Liechtenstein
Executive Summary
Liechtenstein
is in the EEA but Not In the EU
Liechtenstein
is a constitutional monarchy, has a land area
of about 160 sq km (60 sq m), a population of
around 34,500 (July 2008 est), and is sandwiched
between Switzerland and Austria. It has a customs
union and a monetary union with Switzerland. Liechtenstein
belongs to EFTA, and since 1995 to the EEA; it
is member of the UN. The official language is
German; English and French are also spoken, with
a local dialect used in everyday life.
A
referendum held in March, 2003, gave the ruling
Prince Hans-Adam II sweeping new powers, including
the right to veto parliamentary bills, sack the
entire government and introduce emergency rule.
Economy Buoyant Based on Industry and Financial
Services
Liechtenstein
was primarily an agrarian country until its economic
union with Switzerland (1922 and reinforced in
1980) propelled it into rapid industrial and financial
development. The princely family is highly active
in leading the country economically. GDP per capita
is $118,000 (2007), inflation and unemployment
are around 1.5% (2007). The currency is the Swiss
Franc, and there are no exchange controls. Membership
of the EEA gives Liechtenstein access to the single
market of the EU in most respects.
In
October, 2003, in a dramatic development, Liechtenstein
refused to sign an agreement to expand the EEA
to incorporate the ten nations due to accede to
the EU in 2004,
apparently in order to get back at the Czech Republic
and Slovakia for the 'Benes' decree in the 1940s
which resulted in the expulsion of Liechtenstein
nationals and the expropriation of their property.
But at the end of November Liechtenstein gave
in and signed up.
Liechtenstein's Lowtax Specialisations
Liechtenstein
has moderate domestic taxes, but has specialised
and very flexible types of 'holding' and 'domiciliary'
company as well as 'establishments' and 'foundations'
which are tax-exempt, but cannot usually trade
inside the country. There are more than 30,000
of these 'offshore' entities, which provide around
30% of state revenues. There is also a trust regime
based on common law, although Liechtenstein is
a civil law jurisdiction. The headline Liechtenstein
product is private banking, although holding companies
must run it close in terms of asset value; trusts
have also been successful.
After
the EU reached final agreement on its Savings
Tax Directive, under which an information-sharing
regime was initiated by 12 out of 15 existing
member states in 2005, Liechtenstein chose, like
Switzerland, to impose a withholding tax on returns
on savings paid to citizens of EU member states,
rather than compromise banking secrecy.
FAFT
Blacklist
In
June 2000, Liechtenstein was identified by the
FATF as a non-cooperative and harmful tax haven.
The result of this is that Liechtenstein was one
of fifteen tax jurisdictions placed on an FATF
blacklist. Each 'harmful' tax haven had a year
in which to correct its tax regulations and legislation,
once it has done so the tax haven will be removed
from the list. Liechtenstein was removed from
the list in 2001 after tightening up its money
laundering legislation.
By
mid-2002, the FATF was able to say that Liechtenstein
was 'off its radar screen'.
Plenty
of Lowish Taxes in Liechtenstein!
Profits
tax on business and income tax on individuals,
both at 18% on higher incomes, don't sound too
bad, but the net worth tax at 2% for business
and around 1% for indivduals can be expensive.
There is no separate capital gains tax (they are
taken into income) but there is a moderate tax
on real estate gains. Estate and gift taxes vary
but are low within the family; VAT is 6.5%. There
is only one tax treaty, with Austria, but withholding
tax on dividends and some other payments is only
4%.
Immigration Controlled by Residence and Work
Permits
EEA
nationals have some qualified freedom of movement
in Liechtenstein, but in practice non-nationals
need residence and work permits. There is a substantial
commuting population from Austria and Switzerland.
BACK
TO TOP
|
LOWTAX.NET
