institutions controlled by EU licensed foreign banks providing services without a branch. Nearly all foreign banks are under Scandinavian control. By the end of 2016 the total assets of major Lithuanian banks were:

- SEB – 7.5 billion Euro ( www.seb.lt  )
- Swedbank – 7.3 billion Euro ( www.swedbank.lt  )
- DNB – 3.9 billion Euro ( www.dnb.lt  )

Other smaller banks:

- Citadele ( www.citadele.lt  )
- Siauliu Bankas ( www.sb.lt  )
- Medicinos Bankas ( www.medbank.lt  )
- Finasta ( http://finasta.com/lit/lt  )

Effective January 1, 2015, all of these banks are controlled by European Central Banks, and Bank of Lithuania. There is no restriction on portfolio investment. The right of ownership to shares acquired through automatically matched trades is transferred on the third working day following the conclusion of the transaction. The Vilnius Stock Exchange is part of the OMX group of exchanges and offers access to 80 percent of all securities trading in the Nordic and Baltic marketplace. OMX is owned by the U.S. firm NASDAQ and the Dubai Bourse. The supervisory service at the Bank of Lithuania oversees commercial banks and credit unions, securities market, and insurance companies. Lithuanian law does not regulate hostile takeovers.

**Foreign Exchange and Remittances**

*Foreign Exchange*

Lithuania has no restrictions on foreign exchange

*Remittance Policies*

Lithuanian remittance policies allow free and unrestricted transfers.

**Sovereign Wealth Funds**

Lithuania does not maintain Sovereign Wealth Funds.

							7. State-Owned Enterprises					

In the beginning of 2015, the Lithuanian government was majority or full owner of 131 enterprises. The SOE sector is valued at approximately USD 5.6 billion and employs just over 42,000 people. The greatest number of SOEs by value are found in the electricity and gas sector (38 percent), followed by transportation (36 percent) and the primary sectors (21 percent). The transportation sector (which in Lithuania’s definition includes the postal service) accounts for over half of all SOE employment followed by the electricity and gas sector, which accounts for about one fifth. The largest SOE employers are Lithuanian Railways, Lithuanian Energy and Lithuanian Post, which collectively employ over 23,000 people.

A list of SOEs is available at the Governance Coordination Center site: http://vkc.turtas.lt/en/company 

According to Lithuanian law, SOEs have no privileges over private companies in conducting business, competing for supply, and/or in implementing projects, enforcing contracts, and accessing finance. The Embassy has no records of complaints from either foreign or domestic companies regarding cases of state companies exercising superiority in competing for business. Nevertheless, anecdotal evidence cited in a 2015 Baltic Institute for Corporate Governance (BICG) report suggests that there have been cases of SOE executives extracting benefits for their own personal gain by way of guided tenders, exercising favoritism when selecting providers of goods or services, or giving business to friends and family members.

The BICG report also concludes that Lithuanian SOE practices fall short of meeting OECD standards. Some Lithuanian SOEs fail to comply with six out of ten norms for the hiring, firing and oversight of top management, and only partly satisfy the other four criteria. However, there has been significant progress in recent years to bring corporate governance practices closer to international norms. For example, the introduction of independent board members helped to professionalize and depoliticize SOE boards and strengthen independent and pragmatic decision making, including in the areas of CEO selection and evaluation. The requirement for SOE CEOs to certify financial statements is also in line with international best practices

**Privatization Program**

The government has privatized most state enterprises and property, with foreign investors purchasing the majority of state assets privatized since 1990. These include companies in the banking, transportation, and energy sectors. Some foreign companies have complained about a lack of transparency or discrimination in certain privatization transactions. Major assets still under government control include the railway company (Lietuvos Gelezinkeliai), Lithuania’s three international airports (Vilnius, Kaunas, and Klaipeda) and Lithuanian post (Lietuvos Pastas).

							8. Responsible Business Conduct					

Although Lithuania’s high private sector contribution to GDP is evidence of a strong private sector, the concept of Corporate Social Responsibility (CSR) is still new in Lithuania, especially in rural areas where there is little or no foreign investment. The understanding of the concept is frequently linked to philanthropy, rather than partnership. The private sector appears more interested in its own business affairs rather than displaying a real commitment to social issues.

There are, however, an increasing number private-public partnerships, as well as social projects, where the private sector is involved in supporting volunteerism, environmental restoration, and scholarships. Furthermore, successful participation in the European Union market will require high standards of CSR. Foreign investors in Lithuania have played a very important role in promoting CSR. In 2009, the government developed and approved a National Corporate Social Responsibility Development Program aimed at promoting CSR. Also, in the past few years there has been growing interest from both government and NGOs in promoting CSR values by organizing competitions and awards ceremonies such as the Social and Labor Ministry’s annual Socially Responsible Business Awards Ceremony, Confederation of Industrialists’ Awards and others. Also, as Lithuania is in the process of acceding to the OECD Anti-Bribery Convention, more business organizations and the legal community have started to promote the importance of companies adopting anti-bribery compliance programs.

							9. Corruption					

According to an EU report on corruption released in February 2014, Lithuania has demonstrated a commitment to prevent and combat corruption through an extensive legal framework. In this report, the European Commission recommends that Lithuania prioritize the prosecution of larger cases and develop prevention tools to detect corruption in procurement on the local government level and in the healthcare sector. The EC also recommends that Lithuania develop a strategy against informal payments in healthcare, and improve the control of declarations of conflicts of interest made by elected and appointed officials. The transparency of political party financing is another area for improvement.

Lithuania is highlighted as a positive example of good practices in the implementation of e-procurement as it has made significant progress in providing online access to centralized data on public procurement. Since 2009, at least 50 percent of the total value of their public bids must be done electronically. As a result, the share of e-procurement rose from 7.7 percent to 63 percent in 2010, reaching 90 percent level in 2016. The range of information published exceeds the requirements of EU law including draft technical specifications, concluded and performed public contracts, and suppliers’ subcontractors.

At the same time, Eurobarometer survey on corruption conducted in 2015 showed that Lithuania lags behind other EU countries in the scores concerning both perceptions and actual experience of corruption. Among the survey results: 95 percent of the Lithuanian respondents said they think that corruption is widespread in Lithuania; 29 percent indicated that they were asked or expected to pay a bribe in the past 12 months; and 89 percent believe that that bribery and the use of connections is often the easiest method for obtaining some public services.

More than 50 governmental institutions regulate commerce in one way or another, creating opportunities for corrupt practices. Large foreign investors report few problems with corruption. On the contrary, most large investors report that high-level officials are often very helpful in solving problems fairly. In general, foreign investors say that corruption is not a significant obstacle to doing business in Lithuania and describe most of the bureaucrats they deal with in Lithuania as reasonable and fair. Small and medium enterprises (SMEs) perceive themselves as more vulnerable to petty bureaucrats and commonly complain about extortion. SMEs often complain that excessive red tape virtually requires the payment of “grease money” to obtain permits promptly. Business owners maintain that some government officials, on the other hand, view SMEs as likely tax-cheats and smugglers, and treat the owners and managers accordingly.

Paying or accepting a bribe is a criminal act. Lithuania established in 1997 the Special Investigation Service (Specialiuju Tyrimu Tarnyba) specifically to fight public sector corruption. The agency investigates approximately 100 cases of alleged corruption every year, but has yet to bring charges against high-level officials for corrupt practices. Lithuania ratified the UN Convention Against Corruption in December 2006. Transparency International (TI) also has a national chapter in Lithuania. TI ranked Lithuania 38th out of 176 in its 2016 Perceptions of Corruption Index with a score of 59 out of 100. (TI considers countries with a score below 50 to have serious problems with corruption.) Police, medical personnel and local government, among others, were cited by TI as prone to corruption.

Lithuania ratified the UN Anticorruption Convention in 2006 and is in the process of acceding to the OECD Anti-Bribery Convention.

**Resources to Report Corruption**

Special Investigation ServiceJaksto g. 6, 01105 Vilnius, LithuaniaTel: 370-5266333Fax: 370-70663307Email: pranesk@stt.lt

Transparency InternationalSergejus Muravjovas, Executive DirectorTransparency InternationalDidzioji st. 5, LT–01128, Vilnius, LithuaniaTel: 370 5 212 69 51info@transparency.lt |skype: ti_lithuania

							10. Political and Security Environment					

Since its independence in 1991, Lithuania has not witnessed any incidents involving politically motivated damage to projects and/or installations.

							11. Labor Policies and Practices					

Lithuanian labor is relatively inexpensive compared to Western Europe. However, employment regulations are often stricter than those in other EU countries, according to some foreign investors. By law, white-collar workers have a 40-hour workweek. Blue-collar workers have a 48-hour workweek with premium pay for overtime. Maternity leave in Lithuania is granted up to 126 days, and the government compensates 100 percent of the mother’s salary. A father is also allowed to take paternity leave for one month- his salary is compensated 100 percent as well. Sick leave in Lithuania is granted up to 14 days at any one time and no more than 90 days a year. For the first two days the salary compensation is 80 – 100 percent and it is paid by the employer the rest of the days are compensated by SODRA (Lithuanian Social Security body) at 80 percent of the salary. Lithuania is a member of International Labor Organization (ILO) and has ratified its core conventions.

The government adjusts the monthly minimum wage periodically. In 2017, Lithuania’s minimum monthly wage was EUR 380 (USD 410). The average monthly wage was approximately EUR 813 (878USD ).

The ability of Lithuanians to work legally in EU countries generated a sizable outflow of labor, causing a domestic shortage of skilled construction workers, truck drivers, shop assistants, medical nurses, and medical specialists. Currently, unemployment is slowly falling. Lithuania’s unemployment at the end of 2016 was 7.9 percent.

Lithuania’s management-labor relations are good. Labor unions are not considered overly influential in Lithuania, according to some foreign investors. There have been no major strikes or labor disruptions since 1991.

Some business leaders claim that the Labor Code lacks flexibility and increases the cost of production by making it harder to hire and fire employees. This is a particular complaint of businesses that experience seasonal fluctuations in labor needs. The Seimas passed a new Labor Code in July 2016, however the new Government elected in October 2016 postponed implementation until July 1, 2017, after a Tripartite Council (government, labor, and business) review and make further recommendations for amendment to the new code. At the time of publication, the Seimas is expected to pass the amendments in time for the July 1 deadline. Most Lithuanians expect that these changes would encourage foreign investment and job creation.

Lithuania has one of the best-educated workforces in central and eastern Europe. Lithuania ranks fourth among the EU states in terms of population with higher education and first in the Baltic States. Lithuania is one of the five EU members with the highest percentage of people speaking at least one foreign language. Ninety percent of Lithuanians can speak at least one other language – usually English, Polish, and/or Russian – apart from their mother tongue.

Major Lithuanian companies specializing in IT, biotechnology, laser technology, etc., cooperate closely with the leading Lithuanian technological universities, which provide companies with R&D services and offer students specialized on-the-job training programs. In this way companies are able to attract a large number of qualified specialists for both local and international projects. Some technology companies have noted challenges in finding highly- skilled workers with advanced technical degrees.

							12. OPIC and Other Investment Insurance Programs					

Coverage from the Overseas Private Investment Corporation (OPIC) (www.opic.gov ) is available for U.S. investments in Lithuania.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*

*Table 3: Sources and Destination of FDI*

*Table 4: Sources of Portfolio Investment*

*IMF

							14. Contact for More Information					

Jonas Vasilevicius, Commercial SpecialistTel: 370-5 2665671VasileviciusJ@state.gov

U.S. Embassy VilniusAkmenu str. 6Vilnius, Lithuaniahttps://www.facebook.com/vilnius.usembassy https://lt.usembassy.gov/business/

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### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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#### The Lessons of 1989: Freedom and Our Future