Tax in the Principality of Liechtenstein

Since 2011 the Principality of Liechtenstein does have a modern but simple, internationally compatible tax law which is compliant with European law. It applies for legal entities and trusts as following:

Tax on earnings

In general terms, tax on earnings for all legal entities domiciled in the Principality of Liechtenstein amounts to 12.5% of taxable net earnings, the annual minimum tax amounts to CHF 1,800.00, whereas the following income does not count to the attributable tax base:

  • dividends
  • capital gains
  • earnings of non-domestic permanent establishments
  • tenancy and franchise earnings from non-domestic real estate assets
  • real estate capital gains
  • capital growth from inheritance, bequest or gifting
  • capital contributions including à fonds perdu benefits

Income from intellectual property rights, created or acquired after January 1, 2011, are subject of a special arrangement, according to which 80% of the income can be deducted as expense.

Actually an equity capital interest deduction amounting to 4% is also permitted, reducing the attributable tax base, thus lowering the effective tax rate. The interest rate may be adjusted annually by the tax administration on the basis of the general interest level.

The modified equity capital is calculated as follows:

+ paid-in capital
+ reserves
- stakes in legal entities
- non-domestic real estate assets
- non-domestic permanent establishment assets
- non-operating assets
= modified capital

Losses may be carried forward or settled without any timely limitation. Additionally losses of foreign business premises may be taken into consideration if they have not been taken into consideration in the state of the foreign business premises.

Due to the possibility of trans-border group taxation we do have all premises for loss compensation within an international group.

The company applying for loss compensation must have its seat or its effective management within Liechtenstein and must have a majority ownership within other domestic or international companies. Similar applies for foreign companies having a business premises in Liechtenstein.

There are no withholding taxes or any other kind of taxes on dividends paid out to the owners or shareholders here in Liechtenstein. Whether the owner or shareholder has to pay personally any taxes on dividends depends on his personal tax status abroad.

The VAT amounts in Liechtenstein in general for goods and services 8%, equal to Switzerland. A pre-tax deduction for companies is possible.

Actually one of the main future aims of the Liechtenstein government is the compilation of double tax treaties. Actually we do have already several double tax treaties in force. E.g.  with Germany, United Kingdom, Austria, Luxembourg, Singapore and Hong Kong, aso. There are several agreements already signed but not in force yet, and with others they do have concrete negotiations going on.

Private asset structures

Drawing upon the rules of the Luxembourg Société de Gestion de Patrimoine Familial (SPF), a new tax privilege for legal entities which engage exclusively in asset management and do not exercise any economic activity has now replaced the special company taxes. This involves the creation of so-called private asset structures (Privatvermögensstrukturen – “PVS”). The restrictions applicable to the PVS need to be stipulated in the articles of association and is granted by the tax administration, upon request.

PVS are subject to the minimum earnings tax charge of CHF 1,800.00 per annum.

Trusts

In the case of trusts which are domiciled or maintain their management in the Principality of Liechtenstein, only the minimum earnings tax of CHF 1,800.00 is imposed. No tax assessment is required.