Lithuania is the third Baltic country, often looked at alongside a Latvian SIA by entrepreneurs comparing the region. Both countries share EU membership, the eurozone, and Schengen, but diverge notably on taxation and required capital.
A far higher minimum capital on the Lithuanian side
This is the most immediate friction point: forming a Lithuanian UAB generally requires a minimum capital of €1,000, versus €1 for a Latvian micro-SIA. For a solo entrepreneur starting out, with no need to tie up funds, this gap matters from day one.
On taxation, Lithuania applies a reduced rate of 0% or 7% for young small companies, but returns to 17% under the standard regime, without the deferred-taxation-on-distribution mechanism that makes the Latvian model strong.
The numbers-based comparison, point by point
| Criteria | Latvia (SIA) | Lithuania (UAB) |
|---|---|---|
| CIT | 0% reinvested / 20% distributed | 17% (7% or 0% for small new companies) |
| Minimum capital | €1 / €2,800 | €1,000 (often) |
| VAT | 21% | 21% |
| EU / Eurozone / Schengen | Yes / Yes / Yes | Yes / Yes / Yes |
Verdict
Latvia remains clearly superior for companies that reinvest their profits, thanks to the deferred 0% and a minimal starting capital.
Advantages of Latvia and Lithuania
Advantages of Latvia
- 0% CIT on reinvested profits, with no time limit
- Symbolic starting capital, from €1
- More developed support ecosystem for non-residents
- More accessible banking for foreign entrepreneurs
Advantages of Lithuania
- Reduced rate of 0% or 7% for young small companies
- Well-established fintech and industrial ecosystem in Vilnius
- Same EU, eurozone, and Schengen membership as Latvia
- Slightly larger domestic market
Who Latvia is the best choice for
If you're starting on a limited budget and want to reinvest your profits with no time cap, Latvia wins on the two criteria that matter most at start-up: required capital and the deferred tax regime, with no time limit unlike Lithuania's reduced regime reserved for young companies.
Who Lithuania may suit better
Lithuania can suit you if your activity fits within Vilnius's fintech or industrial ecosystem, or if you're launching a very young company that can benefit from the 0% or 7% reduced rate during its first years, before switching to the standard regime.
Go further
The most frequent question between these two countries is about bank accounts: see our article Latvia or Lithuania, where to open a business bank account.
Frequently asked questions
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