Liechtenstein: Domestic Corporate Taxation
Value Added Tax
Alongside the 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.
The rate of VAT is 8% with a reduced rate of 2.5% 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 3.8% applies to lodging services.
In November 2008, the government ratified proposals seeking to amend three provisions contained within its value-added tax (VAT) law.
Among the new provisions detailed in the bill was an order to align Liechtenstein's legislation with Swiss VAT law.
As a result of these modifications, the tax exemption afforded to investment companies was to be regulated differently in future, the government explained.
Not 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.
However, 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.
On 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 would be increased in line with those in Switzerland from 2011.
In 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 enacted the corresponding decree implementing the new rates.
Given Liechtenstein’s international treaty obligation with Switzerland, the principality was obliged to also adopt these tax increases, by making the necessary changes to articles 25, 28, and 37 of the country’s VAT law.
The VAT rise took effect in both Liechtenstein and Switzerland from January 1, 2011.