EMI License in Lithuania

Requirements to get the Electronic Money License in Lithuania

The Bank of Lithuania has set explicit transparent requirements, that can be found within the EMI law text directly. Any applicant should make their best effort to fulfill these criteria before carrying out an application for the Electronic Money Institution license in Lithuania.

Documents to prepare for the application

In the first place, it is important to keep in mind that the EMI license can only be granted to a company registered in Lithuania.

Incorporating a legal entity in Lithuania is then necessary and the documents to proceed are as follows:

• Certified copy of the passport of all the beneficial owners;
• Certified proof of address of all the beneficial owners;
• Detailed business plan (also required at later stages);
• Renting of physical office space with a legal address (can’t be an empty room);
• A minimum share capital deposit of 2.500 EUR (this amount will have to be raised to 350,000 EUR for the license application).

As the company is registered under the UAB form (“Uždaroji Akcinė Bendrovė”, a Limited Liability Company), the application to the Bank of Lithuania for the Electronic Money Institution license can be carried out as soon as the project has prepared and gathered the necessary documents:

• Articles of Association of the UAB company in Lithuania;
• Detailed assessment and schemes of the IT infrastructures of the operation;
• In addendum to the business plan: financial forecasts for the first three years and a detailed organizational chart;
• Raising the authorized capital to 350,000 EUR (if not done at the incorporation stage);
• A set of documents covering different aspects of clients’ protection: safeguarding of funds, monitoring and handling of security incidents, professional indemnity insurance, etc;
• A set of documents describing good business practices: internal control mechanisms, governance, business continuity plan, etc;
• A set of documents pertaining to Anti-Money Laundering and KYC due diligence (see next section);
• Contract with an independent audit firm or equivalent;
• Full profile of the directors and managers of the company: ID, resume, proof of non-criminal record, reference letters, and anything relevant to their experience and professional background.

AML/KYC requirements

The Lithuanian EMI law makes explicit reference to the Law of the Republic of Lithuania on Prevention of Money Laundering and Terrorist Financing and to the Regulation (EU) No 2015/847 of the European Parliament and of the Council of 20 May 2015. In simpler terms: Lithuania applies the EU regulations on Anti Money-Laundering and further expends the requirements by its own domestic law.

A licensed EMI is liable to identify all of its customers at the beginning of the business relationship. Additional identification is mandatory if the customer conducts operations or transactions of above a certain amount (depending on the nature of the operation and defined in Chapter 3 Article 9 of the Lithuanian AML law).

Due diligence must be conducted proportionally to the level of risk and nature of the customer and business relationship. Lithuanian law distinguishes Simplified Due Diligence from regular Due Diligence. Articles 10 and 11 of the Lithuanian AML law define the classification to rule by, however, it is the company’s responsibility to implement workable risk assessment matrices and to apply the right level of due diligence in its systems. Usually, a proper KYC software provider is a great assistance for that purpose.

Electronic Money Institutions are liable to report transactions to the Financial Crime Investigation Service (FCIS), the financial intelligence unit of the Lithuanian Ministry of Interior. Naturally, this implies constant monitoring of the customers’ transactions and direct contact with the teams of the FCIS. The collected information from the monitoring activity of the EMI must be kept for 10 years. Every document pertaining to clients must be kept for 10 years after the termination of their business relationship (if it happens).

The transactions that must be reported are suspicious operations, with doubt or certainty regarding money laundering or financing of terrorism, as well as any transaction exceeding 15,000 EUR.

Share capital requirements

The Bank of Lithuania expects every applicant and holder of an Electronic Money Institution license to declare and hold a minimum share capital of 350,000 EUR. The authorized capital should never fall below this sum.

It is worth noting that this amount of 350,000 EUR is common among all the Electronic Money Institution frameworks of the European Union, existing and upcoming. This is therefore an implicit requirement for any company willing to engage in stablecoin (EMT or ART, under the new MiCA Regulation in Europe) issuance or service provision in the future.

The process to apply for the Electronic Money Institution license in Lithuania

After preparing the documents and systems and building a team as required by law, the board of the project can decide to start the application process. There are a few milestones to keep in mind when looking for how to get an EMI license in Lithuania. Having a roadmap ready helps significantly in organizing the project and further operations. Our team can assist in wide measure with this matter.

In this subsection, you shall find generalistic information about the process of getting an EMI license in Lithuania.

Registration of a Lithuanian company

The law explicitly requires candidates for the Electronic Money Institution license to have their head office and legal entity based in the Republic of Lithuania. Article 11§3 of the EMI law clearly states the following: “An electronic money institution shall be required to have a head office in the Republic of Lithuania“.

The preferred company form to apply for the EMI license is the Limited Liability Company or “UAB” in Lithuania. This company structure has a minimum share capital of 2,500 EUR required at incorporation. It shall be duly noted by project managers that the share capital requirement for the license is 350,000 EUR. Therefore, it is advised to start with this amount of share capital.

The incorporation of a Lithuanian limited company is simple. It takes up to two business weeks and only requires certified documents for the ultimate beneficial owners of the company. A short business plan shall accompany the incorporation file, however, as for the share capital, it is advised to immediately proceed with the detailed business plan that will be required in later stages.

A Lithuanian company can be opened remotely without the necessity to travel to Lithuania.

Application for the EMI license

The first step in the licensing process is to book a pre-application meeting with the Bank of Lithuania. This way, the project can be exposed and a preliminary response can be given in order to further guide the project’s team with the application process.

To apply for the EMI license in Lithuania, the company must disburse a license application fee of 1,463 EUR. The application process will not start until this fee has been paid.

The company can now file the application for assessment, including all the required documents. After review, the Bank of Lithuania will answer with a first round of comments.

The company is then asked to provide a response to the comments of the Bank of Lithuania. If changes shall be made to the operations and documents, they should be implemented in the shortest delays. After that, the response and changes are carried out to the Bank of Lithuania for further assessment. This leads to a meeting between the applicant and the regulator, in the premises of the Bank of Lithuania.

The supervisory authorities for the EMI license then give a second round of comments. These comments must be implemented in the final version of the business project. This version will be presented to the Bank of Lithuania for a final decision. Any change brought into this final version must be commented on for the regulators to see.

Finally, if the final version of the business project is deemed to comply with all the requirements of the Electronic Money Institution framework, the Bank of Lithuania grants a license to the project.

Follow-up with the regulatory authorities

The license is provided on an indefinite term. One of the duties of the licensed company is to establish regular contact with the Bank of Lithuania and with the Financial Crime Investigation Service (for AML-CFT and KYC duties).

The regulator has the legal right and duty to inspect and sanction Electronic Money Institutions if they consider it necessary, at any time.

In the same fashion, the Bank of Lithuania shall update the licensed entities about any development in law and any important notice from the side of the State of Lithuania.

Obligations of an Electronic Money Institution in Lithuania

Once your project has successfully secured the Electronic Money Institution license in Lithuania, a certain number of legal and corporate obligations apply for the remainder of its existence. It is important to acknowledge these obligations and to set up the human and technical resources to answer them.

Compliance with the law

Provided the nature of the activity of Electronic Money Institutions, the Lithuanian EMI law is set in order to protect customers’ funds and interests, as well as the civil society (by the enforcement of AML-CFT rules and subsequent due diligence procedures by the EMI).

First, every single requirement laid out for the application process holds true once the license is granted. These requirements must be observed at all times by the licensed company, according to Article 13§10 of the EMI law.

It stands repeating that the minimum share capital of 350,000 EUR must stay at or over this amount at all times.

State fees

The license is granted for an indefinite period of time and there is no state fee to disburse on a yearly basis.

Accounting and financial statements

As stated in Article 28 of the EMI law: “An electronic money institution must keep accounts in accordance with the Law of the Republic of Lithuania on Accounting.”

The EMI’s accounting systems, methods, and procedures will be analyzed by the Bank of Lithuania as part of the application process. They shall be in line with the specificity of the activities operated by the company and with, as described in law: “correctness of segregation of electronic money issuance, provision of payment services and other business carried out“.

The production of yearly financial statements is mandatory in Lithuania.

Audit requirements

Electronic Money Institutions’ financial statements must be audited by an audit firm or certified auditor meeting the requirements of the Law on Financial Institutions and the Law of the Republic of Lithuania on the Audit of Financial Statements.

An EMI in Lithuania is also held responsible for having its own internal audit function.

Taxation of Electronic Money Institutions in Lithuania

As the Electronic Money Institution license requires companies to operate from the Republic of Lithuania, the matter of taxes is important to acknowledge.

Corporate income tax

Electronic Money Institutions in Lithuania are subject to the standard corporate income tax rate of 15% on the totality of the profits realized by the company (in and out of Lithuania).

Personal income tax for domestic workers

In case your EMI hires domestic personnel in Lithuania, the personal income tax rate applicable is 20% for yearly income below 101,094 EUR and 32% for any amount exceeding this part (with the exception of the initial 101,094 EUR, staying in the 20% rate bracket).

VAT on financial services

The standard VAT rate in Lithuania is 21%. Companies in Lithuania are liable to get a VAT number.

However, financial services are not subject to VAT in Lithuania.