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Liechtenstein Consults On Amendments To Tax Act

by Ulrika Lomas, Lowtax.net, Brussels
09 December, 2013

During a recent sitting, the Liechtenstein Government approved a consultation report pertaining to changes to the Principality's Tax Act.

The consultation bill implements measures approved in principle by the Liechtenstein parliament within the framework of the third recovery package (Massnahmenpaket III), aimed at increasing tax revenues.

In the area of income tax for legal entities, the Liechtenstein parliament tasked the Government with finding an alternative to plans to "decouple" notional income and the equity interest deduction, albeit ensuring a comparable impact on the state finances.

Following a meeting with industry representatives, the Finance Ministry put forward an alternative solution, intended to "correct" the tax base. Here, the Ministry advocated changes when determining a corporation's "modified equity," namely the company's own capital less own shares, investments in shares or participations, foreign real estate, assets of foreign permanent establishments, and non-operating assets.

Under the proposal, in addition to the usual deductions, a deduction of 6 percent on all assets is to be implemented. The measure is expected to yield additional income of around CHF12m (USD13.3m). Furthermore, all taxpayers are to be subject to the minimum corporate tax obligation in future.

In the area of income and wealth tax, the Government has proposed that part of the tax revenues from taxpayers with limited tax liability should flow to the state. Taxpayers with limited tax liability in Liechtenstein are individuals whose residence and habitual abode is not in Liechtenstein, and are therefore taxable on their Liechtenstein wealth and income.

Massnahmenpaket III is designed to redress the public finances to the tune of around CHF233m (USD260m), and includes plans notably to raise the minimum income tax to CHF1,900, from CHF1,200 currently.

The consultation ends on January 24, 2014.

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