Carriers do not leave Lithuania to knock on the door: taxes force them to choose another path

In November 2019, it was possible to see an unusual image on Vilnius Gediminas avenue: a procession of several dozen trucks announced the funeral of the Lithuanian transport sector. “1990 to 2020” hung on one of them.

However, 2020 has passed and the transport sector in Lithuania is still alive. According to the data provided by the STI, the threats to relocate the business abroad did not materialize.

In the same November 2019, the International Transport and Logistics Alliance distributed a report on a survey of companies engaged in the international transport of goods. Vilmorus asked employers to assess future expectations and business prospects related to the government’s decision to increase the driver’s salary index to 1.65 of the monthly minimum wage.

“The research data showed that due to the increase in drivers’ wages by 26 percent. Carriers intend to cease operations, 58 percent. is preparing for transformation, considering moving abroad or hiring drivers from other countries, and 16 percent. claims to do nothing.

Among those who intend to restructure companies, the majority of company directors, 65%, plan to transfer their businesses to other countries. 50 percent would choose Poland, another 15 percent. The rest look at Germany, the rest look at Estonia (5%), Latvia (4%), Sweden (1.7%), Russia (1.7%) and 7%. respondents did not decide on the specific country, “the report reads.

Carrier representatives in various formats have spoken about the emerging business on several occasions. For example, in February this year, the Linava National Road Transport Association announced that since the beginning of the pandemic, Lithuania had lost more than 115 transport companies, more than 90 of them moved to Poland, others to Germany and other Western European countries. countries.

“This is due to three factors: the measures provided for in the Mobility Package, the pandemic that started last year and the introduction of new tax measures that have increased the tax burden on carriers and have worsened competitive conditions,” said the Linava’s secretary general, Zenon. Buivydas in the report.

Less than 2% were registered.

Starting in 2020, when withdrawing properties or activities from Lithuania, income tax must be paid. Income tax in Lithuania had to be paid before June 15, so it has only recently become clear whether carriers travel abroad and whether they pay the tax when doing so.

As explained by Jolanta Kazlauskienė, Head of the Legal Entity Registration Department of the Center for Registries, the following legal statutes when transferring a legal person abroad: a legal person participating in a cross-border merger The creation of a European company through a merger.

“Of course, when transferring the activities of a legal entity operating in Lithuania to another foreign country, the legal status of the legal entity located here cannot change. A legal entity registered in Lithuania can simply be liquidated and deregistered, and a new legal entity established and registered in a foreign country can be established, ”he added.

J. Kazlauskienė also explained the definitions of the legal statutes of various other legal entities, which are important for understanding STI data on decommissioned legal entities.

“Legal entities can have 13 different legal statuses,” he said. – Legal status in liquidation means that the shareholders of the legal entity have decided to liquidate the legal entity. Once all the necessary procedures have been completed, the legal entity will cease to exist.

Bankruptcy means that: a legal entity has been declared bankrupt by a court or a meeting of creditors. At the end of the bankruptcy process, the usually registered legal situation is liquidated due to bankruptcy, which means that the court or the creditors’ meeting has decided to liquidate the bankrupt legal entity.

Reorganization of legal status means the termination of a legal entity without liquidation procedure, when one or more legal entities merge with another existing legal entity, thus merging them into one legal entity. Said legal entity will end when unsubscribed from the Registry of Legal Entities.

The most common legal status is “unregistered legal status” – it means that a legal entity does not have any registered legal status, that is, it is not liquidated, reorganized, bankrupt or similar. It follows that a legal person of this type operates. ‘

STI Delfi presented the number of companies canceled in 2020 and their declared income tax payable. Data was also provided on the companies according to their status before the decommissioning: how many were bankrupt, in liquidation, etc. These statements seem to indicate the natural result of the companies rather than their relocation.

According to STI data, in 2020, a total of 3,518 legal entities were deregistered in Lithuania, whose total declared income tax payable amounted to 398,382 euros.

Most of the income tax had to be paid by reorganized legal entities before the deregistration. The amount declared by 320 legal persons amounts to 364,451 euros, that is, almost 92%. total amounts.

The remaining 1699 legal entities that were liquidated before the derecognition (EUR 31,938) and 6 legal entities that were merged in one country before the derecognition (EUR 1993).

The main economic activity carried out by the largest number of legal persons terminated was wholesale and retail trade and the repair of motor vehicles and motorcycles: 746.

Another category indicated by the STI is unidentified economic activity. Of these, 463 were discharged. In 2020, 285 legal entities engaged in professional, scientific and technical activities, 256 engaged in construction, and 243 engaged in transportation and storage were also terminated.

In other words, the transportation and storage category accounted for 6.9 percent. of all legal entities terminated in 2020.

According to STI data, as of December 31, 2020, there were 13,616 legal entities in Lithuania, whose main economic activity was transportation and storage. Thus, in 2020, 1.8 percent was removed. all legal entities in this category.

The corporation tax to be paid declared by 243 transport and storage legal entities in 2020 was 3,836 euros. The total amount was allocated to 100 legal entities (41%) that were liquidated before the withdrawal.

Another 106 legal entities (44%) filed for bankruptcy before deregistration, 29 were liquidated due to bankruptcy, 6 were reorganized and 2 legal personality was not registered.

154 legal persons terminated were limited liability companies, 2 agricultural companies, 1 branch of a foreign legal entity and another organization, 75 sole proprietorships, 11 small companies.

The income tax to pay declared in the category was 1%. the total of all legal entities deregistered in 2020.

A natural process

Financial analyst Marius Dubnikovas commented that CTI statistics on the transport and storage sector do not show large companies pulling out of Lithuania.

“These numbers are really small, less than 1 percent, so there is no trend here,” he said.

“In turn, 3.8 thousand. The amount of income tax in euros shows that the liquidated companies were inactive, perhaps simply without success. If there were a very high number, it could be concluded that the large units are shrinking, even liquidating in Lithuania. However, it cannot be concluded that no one is leaving Lithuania, “he said.

M. Dubnikov explained that it is not necessary for entrepreneurs to liquidate companies operating in Lithuania.

“You can just relocate and leave companies here on a smaller scale or completely dry,” he told Delfi.

You can count

Z. Buivydas explained the situation in a similar way.

“Companies really know how to count and they won’t go wrong if they keep paying a fee to increase. Nobody does that. It makes it much easier: a new UAB is established in another country and new machines, new orders are transferred directly there.

And in this company they either sell vehicles or rent them. You can’t run the business all the time, you just have to raise the taxes, “he said.

The head of Linava said he did not have precise statistics on the number of companies established by Lithuanian capital abroad.

“We interact with various companies that help companies move. We test ourselves, we look for opportunities to help small businesses to continue their operations at minimal cost, to build part of their business in another country with lower taxes.

Last week, talking to one of the companies, they have raised about 150 companies. These are the strongest. They don’t list all machines, they register new machines in another country. The Punsk Voivodeship, for example, is very happy because it now receives a lot of taxes. To my knowledge there are now around 6,000 new machines manufactured for Lithuanian companies there, ”he said.

Z. Buivydas agreed that the current process could be more precisely called not the establishment of a company, but its development abroad.

“It just came to our knowledge then. No one wants more, everyone is looking at the optimal option. <...> I could not answer how long it will take for companies registered in Lithuania to liquidate.

The company has been created by enterprising people since the 1990s. The state contributed nothing, just a few more successful periods. When Adolfas Šleževičius was prime minister and applied zero taxes to reinvested earnings. In 1995 it was a great step forward, then we renewed the parks and Europe also trusted us ”, said the interlocutor.