When a head of a Lithuanian company is a foreigner

Dovilė AukštuolytėPartner, Attorney at Law, Certified Data Protection Officer, 3law Miskinis and Partners Law Office

Citizens of EU Member States who intend to work in the Republic of Lithuania, including running a company, do not need to obtain a work permit. A citizen of EU Member State who has come to live in Lithuania for more than 3 months in 180 days (half a year) has the right to receive a certificate confirming his / her right to reside temporarily in Lithuania. Such a permit is issued by the Migration Service under the Ministry of the Interior of the Republic of Lithuania.

However, a citizen of a Member State of the EU may manage a company of the Republic of Lithuania not only while living in Lithuania, but also remotely. It is convenient, for instance, for a shareholder of a Lithuanian company. In this case, a remote employment contract could be concluded between the foreign citizen and the company. The remote employment contract specifies in that case the place of employment of the manager that EU Member State in which the manager is domiciled.

A manager residing abroad may use the services provided in the Republic of Lithuania electronically. A foreigner who wishes to use the administrative, public or commercial services provided electronically (remotely) in the Republic of Lithuania may submit an application for granting the status of an electronic resident of the Republic of Lithuania. A foreigner may start using the opportunities provided by the status of an e-resident when he/she has been granted the status of an e-resident in accordance with the procedure established by the Law of the Republic of Lithuania “On the Legal Status of Aliens” and has been issued an electronic identification and electronic signature means.

A foreigner located abroad submits the application through the chosen external service provider, and a foreigner legally staying in the Republic of Lithuania – personally to the Migration Department.

For tax purposes, a manager residing and working in other EU state-member should be subject to tax and social security law in this state.

This means that a foreign resident whose actual place of employment is in other EU state-member should be subject to payroll tax and income tax and social security contributions in the State of his residence (Article 11 of Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems), foreign state (EU) tariffs apply and all social guarantees provided for in foreign state (EU) legislation are provided.

But in that case when the head of a Lithuanian company works in another foreign country and runs a business from that country, there is a high probability that the Lithuanian company can be considered to be operating abroad. Than, there may be an obligation to register a permanent establishment in foreign state (EU) and to pay corporation tax in that country.