Escrow holds a buyer’s money with a neutral party until agreed conditions are met. A split payment divides one incoming payment among several recipients, such as a seller, a platform fee and a tax amount. They solve different problems, and many B2B deals, marketplaces and cross-border contracts use both. This guide explains how each works, how Lithuanian and EU rules affect them, and which account setup supports them.

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TL;DR

Escrow protects against non-performance: money is pre-funded, held by a third party and released only when contract conditions are satisfied.
Split payments protect against messy settlement: one payment is divided automatically between recipients, for example provider, platform commission and VAT.
Regulation matters. Whoever holds or controls client funds in the EU generally needs to be a licensed payment or e-money institution with safeguarded funds, or to qualify for a narrow exclusion.
Account structure is the practical lever. Dedicated IBANs, separate accounts per deal or purpose, and role-based access make both models easier to run and audit.
Costs are in the details. Escrow services are normally paid, and per-transfer fees multiply quickly when one payment is split many ways.

What escrow means in a business payment
What split payments are
Escrow vs. split payments: the differences that matter
When businesses use each model
Regulation: who may hold other people’s money
Fees, timing and disputes: what to expect
Our perspective: structure the accounts first
Securing the systems that handle the money
Setting up escrow-style and split flows with Demivolt
A checklist before you launch
FAQ
Sources

What escrow means in a business payment

In Lithuanian practice, escrow is usually set up as a conditional deposit agreement (sąlyginio deponavimo sutartis). According to the Lithuanian law firm Getlex, this is a written agreement between the parties and an escrow agent. It states how the money is paid into the agent’s account and the conditions under which it is released to one party or returned to the payer. Getlex also notes that the service is normally paid.

The logic is simple. Neither side has to trust the other with the full amount up front:

The buyer and seller sign the contract and the escrow terms.
The buyer pays the agreed amount to the escrow account.
The agent confirms that the money has arrived.
The seller performs: delivers goods, completes a milestone, transfers an asset.
The conditions are checked, and the funds are released to the seller or returned to the buyer.

Getlex’s legal view is that escrow lowers non-performance risk because a neutral third party holds pre-funded money and pays out only after the contractual conditions are met. The conditions are the heart of the arrangement. A vague trigger such as “satisfactory delivery” invites disputes. A precise one, such as a signed acceptance certificate, a carrier’s proof of delivery or a notarized transfer, does not.

Escrow in cross-border trade

Escrow is also a standard tool when an exporter does not want to ship before being paid and a buyer does not want to pay before receiving goods. The U.S. Department of Commerce describes how an escrow service holds advance-payment funds until specified conditions are met. After payment is verified, the exporter ships, the buyer gets a set inspection period, and the funds are released after acceptance or when that period expires.

The inspection period is the part many contracts forget. Without it, the buyer can stall acceptance indefinitely, or the seller can claim release the moment goods leave the warehouse. Define the number of days, what counts as a valid rejection and who decides when the buyer and seller disagree.

What split payments are

A split payment sends parts of one payment to different destinations. In a marketplace, Sharetribe explains, the usual pattern is that the provider receives the amount less the marketplace commission, while the marketplace collects its fee from the provider, the customer or both.

Typical business uses include:

Marketplaces and platforms: a customer pays €1,000, the seller receives the net amount and the platform keeps its commission.
Agencies and resellers: a client pays one invoice and the referral partner’s share is routed out automatically.
Multi-supplier orders: one customer payment covers goods from several suppliers.
Tax splits: the net price goes to the supplier and the VAT amount goes to a separate account.

The last case is a regulated mechanism in some EU countries, not just a commercial choice, and it is worth keeping apart from the others.

VAT split payment is a different thing

The European Commission’s 2017 study describes a VAT split-payment mechanism as dividing the taxable base and the VAT amount, potentially through two payments. Its aim is to reduce missing-trader fraud by denying suppliers access to the VAT before it is declared. The same study found no strong evidence that the broad benefits outweigh the costs, and it flagged higher administrative costs, system complexity and cash-flow effects for businesses as significant challenges.

For a business in Lithuania, the practical point is this: a commercial split (commission, supplier shares) is something you design in your contracts and payment flows. A statutory VAT split is something a tax authority imposes. Do not assume one setup covers the other.

Escrow vs. split payments: the differences that matter

Question	Escrow	Split payment
Main purpose	Reduce the risk that one side does not perform	Divide one payment among several recipients
Who holds the money	A neutral third party until conditions are met	Usually passes through a payment account and is distributed immediately or on a schedule
Trigger for payout	Contract conditions: delivery, acceptance, milestone	The payment itself, or a set rule such as a percentage
Typical users	Large B2B contracts, asset deals, cross-border sales with new counterparties	Marketplaces, platforms, agencies, multi-supplier orders
Main risk	Disputes over whether conditions were met	Wrong amounts, reconciliation errors, unclear fee allocation
Regulatory sensitivity	Holding client funds	Receiving and distributing funds for others

Using them together

The two models combine well. A platform can accept the buyer’s payment into a held balance (the escrow stage). When delivery is confirmed, it releases the funds and splits them: the seller’s net amount, the platform commission and any separate tax or partner shares. The buyer gets protection, the seller gets a guaranteed pre-funded order, and the platform gets automatic settlement.

The more complex the combination, the more important the underlying account structure and the licence of whoever holds the funds.

When businesses use each model

Escrow fits when:

the counterparty is new or in another jurisdiction;
the deal value is high relative to your usual transactions;
delivery is staged, for example custom manufacturing, software development or equipment installation;
the buyer must verify something before paying out.

Split payments fit when:

you pay several parties from one customer payment on a regular basis;
your platform earns a commission on each transaction;
partners or advisors earn a share of client revenue;
you want separate treatment of tax, fees and net revenue for bookkeeping.

Neither is needed when you trade repeatedly with trusted partners on standard credit terms and a clear invoicing process. Then ordinary SEPA or SWIFT transfers with good payment risk management are simpler. Our article on payment risk management for businesses in Lithuania covers the preventive controls that come before any escrow arrangement.

Regulation: who may hold other people’s money

This is the part that decides whether a setup is lawful, not just convenient.

Safeguarding of client funds

The Bank of Lithuania states that payment and e-money institutions must safeguard client funds in one of three ways: in a separate account at a credit institution in Lithuania or another EU Member State, in specified secure, liquid, low-risk assets, or through an insurance policy or guarantee. The principle is that client money is kept apart from the institution’s own money.

The EU legal base is PSD2, which sets the framework for payment services, including the licensing and supervision of payment institutions. The European Commission’s 2023 PSD3 proposal keeps the same core idea: safeguarding rules stay based on separating user funds from the institution’s own funds. It also names concentration risk in safeguarded funds as an important risk to address.

The commercial agent exclusion is narrow

PSD2 excludes commercial agents who act for both payer and payee only if they never possess or control client funds. A platform that receives the buyer’s money and then pays the seller is, in most designs, controlling funds. Treat that as a regulated activity unless a lawyer confirms otherwise. If you are building a marketplace, the safest route is to route the money through a licensed institution rather than through your own operating account.

What enforcement looks like

The Bank of Lithuania has taken real action on weak safeguarding:

On 25 November 2024 it announced that it had revoked the licence of UAB Foxpay. It said the company failed to maintain adequate segregation, reconciliation and safeguarding controls and on some dates held less safeguarded client money than required. It also cited inadequate AML monitoring, beneficiary identification and conflict-of-interest controls.
In 2019 it reported that SatchelPay was fined €23,000 for holding client funds in accounts that were not permitted safeguarding accounts under Lithuanian e-money rules.

The lesson for a business using such a provider: check the licence, ask where client money is held, and keep your own records so you can show what was yours and what was held for others.

VAT timing on advance payments

Escrow and prepayment structures often involve money moving before goods or services are supplied. Lithuanian VAT guidance states that where goods or services are paid fully or partly before supply and the supply takes place no earlier than 12 months after the transaction, the VAT obligation arises on receipt of the advance payment. For earlier supply, the taxable person may choose to treat the advance as the chargeable event. Ask your accountant how this applies to funds that sit in escrow and when you treat them as received.

Invoicing follows its own timeline. According to the State Tax Inspectorate, a taxable person generally must document completed supplies with a VAT invoice. Ordinary supplies are invoiced immediately, while specified intra-EU supplies and reverse-charge services have later monthly deadlines. Build invoice issuance into the release conditions so that the paperwork and the payout stay in step.

Fees, timing and disputes: what to expect

Escrow fees are set by the agent and the agreement, not by a public tariff. Getlex notes that the service is normally paid, so ask for the fee basis (flat or percentage), who bears it and whether it changes if the deal is cancelled. Settlement time depends on the rail used to fund and release the escrow, so agree on working-day limits in writing rather than assuming them.

Split payments multiply transfer counts. If one customer payment is divided into four outgoing transfers, you pay four per-transfer fees. That is where transparent pricing becomes a design input. These are the published Demivolt rates for the payment rails that most split and escrow flows use:

Item	Fee
Account opening	0
Account verification	0
Dedicated Client Manager	0
Monthly maintenance	0
Account closure	0
Internal transfers between Demivolt accounts	0
SEPA In	0 €
SEPA Out	0.40 € per transfer
SWIFT In	25.00 €
SWIFT Out	30.00 €

You can model your own split volumes with the SEPA fee calculator.

A simple worked example: a platform receives one €2,000 SEPA payment and pays out three SEPA transfers, to the seller, a logistics partner and an advisor. Incoming SEPA costs 0 €, and the three outgoing transfers cost 3 × 0.40 € = 1.20 €. Routing a part of that to a non-euro destination through SWIFT Out would add 30.00 € for that leg, so it is worth settling in euros where the counterparty allows.

Dispute steps to write into the agreement

A good escrow or split arrangement answers these questions before money moves:

What exactly triggers release, and who confirms it?
How many days does the buyer have to inspect and reject?
What evidence does a rejection require?
Who decides if the parties disagree: a named mediator, an arbitration clause, a court?
If the deal fails, are funds returned in full, or are fees deducted?
How are partial deliveries and partial refunds split between recipients?

For split payments, add one more: when a customer is refunded, which recipient bears the loss, and how is the commission reversed?

Our perspective: structure the accounts first

At Demivolt, we see the same pattern in cross-border and platform businesses. The legal contract gets attention, while the account structure behind it is improvised. Then a payout goes to the wrong recipient, a reconciliation takes days, or an auditor asks where client money sat on a given date.

Our view is that three habits remove most of the risk:

Separate money by purpose. Keep operating funds, tax amounts and funds held for third parties in different accounts, each with its own IBAN. A multi-account structure turns “whose money is this?” into a question the ledger answers.
Limit who can move it. Role-based user management lets one person prepare a payout and another approve it. In escrow-style flows, that approval step is the control.
Use a regulated provider with segregated client funds. Our client money is held in segregated accounts, in line with the EU framework described above. That is the standard your own clients and counterparties should expect from anyone in the payment chain.

We also recommend treating any structure in which your company receives funds on behalf of others as a legal question first. If you are unsure whether your design is a regulated activity, get written advice before you launch. Our compliance team can explain how our own onboarding and risk-based checks work, so you know what to prepare.

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Securing the systems that handle the money

Payout logic is only as safe as the portal or dashboard that triggers it. If clients, suppliers or partners log in to approve releases or view balances, their access needs the same discipline as the funds. A client portal security checklist based on NIST and CISA guidance is a practical way to review authentication, access rights and monitoring before you go live. Our guide to card fraud prevention for businesses in Lithuania covers the card side of the same discipline.

Setting up escrow-style and split flows with Demivolt

Demivolt is a regulated European fintech platform offering business accounts with dedicated IBANs, multi-account structures and role-based access, plus SEPA and SWIFT payments with published fees and segregated client funds. For companies that need to separate customer money, partner shares and operating cash, that combination gives a clear base for the flows described above. Account opening, verification, monthly maintenance and internal transfers between Demivolt accounts cost 0.

If your model involves partners earning a share, see our partner, agency and white-label models. If you are building a platform that needs payments embedded in your own product, look at our Banking-as-a-Service offer. To discuss how your escrow or split flow would map onto accounts and payment rails, contact us through our website and we will walk through it with you. Open banking connections can add to the picture, as described in our guide to open banking integration in Lithuania.

A checklist before you launch

Define the model. Is it escrow, a commercial split, a VAT split or a mix?
Identify who holds the funds at each stage, and confirm that party’s licence with the Bank of Lithuania or the relevant EU authority.
Write precise release conditions and an inspection period.
Map every transfer and its fee, then run your expected volumes through the calculator.
Agree on dispute handling and refund allocation in the contract.
Align VAT and invoicing with your accountant.
Set roles and approvals so no single person can create and release a payout.
Test reconciliation on a small pilot before full volume.

FAQ

Is escrow legal in Lithuania?

Yes. Lithuanian practice uses a conditional deposit agreement, which sets out how the money is paid to an escrow agent and when it is released or returned. The agent holding the money must be able to do so lawfully, so verify its licence and how it safeguards funds.

Can a marketplace split payments between sellers without a licence?

Only in narrow cases. PSD2 excludes commercial agents from its scope only if they never possess or control client funds. A marketplace that receives a buyer’s money and then pays sellers usually controls funds, so it should use a licensed institution or obtain advice on authorization.

What is the difference between a commercial split payment and a VAT split payment?

A commercial split divides one payment between parties such as seller and platform, by contract. A VAT split payment is a tax mechanism that separates the net amount from the VAT amount, intended to curb missing-trader fraud. The two are unrelated in purpose and legal basis.

How much does a split payment cost?

Cost depends on how many outgoing transfers you make. With Demivolt, each outgoing SEPA transfer costs 0.40 €, so a payment split into three recipients costs 1.20 € in outgoing fees, and SWIFT Out costs 30.00 € per transfer. Incoming SEPA is 0 €.

Escrow and Split Payments for Businesses in Lithuania