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this Page:
- LIECHTENSTEIN
FORMS OF OFFSHORE OPERATION
- LIECHTENSTEIN TAX
TREATMENT OF OFFSHORE OPERATIONS
- LIECHTENSTEIN'S INCLUSION ON
FATF BLACKLIST
- LIECHTENSTEIN
TAXATION OF FOREIGN EMPLOYEES OF OFFSHORE OPERATIONS
- LIECHTENSTEIN
EXCHANGE CONTROLS
- LIECHTENSTEIN
OFFSHORE ACTIVITIES
- LIECHTENSTEIN
EMPLOYMENT AND RESIDENCE
The
term 'offshore' is not used in Liechtenstein legislation
or in describing company forms. Use of special
'holding' or 'domiciliary' company forms is the
key criterion for obtaining offshore tax treatment
for limited companies; alternatively, non-residence,
the trust, the trust enterprise, the establishment
and the foundation forms also offer tax benefits.
In
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 contains the
essential guidelines and basic ideas for a reform
of Liechtenstein tax law. Concrete draft amendment
proposals were expected by the government to be
published by the end of 2007.
The
goal of the planned tax reform is to adapt the
existing tax law so that Liechtenstein will continue
to have a tax system in the future that is attractive
both nationally and internationally taking the
current and future demands of the economy and
society into account.
The
FL Tax Roadmap sets out the framework for the
concrete development of a tax reform concept,
but it does not contain any further details. The
constitutional preconditions and the tax policy
principles of the Government serve as the foundation.
However, the Government's tax policy principles
include the criteria of "revenue and decision
neutrality, competitiveness and performance, conformity
with European law, and international compatibility."
The tax reform criteria stipulate that simplicity
and transparency be the over-arching objectives,
meaning that the number of taxes in Liechtenstein
could be reduced.
Along
with Switzerland, in 2004 Liechtenstein accepted
the EU's Savings Tax Directive, and has imposed
a withholding tax on interest and other savings
returns paid to citizens of the member states
of the EU from 1st July 2005. Initially, this
tax is at the rate of 15%, of which 75% will be
handed over to the member states concerned.
The
country also agreed, along with Switzerland, to
provide mutual assistance in cases of tax fraud,
although the legislation to allow this was controversial.
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Liechtenstein
Forms of Offshore Operation
Offshore operations may take place within the
following forms:
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Liechtenstein Tax Treatment
of Offshore Operations
See Domestic
Corporate Taxes for the general principles
of Liechtenstein taxation; these apply to offshore
entities unless otherwise mentioned.
'Offshore' ('low tax' would be a better expression)
entities are taxed as follows:
- Holding
and domiciliary companies (often called
exempt companies) do not pay profits or
property tax; the net worth tax is 0.1%
of taxable capital subject to a minimum
of SFr 1,000. This tax is payable annually,
in advance. Holding or domiciliary status
precludes a company from taking advantage
of the double tax
treaty with Austria, unless 51% of its
capital is held by Liechtenstein citizens.
- The
Establishment (Anstalt) is taxed on the
same basis as holding and domiciliary companies,
if it has similar types of activity. Stamp
duty is reduced to 0.5% for capital exceeding
SFr 5m, and 0.3% for capital exceeding SFr
10m.
- The
Foundation (Stiftung) and the Trust are
taxed on the same basis as holding and domiciliary
companies, but the rate of tax is 0.075%
if capital is between SFr 2m and 10m, and
0.05% if capital is over SFr 10m. Payment
to non-resident beneficiaries of a Stiftung
or Trust are free of withholding tax. Family
foundations pay a reduced rate of stamp
duty of 0.2% on their formation capital.
- Non-resident
companies, which are companies active only
outside Liechtenstein, even though they
may have a Liechtenstein headquarters (not
always easy to distinguish from domiciliary
companies) are taxed in the same way as
holding and domiciliary companies; income
remitted to Liechtenstein may be taxable,
however.
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Liechtenstein's
Inclusion on FATF Blacklist
In
June 2000, Liechtenstein was identified by
the FATF as a non-cooperative and harmful
tax haven. The FATF released its next annual
report in June 2001, in which the organisation
revised its list of countries and territories
deemed non-cooperative. Only four were removed
from the list, including Liechtenstein (the
other three being the Cayman Islands, the
Bahamas and Panama). Liechtenstein was praised
by the FATF for its substantial efforts to
conform to forty recommendations set out by
the FATF in a code of good practice governing
money laundering.
By
July, 2002, the FATF was able to say that
Liechtenstein was 'no longer on its radar'.
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Liechtenstein Taxation of
Foreign and Non Resident Employees
In Liechtenstein the taxation of individuals
is based entirely on the concept of residence,
regardless of nationality. See Domestic
Personal Taxes for the general principles
of individual taxation in Liechtenstein, which
also apply to the resident employees of non-resident
entities, with the difference that a non-resident
employer will not operate the 'PAYE'-style withholding
system of employment taxation, so that the resident
employee will need to pay taxes directly to
the tax authorities.
Generally, individuals are considered to be
resident when they maintain a residence in Liechtenstein
with the intention of remaining other than temporarily,
or if they are residing in Liechtenstein and
performing an activity for gain, whether employed
or self-employed.
Non-resident
employees of Liechtenstein employers are liable
for tax only on income arising in Liechtenstein
or recieved in the country.
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Liechtenstein Exchange Control
Liechtenstein has no exchange controls.
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Liechtenstein Offshore Activities
'Offshore', ie low-tax, activity in Liechtenstein
is possible only through the various specialised
forms and statuses listed above. Broadly speaking,
commercial activity (ie non-investment activity)
is not permitted within Liechtenstein to any
of the 'offshore' entities.
The
'holding' entity is not limited as to where
it holds assets, and can therefore operate within
Liechtenstein as long as it sticks to holding
activities.
The
'domiciliary' entity is limited to external
trading operations, but is permitted certain
internal activities, as explained in Offshore
Business Sectors.
The
establishment (Anstalt) can operate freely within
Liechtenstein on an exempt basis as long as
it sticks to (non-commercial) holding and investment-type
operations.
The
foundation (Stiftung) and the Trust are not
limited from a tax point of view as regards
holding and investment activities, and can carry
these out in Liechtenstein as well as outside.
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Liechtenstein
Employment and Residence
There are no special privileges or disabilities
for the employees of non-resident or offshore
operations as such. Non-Liechtenstein citizens
require residence and work permits for any extended
stay in the country. Liechtenstein's membership
of the EEA gives additional rights for freedom
of movement and work to EEA citizens.
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