Klaipėda SEZ: tax benefits of half a billion for the city and the state

During the last 10 years, investors operating in the Klaipėda SEZ paid 66 million. EUR of personal income tax (PIT) – the majority of these funds went specifically to the budget of the port city. During this period, LEZ investors paid another 500 million. EUR VAT and “Sodra” taxes, which went to the state and social security budgets.

In 2022 alone – the last year for which detailed data is currently available – Klaipėda SEZ investors paid 12.9 million. EUR GPM. Since the majority of the employees of the Klaipėda SEZ are Klaipėda residents, the majority of this tax went to the budget of the Klaipėda City Municipality.

In addition, in 2022 alone Klaipėda SEZ investors paid 80 million to the state budget. EUR value added tax and another 14 million. Eur Sodra taxes. And the entire tax contribution of Klaipėda SEZ companies to the city, state and social security budgets over the last 10 years amounted to almost 567 million. Eur.

For comparison, the total state aid to Klaipėda SEZ companies during the last decade amounted to 53 million. Eur. In other words, the direct tax value of the investors’ activity alone exceeded the state support by more than 10 times during this period. And in 2022 alone, Klaipėda SEZ investors paid twice as much tax as they received support in the last decade.

According to Eimantas Kiudulas, head of the Klaipėda SEZ, free economic zones are an excellent example of how state and city investments in the creation of businesses and new jobs pay off several times if such projects are implemented professionally. According to him, there is another interesting detail hidden in the Klaipėda SEZ calculations – the consistently improving ratio of received support and paid taxes. For example, in 2016 SEZ companies paid 32 mln. EUR taxes and received five times less, ie 6 million. EUR state aid. in 2021 this ratio already reached 8 times, and in 2022 – even 13 times. In other words, even if the state continues to allocate funds and subsidies to SEZ investors, the “payback” of these investments in the form of taxes only improves.

“Large, growing taxes that exceed state support ten times over prove that the establishment and support of free zones was the right choice for Lithuania. On the other hand, tax incentives around the world have been no longer a priority for investors for some time – they are primarily looking for talent, expertise, infrastructure and the business community. Lithuania is no longer a country of cheap labor, and the fact that investors keep choosing to create and grow value here is a great achievement of the state, our city and every Klaipėda resident”, comments E. Kiudulas.

The statements about the labor price factor are also illustrated by the latest detailed salary statistics, according to which the average salaries in the enterprises of SEZ investors in 2022. were 26% higher than in Klaipėda county as a whole and 17% higher than among the manufacturing companies of the county. In addition, the average wages of Klaipėda SEZ investors were even several euros higher than the overall average in Vilnius.

E. Kiudulas also draws attention to the fact that the discussed figures only mention the direct taxes of SEZ investors, although the real influence of the territory’s business community on the economy and the state is even greater. For example, in 2022 alone SEZ investors bought goods and services in the Lithuanian market for more than 500 million. EUR, and during the last decade – even for 2.7 billion. Eur. All this translates into orders, wages and taxes paid to hundreds of other businesses in the coastal region and across the country, suppliers of various goods and services.

“The ongoing transformation of the Klaipėda SEZ from a traditional production area to an ecosystem of research, product development, innovation and high added value brings obvious results for the city and the state, but the great challenge of this development is the further development, attraction and retention of talent. Over the past decade, several veterans of the SEZ have started innovative activities, we have attracted several companies with high added value, but it is the supply of talent and the quality of life in Klaipėda that will determine whether we will be able to maintain a similar pace in the coming decade,” says E. Kiudulas, emphasizing that Klaipėda’s Both foreign and Lithuanian capital investors operate in the SEZ.

Reduces the value added gap

Attracting new investments continues to be critically important for the country’s development – Lithuania’s economy is still 2-3 times behind the leading EU countries in terms of gross domestic product created by one employee and wages. Therefore, free economic zones, which help to attract industries with higher added value than the overall national average, are important in order to reduce this gap as soon as possible, says Marius Stasiukaitis, head of strategy at the foreign direct investment development agency “Invest in Lithuania”.

“Klaipėda SEZ is one of the longest and most successfully operating industrial areas in Lithuania, where industrial businesses based on high added value are concentrated. The chosen direction to develop an ecosystem based on advanced production competences and innovations is also important for the overall competitiveness of Lithuania. Competing on low costs alone is a path that leads nowhere. In the region of Central and Eastern Europe, there is not one country that can offer significantly lower costs than Lithuania.

Klaipėda’s strategic position is also important, due to which this region has a great potential to be one of Lithuania’s green technology centers. This is determined by both the strategic position of the seaport and the renewable energy development potential of the Baltic Sea. However, this requires decisive steps by both the state and the region – a clear vision and strategy of how we plan to become a center of green competences. The country’s general advantages alone – infrastructure, talent or business environment – will not be enough to attract innovative, strategic companies developing and producing green technologies”, comments the strategy manager of “Invest in Lithuania”.