Lithuania’s Business Services Report on 2021 ICT & GBS

Lithuania’s ICT (Information and Communication Technologies) and GBS (Global Business Services) sector has enjoyed confident growth for more than a decade now, and it remains resilient despite all the recent crises. This is all thanks to the business-friendly ecosystem, the motivated and highly skilled talent, and the highly developed digital infrastructure.

Actually, 89% of the GBS Centers in Lithuania are multifunctional, while 93% are currently developing an Intelligent Process Automation – IPA solutions for in-house. These services are usually delivered in 35 different languages, and most of the GBS workforce is educated until the tertiary level.

There are 85 global and leading companies in Lithuania, which have already entrusted their operations to this new system and have employed over 20,000 employees tasked with carrying out the day-to-day operations and delivering innovations.

So, even amid the current pandemic, the growth of the ICT and GBS sector has not paused at all in Lithuania. Employment has already grown by 4.5%, and this sector employs very many specialists for the first time.

The Research and Financial Services sectors are the most extensive employee bases for the GBS ecosystem. As of 2020, the financial services companies had employed more than half of the entire labor force.

It is, however, sheer numbers, and the ICT sector continues to be a leader, with more than 41% of all the business centers belonging to this sector.

Location

The primary ICT and GBS hubs are Kaunas and Vilnius. There is only a one-hour drive on the train between these two cities, and they form a single talent catchment area with 1.4m inhabitants.

Markets covered

In 2020, the sector further expanded to cover the European markets. In the last year, there has been a considerable rise in the UK coverage, with an increase of 13pp in the total number of centers covering the UK.

This, therefore, makes the UK the single most popular market for the business services centers of Lithuania, with more than 72% of all the centers. It is followed closely by Germany that has 68%.

It is currently the leading function being performed by the GBS centers. Although Accounting and Finance grew with just 1pp in the last year, a share of employees perform the function and are expected to grow over the coming years significantly.

2021 New “Green Corridor Laws”

On 1st January 2021, Lithuania made new amendments to its legislation that created new laws that were more favorable for foreign investors and the locals, who were considering large-scale data processing, manufacturing, and data hosting services.

These new amendments were called “Green Corridor.” They included new laws on investments, territorial planning, and legal status for aliens, employment, Territorial Planning, and Corporate Income Tax.

According to the law, projects would be considered as large-scale if they met the following criteria;

-They had at least 20 million EURO in capital expenditure and 30 million when investing in Vilnius.

-Should have at least 150 full-time jobs created and maintained over the next five years, or 200 for Vilnius.

-At least 75% of the company’s income should be derived from data processing, manufacturing, or web-server hosting.

-That the entity should have an auditor’s opinion that confirms their required amount of private capital invested.

These specific indicators must be achieved for the law to be effected. The law guarantees the Green Corridor investors the following;

-Tax Incentives; this is of primary importance, especially for foreign investors. There will be tax exemptions for the large-scale projects from corporate income tax for up to 20 years. This will, however, apply to the firms that meet the above criteria.

-More accessible recruitment options for workers from third world countries through exempting them from requiring to obtain a work permit. They will also not be subjected to qualification requirements such as work experience. This means that they can start working the day they apply for the jobs under temporary residency permits.

-Quick and easy land planning, lease of state-owned land, and environmental impact assessment. This condition was created for any foreigner wishing to lease land without going through an auction. The obligation for preparing large-scale projects was waived, and the servitude setup procedure was simplified.

Ask for more information

Once the investment agreement has been concluded on a large-scale investment project, the Lithuanian Government would grant the project the Status of National Significance, which guarantees a smoother and faster decision-making process.

This will mean that the public administrations will be required to provide you with all the necessary administrative services within three days, and any decisions about the projects will take priority at all times.

The primary purpose of this law is to stimulate innovation and investments in the country and create high-valued jobs for the citizens. It will also act as a catalyst for quick transformation into the Lithuanian Industry.

So, to sum it all up, the country's expectations for large-scale investments are high, and this is because businesses, both international and local, are interested in such opportunities.

With the joint efforts made by Invest Lithuania and MEI, this plan is likely to attract plenty of investment from large businesses.

The New Corporate Income Tax Law

As mentioned above, the new legislation in Lithuania caused amendments to the corporate income tax law to provide significant incentives for large projects.

The law was passed in 2020, and it provided significant incentives for large-scale projects. It took effect on 1st January 2021 and will be in effect all through to December of 2025.

The law specifies that all qualifying investment projects will be exempt from corporate income tax for a period of five years, from 2021 to 2025.

This incentive is available to entities engaged in the specified large-scale projects such as data processing, manufacturing, web-server hosting, and other activities. The tax exemption is for up to 20 years for foreign entities.

The qualifying investments from any part of Lithuania are allowed, but they must meet the criteria mentioned above.

The companies that qualify for this law could be registered in Lithuania or shareholders of the required businesses listed above.

The shareholders for a future company registered in Lithuania can also act as investors for the application, but the company should be registered in Lithuania until the agreement is signed.

Natural persons who are currently engaged in the activities listed above are also eligible to apply as investors.

The investor's total and annual operating income, including any income from their other companies in the last year, must be at least EUR 10 million.

As an investor, you should prepare your investment project and then submit the application to MEI; this should either be written in English or Lithuanian. It can be signed electronically.

The entire project should be presented in great detail in the application and given at least 50 points. Anything lower will be rejected during the process of evaluation. This is performed by the government’s investment agency – Invest Lithuania.

The following should be included in the application;

-The total number of jobs you will be creating in the project.

-The total percentage of qualified workers to be included in the project.

-The average was you would pay. This should be compared to the average wage in the municipality where the projects will be implemented.

-The actual location of the project.

-The number of exported goods in the case of manufacturing.

-The impact of the project on competitiveness and public welfare in Lithuania.

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