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Major breakthrough in improvement of Lithuanian FDI climate. Green Corridor regulation for large investment projects approved

On 1 January 2021, the so-called Green Corridor Package for Large Investment Projects will come into force. The Package includes amendments to the Lithuanian Law on the Legal Status of Foreigners, Law on Investment, Law on Territory Planning (Zoning), Law on Employment, Law on Land, Law on Environmental Impact Assessment of Proposed Economic Activities and the Law on Corporate Income Tax. The aim of all these amendments is to stimulate FDI (foreign direct investment), new job creation and regional development in Lithuania.
From 1 January 2021 large scale local and foreign investment projects that are larger than EUR 20 million will get special preferential treatment in the areas of taxation, zoning, immigration, etc.
In this issue we will now cover only the new tax benefits granted by the Lithuanian Government to such large investment projects.

Large Investment Project is defined as an investment project in the fields of:
a) data processing,
b) hosting services and related activities or
c) processing manufacturing, for the implementation of which a valid Large Investment Project Agreement has been concluded with the Lithuanian Government.

Under such an investment agreement the investor shall undertake that within 5 years, it will:
(1) create at least 150 (and at least 200 when investing in Vilnius) new full-time job positions in Lithuania, each of which has to be retained for at least 5 years;
(2) invest in Lithuania at least EUR 20 million (and when investing in Vilnius – at least EUR 30 million) of private equity investments.

Some of the most important amendments to help achieve the goals set are established in the Law on Corporate Income Tax (hereinafter, the LCIT). the main of them – corporate income tax benefit.

According to the forthcoming amendments to the LCIT, legal entities that implement a large project under a valid investment agreement and have invested at least EUR 20 million (or EUR 30 million when investing in Vilnius) as well as have created at least 150 (or 200 when investing in Vilnius) new full-time job positions will be exempt from corporate income tax (CIT) for up to 20 years.

The mentioned corporate income tax benefit will apply:

  • only to new Large Investment Projects, for which an investment agreement is concluded with the Government;
  • only to those tax periods (years), during which the relevant legal entity complies with both of the following requirements i.e.:
    (1) investments amount to at least EUR 20 million (or EUR 30 million in Vilnius), and
    (2) the average number of employees is, respectively, at least 150 (or 200 in Vilnius);
  • for a period of up to 20 years as of entry into force of the respective Large Investment Project Agreement concluded with the Government;
  • irrespective of the territory of the Republic of Lithuania, in which the relevant Large Investment Project is being implemented;
  • to legal entities the revenues whereof generated during implementation of the large project in the fields of:
    a) processing manufacturing,
    b) data processing or
    c) hosting services will account for at least 75 % of all revenues generated during the relevant tax periods;
  • only to new investments, i.e. legal entities that have increased their investments to EUR 20 million (or EUR 30 million) threshold required to get the CIT benefit will not be eligible to receive it;
  • to legal entities that conclude a valid Large Investment Project Agreement with the Government by 31 December 2025.

PRIMUS Banking & Finance team in Lithuania:
Robert Juodka, Managing Partner
Greta Bagdanavičiūtė, Senior Associate. This year Greta was noted as a rising star by the LEGAL 500, in Banking, Finance and Capital Markets practice.

PRIMUS‘s Banking, Finance and Capital Markets practice is ranked at Tier 2 by the LEGAL 500 and is on the list together with the leading law firms in the Baltics.
The team is noted for advising clients on bond issuances, credit financing, and establishing investment funds, among many other matters. The practice is led by Robert Juodka, who is advising Rafako on the financing aspects of an international procurement for the construction of new combined heat and power plant in Vilnius. Senior associate Greta Bagdanavičiūtė advises on financial regulatory matters.

Key clients*
Teamgate / Sakret / Milvas / LHV Bank / IBIS Hotel

Work highlights*
Assisting SK ID Solutions AS with entering the Lithuanian market and regulation of e-authentication for banking purposes in Lithuania.
Advising Teamgate on attracting investment from venture capital fund Open Circle Capital.
Assisting Mebelain, SBA Group company, with raising a €20m senior loan from The European Bank for Reconstruction and Development to facilitate the expansion of Mebelain furniture factory in Belarus.

* Represented clients and projects with strict confidentiality rules are not included.


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