Starting an IT Company in Lithuania: A 2026 Guide for Global Founders

The jurisdiction behind an IT business affects far more than its registration certificate. It influences the tax paid on profits, the way VAT is handled, the confidence of international clients, access to business accounts and the company’s ability to bring in investors later.

For founders looking for an efficient base inside the European Union, Lithuania deserves serious consideration. It combines EU and Eurozone membership, a digitally oriented public sector, a credible technology ecosystem and competitive corporate tax treatment for qualifying new and small businesses.

Starting an IT company in Lithuania can work particularly well for software-development agencies, SaaS founders, AI businesses, cybersecurity providers, app developers, IT consultants, managed-service providers and digital-product companies serving international clients.

Why Lithuania Works for an International IT Business

Lithuania offers something valuable to a technology founder: a reputable EU company without the operating cost typically associated with Europe’s largest business centres.

A Lithuanian company can contract with customers across the European Economic Area, invoice in euros and receive payments through the SEPA system. For B2B technology companies, an EU legal entity may also simplify vendor onboarding and procurement when clients prefer—or require—a supplier established within the European Union.

The country is not simply a low-cost registration jurisdiction. Lithuania has an established technology sector spanning software engineering, fintech, cybersecurity, artificial intelligence and global business services. Invest Lithuania describes the country as a technology hub supported by skilled IT specialists, modern digital infrastructure and an active startup ecosystem.

Foreign founders can own a Lithuanian company in full; a Lithuanian shareholder is not required. If a foreign legal entity will hold shares, however, the UAB structure is generally required because an MB may be owned only by natural persons.

Corporate Tax in Lithuania: The Headline Rate Is Only the Beginning

From the 2026 tax period, three corporate income tax rates are particularly relevant:

These figures are confirmed in the Lithuanian State Tax Inspectorate’s guidance on corporate income tax rates. The reduced rates are valuable, but they are not automatic.

The 0% Corporate Tax Opportunity

A newly registered IT company may qualify for a 0% corporate income tax rate during its first and second tax periods. For a startup reinvesting in development, cloud infrastructure, talent and customer acquisition, the cash-flow benefit can be meaningful.

To qualify, the company must satisfy all applicable statutory conditions. Among the key requirements, revenue must not exceed €300,000 in the relevant tax period, the participants must be natural persons, and the related-entity rules must not disqualify the company. During the first three consecutive tax periods, the business must also avoid disqualifying events such as transferring shares or membership interests to new participants, reorganisation, liquidation or suspension of activity.

This makes ownership planning important before incorporation. Registering a company under one person and transferring it to the intended founder later may destroy access to the 0% rate. If the tax relief forms part of the business plan, the correct founder and ownership structure should be established from day one.

The 7% Reduced Rate

A qualifying small company may apply the reduced 7% corporate income tax rate when its annual revenue does not exceed €300,000 and the relevant related-company conditions are met. From 2026, the previous employee-count restriction no longer applies to this reduced rate.

The €300,000 test cannot always be assessed by looking at one company in isolation. Where the founder controls or participates in related entities, their revenue may need to be considered together. A founder who already owns another company should therefore check eligibility rather than assuming the Lithuanian IT company automatically qualifies.

Expenses an IT Company May Deduct

Legitimate costs incurred to earn income may generally reduce taxable profit when they are properly documented and satisfy Lithuanian tax rules. Depending on the business model, these can include developer and employee costs, contractor fees, cloud hosting, software licences, professional subscriptions, computer equipment, advertising, accounting, legal services, office expenses and business travel.

Documentation matters. A payment made from the company account does not become tax-deductible merely because the founder calls it a business expense. The cost must have a genuine business purpose and be supported by appropriate invoices, agreements and accounting records.

Do Not Model the Business Using Corporate Tax Alone

A 0% or 7% corporate tax rate does not mean the founder’s total tax burden is 0% or 7%. The tax outcome also depends on how money is taken from the company.

Dividends paid to an individual are generally subject to 15% Lithuanian personal income tax. Salary, management remuneration and payments to an MB member follow different tax and social-security rules. A foreign founder must also consider the law of the country where they are personally tax resident and any applicable double-taxation treaty.

There is another issue international founders often overlook: registering a company in Lithuania does not automatically move its effective management—or the founder’s personal tax residence—to Lithuania. If the company is managed entirely from another country, that country may examine whether the business creates a permanent establishment, a place of effective management or other local tax obligations.

The right structure should therefore be assessed at two levels: the Lithuanian company and the founder’s country of residence.

MB or UAB: Which Structure Is Better for an IT Company?

Most founders opening an IT company in Lithuania choose between an MB, or Small Partnership, and a UAB, or Private Limited Company. Both generally provide limited liability, but they are designed for different stages and ownership models.

An MB is often the efficient choice for an IT consultant, freelance developer or small agency whose owners are individuals and who do not expect external investment in the near future.

A UAB is usually better when the plan includes venture capital, a corporate shareholder, employee equity, several investment rounds or a future sale of shares. Investors generally understand the UAB structure more easily, and its share-based ownership is better suited to a growing cap table.

Choosing an MB solely because it is cheaper to establish can create avoidable restructuring later. Choosing a UAB for a one-person consulting business can create administration the founder does not yet need. The right decision depends on the company you intend to build—not only the company you have on registration day.

VAT for Software Development, SaaS and Digital Services

Lithuania’s standard VAT rate is 21%. Under the rules effective from May 2025, the €45,000 domestic registration threshold is assessed by calendar year. Registration is generally required when the value of relevant supplies in Lithuania exceeds €45,000 during the previous or current calendar year. The State Tax Inspectorate explains the calculation of this threshold.

For an IT company, however, turnover alone does not answer every VAT question. The correct treatment depends on what is sold, whether the customer is a business or a consumer, and where that customer is established.

B2B IT Services

For most services supplied to a business customer in another EU country, the place of taxation is where the customer is established. If the customer has a valid EU VAT number, a Lithuanian software company will often issue the invoice without Lithuanian VAT and apply the reverse-charge mechanism. The European Commission sets out this general B2B rule in its guidance on the place of taxation for services.

The customer’s VAT status should be verified, and invoices must contain the required details. “The client is abroad” is not, on its own, a sufficient VAT analysis.

SaaS and Digital Products Sold to Consumers

Many automated SaaS subscriptions and digitally supplied products sold to private consumers follow different rules. B2C electronic services are generally taxed where the consumer resides, subject to the EU’s €10,000 cross-border threshold and its conditions.

Once customer-country VAT applies, the One Stop Shop can allow the company to report eligible EU consumer sales through a single registration rather than registering separately in every Member State. The European Commission’s OSS guidance explains how the threshold and reporting mechanism work.

VAT should be mapped before the first invoice is issued—not reconstructed after sales have already been made across several countries.

Does an IT Company Need a Licence in Lithuania?

Ordinary programming, software development, web development, IT consultancy, technical support and many other technology services do not generally require a special operating licence in Lithuania.

The position changes when technology is used to deliver a regulated service. Additional authorisation or specialist compliance may be required for fintech and payment services, crypto-asset activities, telecommunications, online gambling, certain healthcare products, regulated cybersecurity services or software classified as a medical device.

The substance of the activity matters more than the label “IT company”. A business cannot avoid financial, healthcare or telecommunications regulation simply by describing itself as a software provider.

Protect the Company’s Most Valuable Asset: Its Intellectual Property

For a technology company, the most valuable asset is often not cash in the bank. It is the code, product architecture, brand, data, documentation and know-how created by founders, employees and contractors.

Incorporation alone does not guarantee that the company owns everything developed for it. Employment agreements, contractor contracts and founder arrangements should clearly address intellectual-property ownership, confidentiality and the assignment of rights.

An investor or buyer conducting due diligence will want to see a clean chain of title. If the source code was created before incorporation or by freelancers working under weak contracts, the company may not own the asset it is trying to finance or sell.

Technology businesses should also implement GDPR-compliant privacy documentation, data-processing agreements, security controls and incident procedures appropriate to the product and customer base.

How to Open an IT Company in Lithuania

The exact formation route depends on the chosen legal structure, the founder’s nationality, available electronic identification and whether the company is being registered directly under the intended owner.

The usual process is to:

1. Define the business model, founder structure and expected customer locations.

2. Choose between an MB and a UAB.

3. Select and verify the company name.

4. Arrange a registered office address in Lithuania.

5. Prepare founder, incorporation and beneficial-ownership documents.

6. Register the company with the Register of Legal Entities.

7. Open an appropriate business bank or payment account, subject to provider due diligence.

8. Establish accounting, invoicing and document-retention procedures.

9. Assess VAT, VIES and OSS obligations before cross-border sales begin.

10. Put client contracts, privacy documents and intellectual-property agreements in place.

Remote company formation in Lithuania is possible in many cases, including for foreign founders, but the correct route depends on the founder’s documents and electronic identification. Account providers will also conduct their own KYC and anti-money-laundering checks, so account approval should never be treated as automatic.

Is Lithuania the Right Base for Your IT Company?

Lithuania is particularly attractive when the objective is to build a lean technology company with international clients, euro-denominated payments and a credible presence inside the EU.

Its tax system can be highly competitive for founders who qualify for the 0% or 7% corporate income tax rates. Its MB structure offers flexibility for smaller founder-led businesses, while the UAB provides a more investment-ready framework for SaaS companies and scalable technology ventures.

But the best jurisdiction is not selected by comparing corporate tax rates alone. The founder’s residence, management location, client geography, VAT model, ownership plan and future fundraising strategy all influence the final result.

Your software may scale quickly. Your legal and tax structure should be designed to scale with it.

Start Your IT Company in Lithuania With BalticIncorp

BalticIncorp assists international founders with MB and UAB formation, a registered business address in Lithuania, VAT registration, business-account support and ongoing accounting.

We do more than register a legal entity. We help you choose a structure that reflects how the company will earn revenue, pay its founder and grow internationally.

Contact BalticIncorp to discuss the most suitable route for starting your IT company in Lithuania.

This article provides general information and does not constitute individual tax or legal advice. Eligibility for reduced tax rates and the treatment of cross-border income should be assessed according to the company’s and founder’s specific circumstances.