Are you an aspiring entrepreneur who wants to build a crypto wallet or an exchange that will disrupt the market? As a tech person, you may be focused on the nuances of your crypto exchange platform that make it stand out. But that’s not the only thing there is to it. A crypto exchange or a wallet is first and foremost a business. And as a business, it has to work on minimizing taxation and making sure the legal side of things is taken care of and doesn’t eat up too many resources.
Lithuania is a kind of tax heaven for these purposes. It offers amazing conditions for crypto-related companies and having a Lithuanian license for your cryptocurrency exchange platform is considered a sign of respectability and trust.
If you’re considering opening up a crypto exchange platform or a crypto wallet provider of your own, follow this guide to learn more about what the possibilities are with Lithuanian licenses.
Lithuania cryptocurrency regulations and laws
Lithuania is currently one of the few countries with a clear-cut legal framework for cryptocurrency. It goes as far as the Bank of Lithuania having an official statement on the usage of crypto, and the Ministry of Finance issuing a set of ICO guidelines. If that’s not enough to understand that Lithuania is going to become the central hub or cryptocurrency in Europe, and perhaps in the whole world, here’s a piece of old news. The central bank of the country issued a coin of its own in 2020.
Now, that may be good to know, but let’s take a closer look at the cryptocurrency legislation in the country. According to the country’s tax department statement, individuals who trade cryptocurrency in small and irregular portions are going to pay the personal income tax (PIT) on profits that exceed 2500 EUR. The tax is 15% which is considered the lowest in Europe and is certainly a decent offer considering it’s one of the few legislations that allows citizens to legalize their crypto gains.
Persons who engage in trade actively, like day traders, need to register and get a license to conduct this activity. They can benefit from lower tax rates, starting at 5% with a maximum of 15%. Note that crypto is not considered a currency, but rather a financial instrument. Therefore, traders do not pay tax on their crypto holdings. They only have to pay once they’ve sold a part of the portfolio and calculated their profit from the transaction (selling price subtracted from the purchase price).
Corporations that operate cryptocurrency exchanges or wallets are also taxed 15%. However, those companies that are starting out and bringing in less than 300,000 EUR in gross annual profit are taxed at an adjustable rate of 0-5%.
Since cryptocurrency services are regulated in the country, Lithuanian authorities take matters very seriously. Recently, the Bank of Lithuania issued a statement on Binance asking citizens to avoid investing with the company as they are not yet regulated in the country and Lithuanians risk losing their investments when working with them. So if you want to reach European markets, obtaining a Lithuanian license is the optimal course to take.
Benefits of obtaining a Сrypto Exchange License in Lithuania
Lithuania is becoming one of the most cryptocurrency-friendly and attractive jurisdictions in the EU for crypto companies and crypto traders. The Republic of Lithuania is considered one of the most popular destinations for fintech since the country’s legislative framework provides relatively loyal requirements for startupers. After registering a crypto company in Lithuania, you will need to obtain an activity permit, and the conditions for obtaining such a permit are quite simple. You can register a crypto company in Lithuania remotely, and the registration procedure can be implemented in a relatively short time.
Registering a cryptocurrency company in Lithuania also gives the following benefits:
- Low costs
- Terms: from 3 weeks
- Taxes. Corporate tax of only 15%
- Format of remote registration.
- No requirement to hire local staff
It should be taken into account that the legal framework of the country does not establish restrictions on the foreign property, so the founders and directors of a crypto company can be non-residents. In addition, you do not have to necessarily hire local staff. Another advantage of opening a crypto company in Lithuania is one of the lowest corporate tax rates in the EU (15%).
How much does a crypto license in Lithuania cost?
Lithuania has become a new hub for fintech companies targeting international financial markets. Business-oriented regulatory behavior and significantly lower costs for registering, licensing, and maintaining financial institutions make Lithuania attractive to large international financial institutions as well as fintech start-ups.
The cost of registering a company depends on the chosen legal address, the number of company members, and the availability of remote registration. It is also worth considering that you also need to pay for opening an account to deposit the authorized capital and the cost of support when registering the activity of a crypto exchange.
You can see the cost of these services in the table below.
Types of cryptocurrency license
The license to register a cryptocurrency company in Lithuania is mandatory and currently, the country regulates the issue of cryptocurrencies as well as possible. The legislation that regulates this area provides for two main types of official permits for conducting a regulated cryptocurrency business in Lithuania.
A license of a cryptocurrency exchange operator
This type of license covers companies that want to operate as cryptocurrency exchanges. It does not matter what type of transactions the company wants to conduct, the license covers crypto-to-fiat, fiat-to-crypto, and crypto-to-crypto transactions.
A license of a cryptocurrency depository wallet operator
Lithuanian legislature also provides a license that covers companies providing encrypted crypto wallets to their customers.
Even though there are two licenses, most companies that are operating a cryptocurrency exchange will also provide custodian services so obtaining both types is advised. Cryptocurrency exchange operators and crypto wallet operators need to be separated from licensed traditional financial activities. However, licensed financial institutions can serve the fiat payments of crypto-currency companies and their clients and thus create an efficient mechanism for crypto-related fiat payments.
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Advised structure of a crypto exchange company
The structure of your cryptocurrency company is regulated to a certain extent and the requirements are fair and reasonable. To start off, the company must be a limited liability company and does not need the presence of the owner in Lithuania to carry out the process. The company’s capital should be at least 2500 EUR which is pretty low. It has to be at least one owner and a board member. It does need to have an AML officer on board, but they can be a board member. The AML officer is responsible for another important requirement, compliance with the AML/KYC laws. This means making sure all customers are undergoing a KYC procedure and their data is kept for further analysis by the regulator.
Documentation for obtaining a crypto exchange license
All the documents mentioned below must be notarized by a notary public, and an apostille in English will also be required. If these documents are submitted in accordance with the requirements, the regulator will start the procedure for issuing a license for the Lithuanian cryptocurrency.
To obtain Crypto License in Lithuania, investors will need to provide the following:
- valid passport of each founder of the company;
- power of attorney (PoA) form;
- extensive information about business models and licensed types;
- resumes of all founders of the company, so that local institutions can get acquainted with the experience and capabilities of all persons involved in the cryptocurrency industry;
- the address of the website where the services will be offered;
- criminal records (not older than 3 months) for the members of the board of directors, ultimate beneficial owners, and compliance specialists.
The list of documentation is not exhaustive, as additional information may be required by regulatory authorities.
AML/KYC procedures at Lithuanian companies
Client and recipient identification requirements include:
- it should be clear whether the client is acting on his own behalf or is under control;
- identity card of the client’s representative;
- it is necessary to identify the client-individual;
- it is necessary to identify the client-legal entity;
- collect information about the client – the head of the legal entity;
- collect information about the ownership and management structure of the client-legal entity;
- information about the purpose and nature of the client’s business relationship;
- verification of the identity of the client and the recipient on the basis of documents, data, or information obtained from a reliable and independent source;
- constant monitoring of the client’s business relations;
- updating documents, data, or information;
- constant identification of both new and existing customers;
- suspension of a suspicious monetary transaction or transaction;
- appointment of employees responsible for the implementation of measures to prevent money laundering and the financing of criminal activities;
- introduction of internal systems that allow promptly responding to requests from the Financial Crime Investigation Service through secure channels, etc.
Lithuanian crypto exchange company registration process
Registering a crypto company in Lithuania can be an alternative to starting a business in other European countries. This is due to the fact that launching and operating crypto facilities in this state is rightfully considered a fairly affordable and budget solution in comparison with most European countries.
In order to open a Lithuanian company operating as a crypto business, you must:
- Choose the original name of the future company;
- Prepare the necessary documents;
- Register an address in the country;
- Open an account for the company;
- Submit documentation to the relevant government agencies;
- Submit an application to the Anti-Money Laundering Bureau for the subsequent entry of the company into the Lithuanian registers.
How much time does the registration process take?
The average time for consideration of the application by the regulatory body is about 1 month.
Entrepreneurs who intend to start a crypto business and acquire a license for crypto activities in Lithuania must first set up a Limited Liability Company (UAB) with minimum capital. In Lithuania, it’s 2500 EUR, which is more than affordable for crypto businesses.
Then, it will also be necessary to develop the policies necessary to support activities related to virtual currency, implement AML / KYC controls, and appoint a compliance officer. It is recommended to use a third-party service provider to fulfill AML and KYC requirements. Members of the Management Board, as well as the Ultimate Beneficial Owners (UBO) of the company, must meet the reputation requirements.
With company formation
and FNTT registration
Individual procedural rules in accordance with business model
+ basic maintenance
Corporate account for operating
activity and set of corp. documents
|MLRO with local residence + employment and entire maintenance||MLRO with local residence + employment and entire maintenance|
|Set-up fee:||€ 3600||€ 5900||€ 6900||€ 7900||€ 12900|
|Maintenance fee: (monthly)||0€ / month||€55 / month||€135 / month||€1300 / month||€1300 / month|
Taxation of cryptocurrency companies in Lithuania
The main taxes a crypto company in Lithuania will be paying are the following: corporate income tax, value-added tax, and personal income tax.
Any of these taxes may be assessed in certain situations. For example, income tax exemption applies to tokens that can be identified as securities, in accordance with the provisions of the Civil Code. The tax exemption also applies to tokens that are issued for the use of products and services, if payment is made in tokens. This is because tokens used to purchase products or services are considered money transfers, which should not be subject to corporate income tax.
Investors may be required to pay income tax if tokens are recognized as earned income. In such cases, in accordance with Lithuanian law, investors may be subject to personal income tax at the standard rate of 15%.
Lithuanian legal regulations
Lithuania is a very lenient country when it comes to cryptocurrency regulation. It has plenty of rules in place, and even though the control over them is strict, it provides a safe and secure environment for both traders and companies that offer cryptocurrency exchange and custodian services.
The legal code allows the citizens to trade cryptocurrency legally and transparently with a base tax rate of 15%. The same tax rate applies to corporations with licenses on cryptocurrency exchange and wallets. The tax rate is even more lenient for the startups as until your company brings in 300,000 annually, you pay under 5% in corporate gains tax.
With regard to virtual currencies, the Bank of Lithuania has developed the following rules.
1. Regulated financial market participants providing financial services are prohibited from conducting operations and providing services related to virtual currencies.
Which in turn prohibits the participation of credit institutions in the exchange of cryptocurrencies for fiat currencies. In addition, the Bank of Lithuania specifically indicated that credit institutions should also refrain from activities related to investing in cryptocurrencies. The exception is virtual currencies, which are sold as financial instruments in accordance with Lithuanian law
2. Credit institutions are obliged to refrain from mixing financial services and services related to virtual currencies.
Thus, under the actual ban, in particular, fall – services for the use of means of payment provided by credit institutions for accepting virtual
currencies to pay for goods or services (for example, bank cards)
– binding means of payment to accounts intended for the use of virtual currencies.
Is opening a crypto company in Lithuania worth it?
Getting a crypto license in Lithuania and registering a crypto exchange can be a promising option if you are considering doing business with virtual assets in the EU. Getting a crypto license in Lithuania allows companies to offer services related to cryptocurrencies. The country is characterized by favorable conditions for doing crypto business in Europe and a regulated legislative framework, which contributes to the growth in popularity of this jurisdiction.
The country pays great attention to the development of innovations: it adopts new laws, introduces benefits for businessmen, and helps them with documents. In other words, officials and local businesses managed to prepare a favorable environment for attracting investment in start-ups.
Registration of crypto activity in Lithuania is characterized by such advantages as:
- The Republic is considered a recognized European Fintech center;
- favorable conditions for doing crypto business;
- relatively simple requirements that must be met in order to obtain permission for crypto activities;
- you can open a crypto company in Lithuania in a fairly short time;
- the legislation does not put forward requirements for residency of shareholders and directors of the company;
- no requirement to hire local staff.