How to Register a Sole Proprietorship (Individuali veikla / Verslo liudijimas) in Lithuania

Choosing to work as a sole proprietor in Lithuania is a popular path for freelancers and small business owners who value independence and flexibility. The process is relatively straightforward compared to forming a company, though you’ll need to decide between two different self-employment regimes and keep on top of your tax and contribution obligations. The main hurdles are understanding which regime best fits your work, filing the right paperwork, and budgeting for taxes, while the main rewards are autonomy, simplified administration, and the ability to start quickly with little upfront cost.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Lithuania?

In Lithuania, a sole proprietorship for individuals doing business without forming a company is commonly referred to as individuali veikla (using an ‘individual activity certificate’) or verslo liudijimas (business licence). Both allow self-employment, but differ in what kinds of activities, taxation, duration, and income limits.

How does a sole proprietorship (Individuali veikla / Verslo liudijimas) work in Lithuania?

Individuali veikla / Verslo liudijimas vs. other business structures

While registering as a sole proprietor in Lithuania is the simplest way to go independent, it’s not the only option. Many professionals also consider forming a private limited company (UAB), so it helps to compare the two structures side by side.

Step-by-step guide: How to register a sole proprietorship in Lithuania

Step 1: Check your eligibility

Lithuanian citizens are free to register as sole proprietors without additional restrictions. Citizens of EU and EFTA countries may also establish a sole proprietorship without the need for a work permit. Non-EU/EEA nationals, however, must hold a valid temporary or permanent residence permit if they wish to conduct business through a permanent base in Lithuania.

Step 2: Choose your regime (certificate vs business licence)

Decide whether you will use an individual activity certificate (individuali veikla pagal pažymą) or a business licence (verslo liudijimas). The individual activity certificate is the more flexible option. It can be used for a broad range of professional and commercial activities, does not expire, and is well-suited for freelancers, consultants, and anyone providing ongoing services. By contrast, the business licence (verslo liudijimas) is more restrictive: it applies only to specific activities listed by law (such as small-scale retail or crafts) and is valid for up to one calendar year, after which it must be renewed.

Step 3: Gather required documents

You’ll need at least:

• Identification (passport or ID card)
• Proof of residence status if not an EU/EFTA citizen
• Application for Individual Activity Certificate or Business Licence, using an approved form (for example, Form REG812 for individual activity certificate)
• Details about the activity you’ll carry out (what you will do, where, maybe an address)

All forms can be obtained or submitted via the VMI website.

Step 4: Register with VMI

You have two ways to register:

• Online: The fastest option is through the VMI e-services portal (Mano VMI), where you can submit the required forms electronically
• In person: You can also apply at your local territorial office of the VMI

If you are applying for a business licence, you may also submit your application at your municipality’s administration office, since municipalities set the licence fees and conditions.

Step 5: Pay registration fees/licence fees as required

You can register either online through the VMI e-services portal (Mano VMI), which is the fastest option, or in person at your local territorial office of the VMI. If you are applying for a business licence, you also have the option to submit your application at your municipality’s administration office, since municipalities are responsible for setting licence fees and conditions.

Step 6: Complete post-registration obligations

Once you are registered, your main responsibility is to issue compliant invoices for every service or sale, and to keep accurate records of all income and expenses in a dedicated ledger. You must also file your annual income declaration, usually by May 1 for the previous calendar year, and pay the required personal income tax together with social and health insurance contributions on time. If you are working under a business licence, remember that it is valid only until the end of the calendar year, so you will need to renew it each year if you plan to continue your activity.

Financial and tax obligations for sole proprietors in Lithuania

You are responsible for:

• Personal income tax (GPM): Sole proprietors pay personal income tax on their business income rather than corporate tax. Under an individual activity certificate, income up to €20,000 per year is taxed at 5%, while income above that is taxed at 15%. Under a business licence, a fixed income tax is paid in advance to the municipality, regardless of actual earnings. The annual income declaration must be filed with the VMI by May 1 for the previous calendar year.
• VAT (PVM): The standard VAT rate in Lithuania is 21%, with reduced rates of 9% and 5% for specific goods and services. Registration for VAT becomes mandatory if your annual turnover exceeds €45,000. Once registered, VAT returns are filed monthly or quarterly through the VMI’s Mano VMI portal.
• Social security and health insurance contributions (Sodra): Sole proprietors must pay contributions to Lithuania’s social security fund (Sodra) for pension, sickness, and healthcare coverage. Contributions are calculated based on declared income for those under an individual activity certificate, while business licence holders pay fixed contributions linked to the licence. Payments are usually made monthly or quarterly.
• Record-keeping: You must maintain accurate records of all income and expenses, including receipts and ledgers. These records must be retained for at least 10 years and presented to authorities if requested during inspections or audits.
• Invoicing: Every invoice must contain your taxpayer identification number (VMI code), details of your business and client, the date, a description of goods or services provided, the total amount, and VAT information if applicable. Invoices must be numbered sequentially, issued for every transaction, and stored securely for record-keeping.

Launch your contracting career and stay compliant with Deel

Registering as a sole proprietor gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
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FAQs

What is the minimum capital required to start individuali veikla or verslo liudijimas in Lithuania?
None. Neither regime requires a minimum share or paid-in capital.

Do sole proprietors need to register for VAT?
Only if turnover exceeds the threshold (around €45,000) or if they sell to clients or perform activities that require VAT. Otherwise, this is optional depending on needs.

How much are the standard contributions?
Under an individual activity certificate, income tax is 5% on annual income up to €20,000 and 15% on income above that threshold. In addition, sole proprietors must pay compulsory contributions to Sodra:

• State social insurance (pension, sickness, maternity): 12.52% of taxable income
• Compulsory health insurance: 6.98% of taxable income

If you operate under a business licence, instead of progressive income tax, you pay a fixed income tax set by your municipality in advance, plus the same mandatory social and health contributions.

Can a sole proprietor hire employees?
Yes. If you hire employees, you become an employer: you’ll have employer social security obligations, payroll taxes, etc.

How long does it take to register?
Often, you can get the individual activity certificate or business licence in a few days if you have all the documents ready and use online submission. Some licences may take longer depending on the activity.

Can foreign nationals register as sole proprietors?
Yes. EU/EFTA citizens have relatively simple access. Non-EU citizens need at least a residence permit to conduct individual activity via a permanent base in Lithuania.

Do I need a separate business bank account?
Not strictly mandatory for an individual activity certificate or business licence, but strongly recommended for clarity, especially with invoices and tax / VAT. It simplifies record-keeping.

What happens if I stop working as a sole proprietor?
You should inform VMI to deregister your individual activity or let your business licence lapse (or formally cancel it). File the final income declaration, and settle any tax or contributions due.

Are there any government incentives or reduced rates for new sole proprietors?
Yes: the lower tax rate (5%) for individual activity up to €20,000 is one such advantage. Also, many small-scale self-employed people benefit from simpler regimes. Certain municipalities set lower fixed income taxes for business licences.

Can I use Deel as a sole proprietor in Lithuania to get paid by international clients?
Yes. Deel supports freelancers / independent contractors (“sole proprietors”) getting paid from clients anywhere. Deel can help generate invoices compliant with local law, convert between currencies, and provide documentation for your income and tax records.

Does Deel generate compliant invoices for sole proprietors?
Yes. Deel has invoice templates that comply with VAT/invoice requirements in different jurisdictions, including Lithuania. You should ensure you include your VMI details (taxpayer ID), appropriate VAT information (if registered), and a correct description of services.

Can Deel help me with taxes as a sole proprietor in Lithuania?
Deel provides payment records, reports, and helps track your income. While Deel is not a substitute for a tax accountant, using Deel will make it much easier to prepare your annual filings and ensure you have correct records of invoicing, income, expenses, and payments received.