Liechtenstein: Offshore Legal and Tax Regimes
Under the old tax law, the term 'offshore' was not used in Liechtenstein legislation or in describing company forms. Use of special 'holding' or 'domiciliary' company forms was 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 offered 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 contained the essential guidelines and basic ideas for a reform of Liechtenstein tax law.
The goal of the planned tax reform was to adapt the existing tax law so that Liechtenstein would 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 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.
The planned introduction of group taxation for group companies was also announced, with the stated aim of compensating for any losses within a corporate group.
"For 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.
"The 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.
These plans were formally adopted by Liechtenstein's parliament in September 2010 and the Law on National and Municipal Taxes became effective from January 1, 2011.
Since the introduction of the new Tax Act in January 2011, all businesses are subject to a flat corporate income tax of 12.5%. The exception are private asset structures which are not commercially active and limit their activities to the passive achievement of income from the assets as well as holding and management of assets. Such companies pay an alternative minimum tax of CHF1,200 annually in advance. Transition rules in the new law provide for a three-year adjustment period, meaning that domicillary and holding companies may choose to be taxed under the old law until 2014.
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 was at the rate of 15%, of which 75% was handed over to the member states concerned. The 15% rate was increased to 20% for three years from 2008, and then rose to 35% thereafter.
The country also agreed, along with Switzerland, to provide mutual assistance in cases of tax fraud, although the legislation to allow this was controversial.