Are you cooperating with Lithuania but don’t want to open a branch there? Want to pay by results, not hours? In this case, an agency contract with a self-employed person is exactly what you need. In this article, we explain how to work with a Lithuanian sole trader in a legally correct way – safely, legally and without risks for retraining.
More and more companies in Latvia, especially in the B2B sales, marketing and foreign trade sectors, cooperate with Lithuanian natural persons registered as self-employed – individuali veikla. This is convenient and flexible: there is no need to open an office, there is no need to take on the responsibilities of an employer, and it is possible to build a cooperation where the performer is responsible for his/her own results.
A self-employed person in Lithuania is a natural person who is registered with the Lithuanian State Tax Inspectorate and pays taxes himself. He works independently, freely sets his own working hours and performs his duties in accordance with the contract with the client.
When do I need an agency agreement? If:
– you don’t want to take on a permanent post,
– you only want to pay for results,
– you expect the partner to attract customers and act on your behalf,
then an agency agreement is the right solution.
Unlike a service contract, an agent acts on its own behalf but in the interests of the client. This is particularly effective in attracting customers or expanding the market.
Key elements of the contract
Subject of the contract:
The Agentundertakes, on its own behalf but in the interests of the Customer, to attract customers, promote the sale of products and assist in the conclusion of sales contracts.
Remuneration:
– Payment as a percentage of paid orders;
– Regular payout period (monthly or quarterly);
– Payment only for results actually achieved.
Rights and obligations:
– The agent works independently, setting his own working hours and methods;
– No right to enter into obligations on behalf of the company without a power of attorney.
Taxes:
The agent pays its own taxes in accordance with Lithuanian law. The Customer is not a tax agent.
Overview of work done:
Every month the agent provides a report with a list of clients and the status of transactions.
Risks and their prevention
| Risks | How to avoid |
| Reclassification of a relationship as an employment contract | Don’t pay a fixed salary, don’t impose a timetable |
| Tax disputes | Make sure the agent is registered as a sole trader |
| Intellectual property disputes | Specify in the contract who owns the material created |
Practical ideas for formulations:
“The agent receives 7% of the invoices paid for the clients he or she has referred.”
“The agent shall act at his own risk, choosing his own hours and method of work.”
“Every month, the agent submits a report on the clients attracted and the progress of the transactions.”
Conclusion
An agency contract with a self-employed person in Lithuania is an excellent way to expand your business in the Baltic region without losing flexibility and while complying with regulatory requirements.
If you would like a sample agency agreement or advice on cooperation models with Lithuania, Latvia or Estonia, please contact us. HR Line EU will help you to create a secure and understandable cooperation structure.
