In Liechtenstein taxes are
levied under the Act relating to National and Local Taxation
1961, as qualified in yearly Finance Acts. The main taxes
impinging on businesses are Corporation Taxes (Profits
Tax and Net Worth Tax), Capital Tax, Value Added Tax and
Coupon (Withholding) Tax. There is no separate capital
gains tax as such; capital gains are treated as taxable
income unless they are from real estate, when Property
Profits Tax applies.
November 2006, a working group was commissioned by the government
to offer proposals for a revision of Liechtenstein's tax
laws. This was adopted by the government in February 2007
as the 'Future Liechtenstein Tax Roadmap,' which contained
the essential guidelines and basic ideas for a reform of
Liechtenstein tax law.
government elaborated further on the idea of tax reform
in autumn 2008, unveiling plans for the
introduction of a uniform profit tax for companies, and
the abolition of the capital tax and the coupon tax on securities.
According to the proposals unveiled in September 2008, the
new profit tax was envisaged at a moderate rate of 12.5%,
combined with a deduction for equity capital and an exemption
for earnings from holdings.
planned introduction of group taxation for group companies
was also announced, with the stated aim of compensating
for any losses within a corporate group.
the Liechtenstein financial centre, it is of fundamental
importance to preserve the attractiveness of the location
for asset management structures for individuals or for multiple
investors," the government stated.
tax concept therefore pays particular attention to the taxation
of companies for asset investments by individuals. As private
asset companies, such investments will henceforth be subject
to an attractive taxation regime," it added.
taxation regime described here applies to resident companies,
meaning those that have their registered office in Liechtenstein,
or which are managed and controlled from Liechtenstein.
'holding' companies (companies that hold investments) or
'domiciliary' companies (not having trading activities inside
Liechtenstein), have a separate taxation regime, as do Establishments,
Foundations and Trusts. See Offshore
Legal and Tax Regimes for further details.
May 2010, Liechtenstein’s government has approved
plans for creating a new tax act, designed to modernize
the existing Liechtenstein Tax Act of 1961.
government considers that the current tax law no longer
meets demands for a simple, transparent and competitive
system. Changes are also needed to make Liechtenstein's
tax legislation compatible with European law. The government
confirmed that the reforms would usher in a 12.5% flat rate
to Liechtenstein’s Prime Minister Klaus Tschütscher:
“The new Tax Act is an important step toward enhancing
the attractiveness of our location".
added that: "Through rapid implementation of this tax
reform, we will give more transparency to our citizens and
a framework for sustainable growth to our business location."
simplification of the taxation of natural persons, the new
Tax Act continues to provide a combination of a tax on assets
and a tax on income. Instead of the existing asset exemption
limit and the household deduction, a new increased tax exemption
from overall income will be granted.
to the government, the existing progressive tax schedule
will be replaced by a seven bracket schedule. Dividends
and other income on capital such as interest, leases, and
rents will no longer be taxed separately, but rather via
the taxation of assets. Under the proposal, taxation of
capital gains as well as the estate, inheritance and gift
tax will be eliminated.
persons taxable in Liechtenstein and engaged in economic
activities will only be subject to a 12.5% tax on income
and the existing capital tax will be eliminated under the
new law. In addition, loss carryforwards will no longer
be subject to a time limit, and an equity interest deduction
will be introduced.
important innovations outlined by the government include
group taxation for affiliated companies and provisions for
the treatment of patent income. The proposal also contains
provisions on the tax treatment of national and cross-border
tax reform also provides for the elimination of the "special
company taxes" for domiciliary companies, since this
special tax type threatens to violate the European Economic
Area Agreement with respect to the prohibition of state
aid. The proposed reform suggests replacing it with a private
asset structure, which facilitates taxation of asset management
companies that is attractive yet compatible with European
law and thus further strengthens Liechtenstein as an attractive
location for asset management.
proposal provides for elimination of the coupon tax, with
the exception of old reserves, which can be distributed
in the first two years after entry into force of the new
Tax Act at a lower tax rate of 2%. Afterwards, the tax on
distributed old reserves will again be 4%.
proposed Tax Act introduces a new endowment tax for transferring
assets to legal persons and for special asset endowments,
to the extent these assets are not subject to ordinary taxation
of assets. The provisions of the formation tax, which previously
was governed by the annual Finance Act, have been incorporated
into the Tax Act without any significant changes. The proposal
also introduces a new tax on insurance premiums.
respect to the tax based on expenditure as well as the property
gains tax, only small changes are proposed compared with
the current provisions. Various adjustments are also made
to procedural law, but no significant substantive changes
compared to current practice are planned.
December, 2004, Liechtenstein signed an agreement with the
EU by which the country joined EU and non-EU states implementing
the Savings Tax Directive as from 1st July 2005, imposing
a 15% withholding tax on the returns from individuals' savings.
This increased to 20% on July 1, 2008, and will increase
further to 35% from July 1, 2011.
following information describes domestic corporate taxes
in Liechtenstein prior to any reforms taking effect.
Profits Tax is levied on taxable
income at a basic rate (at the time of writing) between a
minimum of 7.5% and a maximum of 15% according to a formula.
The percentage rate is X, where
X = (Taxable Income x 100)
/ (Taxable Capital x 2).
(See below under Calculation
of Taxable Base for the definitions of Taxable Income
and Taxable Capital). It will be evident that a reasonably
profitable company will always qualify for the maximum rate.
In addition, if dividend distribution
exceeds 8% of Taxable Capital (same definition) there is
a surcharge of up to 5% of Taxable Income in the year in
which the dividend is declared, as follows:
as % of Taxable Capital
Tax Surcharge, %
8 up to 10
10 up to 12
12 up to 14
14 up to 16
16 up to 18
18 up to 20
20 up to 22
22 up to 24
Thus, the maximum rate of
profits tax is 20%, likely to be incurred by a company which
makes a decent profit without much capital employed.
Calculation of Taxable Base
the legislation, profits tax (and capital tax, see below)
are levied only on the proportion of income (or capital)
that the Liechtenstein operation bears to the company's
world-wide operations; plus, in the case of profits tax,
any profits that are remitted to Liechtenstein. The interpretation
of this rule is complex and cannot be simply explained here.
are some of the main provisions affecting calculation of
the taxable base for the profits tax:
- Inventories are to be stated
at the lower of cost or market value; FIFO is usually
applied. General reserves up to one third of of value
are usually accepted without demur.
- Capital gains, otherwise
than from real estate, are treated as taxable income.
- Capital gains from real
estate are taxed (at the time of writing) at between a
minimum of 1.2% and a maximum of 35.64% (sic) depending
on the amount of the gain, the length of time the property
was held, etc etc.
- Foreign dividends after
taxation are included in taxable income (but in the case
of foreign subsidiaries, this interacts in a complicated
way with the 'proportion' rule stated above, especially
because there is no group relief in Liechtenstein).
- Companies may capitalise
reserves or undistributed profits, but any resulting increase
in the carrying value of shareholders' interests will
be counted as taxable income for the company.
- Either straight-line or
declining balance depreciation methods are allowed. Higher
rates may be permitted on occasion. There are detailed
schedules of depreciation rates applicable to various
types of asset. It may be worth noting that goodwill can
be depreciated at 25% per annum (declining balance) or
- Gains on realisation of
assets are taken to taxable income.
- Trading losses can be carried
forwards for two years, but not backwards.
- There is no group relief.
- All taxes paid, including
profits tax, are deductible from income in the accounting
period in which they are paid (the year after the fiscal
Net Worth Tax
The net worth tax is levied
on the share capital of a company (original capital plus
subsequent increases) plus open and hidden reserves, in
so far as these form part of the company's net worth.
In this calculation, reserves
might for instance include retained earnings brought forward,
provisions for income and capital taxes, disallowed inventory
and depreciation reserves, and any other disclosed or undisclosed
reserves; deductions might include any current year loss,
a net deficit brought foward, dividends in excess of the
current year's net profit, and any capital increase in the
current year. Other items might also be involved depending
The rate of net worth tax
applying to a resident company is 0.2% of taxable net worth.
Stamp Duty in
Liechtenstein is levied according to Swiss legislation,
which was substantially amended by the Swiss Federal Law
on Stamp Duty 1993. There is a liability to stamp duty on
the issue of shares and bonds. Zero rates apply to mergers
and other corporate transformations. Issuance of foreign
securities was relieved from stamping in 1993, but turnover
tax applies (see below).
rate of stamp duty on shares (the issue of capital in a
corporation) is, at the time of writing, 1%; but the first
SFr 250,000 of any issue of capital (initial or subsequent)
transfer against payment of ownership in certain instruments
(such as bonds, shares, participation certificates, shares
in investment funds) are subject to the stamp duty as turnover
tax, if one party or intermediary is a domestic securities
dealer. The duty is calculated on the basis of the payment
and is 0.15% for instruments issued by a domestic issuer
and 0.3% for instruments issued by a foreign issuer. Tax
liability rests with the domestic securities dealer.
general, all insurance premium payments for policies belonging
to the domestic portfolio of a supervised insurer are subject
to the tax on insurance premiums. In addition, premium payments
for policies concluded by a domestic policyholder with a
foreign non-supervised insurer are subject to tax. Due to
a comprehensive list of exemptions, generally only premium
payments for liability and vehicle damage insurance as well
as for certain property insurance are still subject to tax,
but not premium payments for personal insurance. The tax
is calculated on the cash premium and is in general 5%,
or 2.5% for single premium redeemable life insurance.
is payable by securities dealers and traders (Effektenhandler),
which includes banks, financing companies, investment funds,
and other entities or persons whose business is focussed
mainly on securities dealing, trading or broking. It also
applies in general to companies whose assets include taxable
securities valued at more than SFr 10 million.
The rate of turnover
tax at the time of writing varies between 0.15% and 0.30%.
Liechtenstein Property Profits Tax
The Property Profits Tax
applies to any individual or corporate person who gains
from a real property transaction. The taxable profit is
the amount by which the proceeds of sale exceed the invested
cost. 'Invested cost' is an officially-assessed value plus
any excess of original purchase cost and subsequent capital
additions (less maintenance costs) over the assessed value.
The rate of property profits
tax is set annually by Parliament, and is usually equal
to the rate of the general Profits Tax.
Liechtenstein Value Added Tax
entry of Liechtenstein into the EEA, Value Added Tax was
introduced under the Law on Value Added Tax 1995. The law
is very similar to the equivalent Swiss law.
rate of VAT is 7.6%, with a reduced rate of 2.4% for food,
printed matter and medicines. Exports are exempt, as are
medical and educational services, and most real estate transactions.
A special tax rate of 3.6% applies to lodging services.
November 2008, the government ratified proposals seeking
to amend three provisions contained within its value-added
tax (VAT) law.
the new provisions detailed in the bill was an order to
align Liechtenstein's legislation with Swiss VAT law.
a result of these modifications, the tax exemption afforded
to investment companies was to be regulated differently
in future, the government explained.
only would a distinction be made between investment companies
with fixed and variable capital, but also investment fund
assets, hitherto benefiting from tax exemptions, would be
deprived of their favourable position.
the number of beneficiaries, both individuals and organisations
alike, gaining from tax exemptions and enjoying international
legal privileges, immunities and facilities, would be widened
under the proposals, the government announced.
May 4, 2010, Liechtenstein’s government adopted a
report and proposal concerning an amendment to the country’s
value-added tax (VAT) law: in accordance with the bill,
VAT rates in Liechtenstein will be increased in line with
those in Switzerland from 2011.
a bid to finance disability insurance, Switzerland’s
parliament voted to temporarily increase the standard rate
of VAT from 7.6% to 8.0%, the reduced rate of VAT from 2.4%
to 2.5% and the special rate of VAT accorded to accommodation
services from 3.6% to 3.8%. Approved in a referendum by
the Swiss people and cantons, Switzerland’s Federal
Council has now enacted the corresponding decree implementing
the new rates.
Liechtenstein’s international treaty obligation with
Switzerland, the principality must also adopt these tax
increases, by making the necessary changes to articles 25,
28, and 37 of the country’s VAT law.
VAT rise is due to take effect in both Liechtenstein and
Switzerland from January 1, 2011.
(Coupon) Tax applies to companies whose capital is divided
into shares, and is levied at the rate of 4% on any
distribution of dividends or profit shares including
distributions in the form of shares, although see above
for proposed changes to this. Generally, there is no
withholding tax on interest or royalty payments, but
it does apply to interest from bonds, to interest from
time deposits with domestic banks in excess of 12 months,
and to interest on some commercial loans over SFr 50,000
with a minimum term over 2 years. Most normal inter-company
loans are not caught by the coupon tax.
Liechtenstein Filing Requirements
and Payment of Tax
subject to Profits Tax must file a return within six
weeks of the shareholders' meeting which adopts the
financial statements, and no later than 1st July in
the calendar year following the end of the company's
The tax assessment
is then normally received in the autumn, and the tax
due is payable within one month of receipt of the assessment.
Instalment payment can sometimes be agreed with the