One of the ways to invest on the Lithuanian market is by opening a special purpose vehicle (SPV). As its name suggests, this is a type of business incorporated by investors with the intention of achieving a specific business purpose.
When registering the SPV, businessmen will transfer a part of their assets, held in other companies, in the SPV, and these assets will be used for the purpose for which the company was set up. Investors will often prefer to set up an SPV company in Lithuania so that they can reduce the risks associated with the respective project, thus isolating the investment from other companies/investments.
Our consultants in company formation in Lithuania can offer information on the basic requirements for registering the SPV and can also provide step-to-step assistance during its incorporation.
Table of Contents
Incorporation method
The process of Lithuania company formation for an SPV company follows the standard registration steps available for any other type of legal entity regulated under the commercial law. Thus, in order to set up an SPV company in Lithuania, investors must sign the statutory documents, prepare the set of papers required by the local institutions, address the responsible authorities, obtain specific approvals, etc.
Many of the obligations that appear for an SPV company are stipulated under the rules of the Lithuanian Civil Code, just as it is the case of commercial companies, but the SPV must abide by many other rules of law that do not regulate the activity of commercial entities.
Legal entities suitable for a Lithuanian SPV
Foreign businessmen can set up an SPV company in Lithuania under one of the following business forms:
- the public limited liability company;
- the private limited liability company.
Legislation
The SPV must abide by several rules of law, one of which is the Civil Code, as mentioned above. The Law on Companies also governs over the incorporation and the functioning of the SPV, as the company is incorporated as one of the 2 legal entities mentioned earlier. A specific rule of law, addressed to SPV operations, is the Law on Securitization and Covered Bonds.
Among its many provisions, the latter law provides the conditions for the registration, reorganization, management, liquidation of SPVs. Some of the highlights of this structure are presented below:
- accounting transfers for an SPV must be done as per the rules of the IFRS 9 (International Financial Reporting Standards);
- assets are introduced in an SPV as per the rules of the Civil Code, Section 5.3.1, which require the parties to sign a sale-purchase agreement;
- the transfer of assets requires guarantees – there are 2 types of guarantees recognized in Lithuania, namely bank guarantees and guarantees issued by other legal entities;
- it is also required to publish an information document (instead of a prospectus) in cases when the value of the SPV securities is above EUR 100,000 and below EUR 5 million over a period of 1 financial year (12 months).
Tax considerations
Investors who want to open a company in Lithuania as an SPV must know that there are several tax obligations arising from this structure. According to the Lithuanian Ministry of Finance, the SPV can be liable to the payment of the corporate income tax and of the value added tax – the latter applies only in certain circumstances.
It must be noted that the provisions of the treaties for the avoidance of double taxation apply to the SPV company. According to the tax rules established in these documents, withholding taxes are generally charged at a rate of 10%, but certain agreements provide a withholding tax of 0%.
We invite businessmen who want to open a Lithuanian company as an SPV to address us for complete information on the registration, taxation and accounting formalities applicable to this structure. Our team of consultants in company registration in Lithuania remains at your service for any inquiry you may have concerning SPVs and securitization law.