Minister of Economy: Lithuania’s FEZs among the most attractive in the region

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2017 12 20

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The Seimas adopted legislative amendments to enable the free economic zones (FEZ) established in Lithuania to be among the most competitive in Europe. According to Minister of Economy Virginijus Sinkevičius who initiated the amendments the new procedures will allow attracting more job-creating investors to the regions.

‘Today, the legal regulation of FEZ is among the most favourable in the entire region of Central and Eastern Europe, which means that the country’s regions with the FEZs established have more opportunities to more actively compete with other countries in the region, including Poland, the Czech Republic, Slovakia and others, for foreign direct investment projects. New jobs and orders for local businesses could significantly contribute to the economic vitality of the regions’, says Minister of Economy Virginijus Sinkevičius.

The plan is to apply 0 percent income tax rate to the companies operating in the FEZ for the first 10 years (currently such an exemption applies for the first 6 years), while for the subsequent 6 years the income tax rate would be 7.5 percent. Furthermore, a limitation on the list of business activities for manufacturing companies will no longer be applied and the newly established companies in the FEZ will be able to enjoy FEZ exemptions.

The amendments to the Law on the Fundamentals of Free Economic Zones and the laws on individual free economic zones also allow the companies established there to lease land plots for 99 years. Until now, the law did not guarantee equal competitive conditions for all the FEZs; Kaunas and Klaipėda’s FEZs offer land for lease for 99 years while other FEZs —for 49 years. The amendments also include the possibility of extending the activities of all the FEZs by law (previously this condition was only valid in the cases of the Kaunas and Klaipėda’s FEZs).

Following the completion of the land lease period, a company will have the right to lease the plot directly from the state without auction instead of subleasing it from the FEZ management company. These changes would ensure continuity of the FEZ companies’ business not to be discontinued after the lease period ends.

‘Support for biotechnology and innovative industry is the Government’s priority. The FEZ regulation that was in place until now did not create favourable conditions for FEZs to attract investors from the pharmaceutical sector. For this reason, the regulation of prohibited activities in FEZ was changed; it is now allowed to establish companies manufacturing medical products that contain narcotic or psychotropic substances regulated in compliance with the procedure established by the Minister of Health’, Mr Sinkevičius said.

The amendments are expected to encourage the FEZs to attract pharmaceutical companies and further develop the country’s biotechnology industry.

The draft amendment to the Law on FEZ is available on: https://e-seimas.lrs.lt/portal/legalAct/lt/TAP/fba597d0e17b11e7b4d1bdd5f1a9ff0e