This form of activities are recommended when you are sure that you are able to implement the business idea on your own, and especially when you are planning to implement economic-commercial activities for a limited period of time. Self-employment is an individual activity which brings income or any other economic benefit to the resident during a continuous period.
Individual activity means:
- independent commercial or production activities of any nature, including business activities under business certificates (manufacture of textiles, repair activities, etc.);
- independent creative work, professional and other similar independent activities, including business activities under business certificates (lawyers, notaries, etc.)
- independent sport activities;
- independent performers’ activities (actors, musicians, etc.)
You may choose between two options:
- become self-employed according to a business certificate;
- become self-employed according to a certificate of self-employment.
|Evaluation criteria||Self-employment according to a business certificate||Self-employment according to a certificate of self-employment|
|Number of participants||A person and a person’s family members, if they are indicated in the business certificate||Sole owner|
|Restrictions of activities||Only the activities specified in the list of types of self-employment activity (which require a business certificate)||All types of economic commercial activities, except those that can only be undertaken by a legal entity|
|Minimum capital amount||There are no requirements regarding the capital.||There are no requirements regarding the capital.|
|Duty to register as a VAT payer||If the turnover exceeds 45 000 Eur||If the turnover exceeds 45 000 Eur|
Note the key differences:
- A business certificate– an advance payment of a fixed income tax is required.
- Self-employment certificate– the income tax is paid upon the end of the tax period (by 1 May).
Obtaining a self-employment certificate
- A self-employment certificate is a document certifying that a person has registered his activities at the local State Tax Inspectorate (hereinafter referred to as the STI) and is entitled to perform the activities indicated in the certificate.
- The application for the issue of a self-employment certificate is submitted not later than on the day of the launch of the activities. The application can be submitted at a STI division, via mail or e-mail. If a person decides to terminate his activities, he must notify the STI within 5 working days before the planned day of termination.
- When independent activities are performed under a self-employment certificate, the income tax is paid from the actual annual income from individual activities. When calculating the taxable income from the earned revenues, it is possible to deduct allowable deductions (costs incurred for earning revenues). When a simplified procedure is applied, a fixed amount can be considered as allowable deductions, for example 30% from all the revenues gained from independent activities. At the end of the year, persons declare their revenues and pay the established taxes. A person performing individual activities under a self-employment certificate must fill in the Income and Expenditure Accounting Register and issue one of the accounting documents: a receipt for the goods (services) bought or sold, an invoice, a VAT invoice, or a cash register receipt. Detailed information is specified in the Rules of Accounting of Residents’ Individual Activities (except for residents holding business certificates).
Individual activity under business certificates
- A business certificate is a document certifying that you have paid a fixed fee for a business certificate and have the right to perform the activities indicated in the business certificate for a certain period of time, to sell the goods you have produced and to render services to residents and legal entities. Business certificates are issued only for certain types of activities.
- To obtain this document, one must address a local division of the State Tax Inspectorate. A business certificate can be issued for the period indicated by the applicant, but not exceeding one calendar year and not shorter than 5 days, except for trade business certificates (trade business certificates can be issued for 1 or several days, or a longer period, but not exceeding 1 calendar year). The accounting of activities performed under a business certificate is very simple. Persons, who do not use a cash register for the accounting of revenues, must fill in the income and expenditure accounting register. Upon the buyer’s request, the seller must issue a sale and purchase receipt.
- A person can perform activities under a business certificate only when he/she is not required to register as a VAT payer or is not registered as a VAT payer.
- A person having obtained a trade business certificate cannot sell goods to another person performing trading activities (the one who has obtained a business certificate, and the one who has registered individual activities), i.e. wholesale trade under a business certificate is not possible.
- A business certificate does not grant the right to engage in licensed activities.
If you undertake an activity according to a certificate of self-employment, you may actually engage in any type of economic commercial activities which meets the criteria of independence, continuity and commercial advantage, except the activities which require incorporation of a legal entity in accordance with legislation, the activities which require permits and licences, also the practice of a lawyer, if in accordance with the Republic of Lithuania Law on the Bar the person does not meet all professional and qualification requirements. Information about licences for the specific types of activity is available under “List of permits”.
Information compiled by: „Enterprise Lithuania“