Attraction of FDIs: the Lithuanian Way Liudas Ramanauskas 14 October 2011, Riga

ESTONIA LATVIA LITHUANIA BELARUS Who we are? Leading regional business law firm with fully integrated offices in Estonia, Latvia, Lithuania and Belarus Established in 1995, today SORAINEN numbers more than 120 lawyers and tax advisers First law firm in the Baltic States and Belarus where a quality management system has been implemented under ISO 9001 standards Serviced more than 7,500 local and international corporate clients and advised on close to 35,000 transactions Vilnius LITHUANIA Riga LATVIA Minsk BELARUS Tallinn ESTONIA

ESTONIA LATVIA LITHUANIA BELARUS SORAINEN was awarded as BALTIC LAW FIRM OF THE YEAR Financial Times & Mergermarket European M&A Awards Dec 2008 London, UK International Financial Law Review IFLR European Awards March 2009 & 2010 London, UK PLC Which lawyer? Law Firm Awards Jan 2009 & May 2010 London, UK International awards 1/2

ESTONIA LATVIA LITHUANIA BELARUS 4 International awards 2/2 Belarus Ministry of Justice Ministrys recognition June 2011 Minsk, Belarus SORAINEN was recognised as BALTIC TAX FIRM OF THE YEAR European Tax Awards are given for the most innovative, international and cross-border tax advice SORAINEN was nominated alongside Big4 audit firms 2010 was the first year when the Baltics were evaluated International Tax Review European Tax Awards May 2010 & 2011 London, UK BEST PROVIDER OF LEGAL SERVICES IN BELARUS SORAINEN is the only law firm from abroad ever awarded by the Belarus Ministry of Justice with this title

ESTONIA LATVIA LITHUANIA BELARUS Our experience Barclays. Full advice in relation to setting up a global technology centre in Vilnius. Drafting and negotiating the Letter of Intent, the Investment Agreement, the grant application and other related documents. It was the first investment agreement during the last 9 years in Lithuania and the first case where incentives under the Invest LT+ Scheme were granted. Western Union. Full advice in relation to setting up an international shared services centre in Vilnius. Advising and representing the client in negotiating the incentive package with the Ministry of Economy and Invest Lithuania. Preparing and negotiating the Letter of Intent, the Investment Agreement and other related documents. Moog Medical Devices. Advising and representing the client in negotiations with the Ministry of Economy and Invest Lithuania over the incentives package and the Letter of Intent for setting up a production and R&D facility in Lithuania. Ideal Invent. Advising and representing the client in negotiations with the Ministry of Economy and Invest Lithuania regarding the Letter of Intent for setting up an IT centre in Lithuania.

ESTONIA LATVIA LITHUANIA BELARUS Why Lithuania? 1/2 Quality labour pool –High education and skills –Knowledge of languages –Loyalty and attitude –Opportunity to train people (cooperation with universities) –Relatively low HR costs Key geographic location in Europe and good infrastructure –Member State of the EU –Cultural familiarity –Good road and rail links –Flight access?

ESTONIA LATVIA LITHUANIA BELARUS Why Lithuania? 2/2 Political and economic situation –Stable politically –Local currency pegged to Euro –Security Investor Support –Financial incentives –Strong Government support –Regulatory / employment flexibility?

ESTONIA LATVIA LITHUANIA BELARUS 8 Protection of foreign investors Bilateral treaties on promotion and protection of investments and avoidance of double taxation The Law on Investments provides for the principles of equal treatment and protection of foreign investors Foreign investors may apply for protection to the International Centre for Settlement of Investment Disputes in Washington (under ICSID Convention)

ESTONIA LATVIA LITHUANIA BELARUS Available incentives Special programmes for promotion of foreign direct investments: –Invest LT+ (incentives up to ca. EUR 1.45 million, exceptions are possible) –Invest LT+ Human Resources (incentives up to ca. EUR 2 million) Investment agreements – for investments of at least: –LTL 20 million (ca. EUR 5.8 million) –LTL 5 million (ca. EUR 1.45 million) in areas with high unemployment EU structural funds (for employee training, development of infrastructure etc.) Tax incentives in free economic zones Possible land rent reduction and land tax exemption by municipalities Financing from the State Labour Exchange to projects in areas with high unemployment Business incubators, industry parks

ESTONIA LATVIA LITHUANIA BELARUS Invest LT+: Requirements for investors Must be a foreign legal entity Should satisfy certain criteria: –Annual turnover amounting to LTL 50 million (ca. EUR 14.5 million) (except for R&D projects) –Operation period of at least 5 years (except for R&D projects) –At least 1 % of annual turnover is invested into R&D (for R&D projects) etc.

ESTONIA LATVIA LITHUANIA BELARUS Invest LT+: Requirements to projects Investment into tangible and intangible assets related to the creation of a new limited liability company or a branch of a foreign undertaking in Lithuania, or expansion of the activities thereof The investment project should satisfy certain criteria: –Amount of investments –Number of jobs to be created –Territory where the project will be implemented etc. Not available for projects in certain sectors of the economy: –Steel, coal sectors –Aid contingent upon the use of domestic over imported goods –Related to wholesale and retail etc. Project value should not exceed EUR 50 million Project should be completed within 36 months (in certain cases the term may be extended) Invest LT+:

ESTONIA LATVIA LITHUANIA BELARUS Invest LT+: Amount of incentives General rule: –20% from the investments into tangible and intangible assets Depending on the project, this amount may be increased Employment costs are not calculated as investments or –10% (20% in R&D projects) from the employment costs incurred in respect of the newly created working places within the period of 2 years (in case of services projects) Depending on the project, this amount may be increased Maximum amount of grants – LTL 5 million (ca EUR 1.45 million, exceptions are possible)

ESTONIA LATVIA LITHUANIA BELARUS Invest LT+: Costs eligible for financing Wage costs (main salary and other disbursements related to the employment (before tax), social security contributions) of employees employed upon the implementation of the investment project (max. for the first 2 years) Costs of construction, reconstruction, capital repairs of buildings / premises, installation of engineering networks Acquisition of equipment, mechanisms, machinery and devices Lease of buildings, premises, land (up to EUR 200,000) General training (up to LTL 15,000 (ca. EUR 4,350) per employee) Etc.

ESTONIA LATVIA LITHUANIA BELARUS Invest LT+: Obligations If applied for incentives, certain obligations have to be assumed: –Not to launch the project before the submission of the grant application (with certain exceptions) –Retain employees for 5 years after the completion of the investment project –Assets should be new and included into the applicants accounting books –Assets may not be removed from the territory of Lithuania for at least 5 years –Minimum salary levels –Relevant reporting –Etc.

ESTONIA LATVIA LITHUANIA BELARUS Invest LT+ Human Resources Eligible expenses – general training: –Wages of employees conducting training (internal lecturers) –Purchase of training services –Acquisition of training resources –Indirect project expenses related to the administration of the project etc. Maximum amount – EUR 2 million per project / EUR 4,345 per person Maximum duration of the project – 36 months

ESTONIA LATVIA LITHUANIA BELARUS Invest LT+: Procedure Initial questionnaire to Invest Lithuania Letter of Intent with the Ministry of Economy Investment Agreement with the Government (optional), provided that the amount of investments exceeds LTL 20 million (~ EUR 5.8 million) (LTL 5 million (~ EUR 1.45 million) in areas with high unemployment) Application to the Lithuanian Business Support Agency Ultimate decision – the Ministry of Economy Trilateral Financing Agreement

Estonia Pärnu mnt Tallinn, Estonia phone fax Latvia Kr. Valdemāra iela 21 LV-1010 Riga, Latvia phone fax Lithuania Jogailos 4 LT Vilnius, Lithuania phone fax Belarus ul Nemiga Minsk, Belarus phone fax ESTONIA LATVIA LITHUANIA BELARUS Contacts Thank You! Liudas Ramanauskas Senior Associate mobile