The aim of the amendments to Liechtenstein’s tax law, which took effect on 1 January 2011, is to modernise the present legal order with regard to taxation by taking into account international developments. This should ensure that Liechtenstein continues to have a tax system which is attractive both nationally and internationally in future, while complying with the European requirements (especially fundamental freedoms and the regulations prohibiting state aid, including ring fencing).
Under the new legislation, legal persons which are taxable in Liechtenstein and engaged in economic activity are only subject to corporate income tax and the supplementary tax on gains from the transfer of real property. No “capital tax” is levied. From now on, corporate income tax at a uniform rate of 12.5% applies to a company’s net income/profit, irrespective of the size of that profit and its distribution. Income and capital gains from participating interests are exempt, and there is no time limit on the use of losses carried forward. Furthermore, an equity capital interest deduction has been introduced. Other innovations contained in the Tax Act will also be important for Liechtenstein’s future development as an economic centre: group taxation for associated undertakings and conditions for handling revenue from intangible property rights. The Tax Act also contains conditions for the tax treatment of national and crossborder restructurings.
The Tax Act abolished special capital contribution duties for holding companies and domicile companies since there was a latent risk of infringement of the prohibition of state aid under the EEA Agreement. The Act does, however, provide for a transitional period in the case of legal entities.
Moreover, the Act has introduced modern taxation in groups for associated undertakings, which allows worldwide set-off of intra-group losses within the same period. As a result, Liechtenstein now has an internationally competitive system of taxation of undertakings carrying on business, commerce or trade, of financial and other service companies, and of holding companies. However, a reduction of foreign tax deductions at source on dividends, interest and royalties is only achievable by means of double taxation conventions and by application to Liechtenstein of the Parent-Subsidiary and Interest and Royalties Directives.
The Tax Act entered into force on 1 January 2011. The special provisions for private asset structures will take effect on 1 March 2011 based on the consent given by the EFTA Surveillance Authority (ESA) on 15 February 2011.
The specific corporation tax taking the form of a capital tax will remain applicable, for a further three years (by 31 December 2013), to legal persons and special dedications of assets which were subject to this special tax (previously Articles 82–88 of the Tax Act) before 28 February 2011. The minimum amount is CHF 1‘200. Upon application, legal persons may be taxed ordinarily before the deadline expires.
Legal persons classifiable as private asset structures (PVS – see below) will generally remain eligible for the CHF 1‘200 minimum corporate income tax after entry into force of the new Tax Act.
The former 4% coupon tax has been abolished, though “old” reserves will continue to attract this tax. It will be reduced from 4 to 2%, provided that distribution takes place within two years of entry into force, i.e. until the end of 2012. Losses which are incurred after 1 January 2011 cannot be set off against „old“ reserves.
At the taxpayer’s request, a coupon tax can be levied on “old” reserves, even if no distribution is made. The portfolio of old reserves must be carried forward, minus the amount of tax levied by re-quest.
Reduced coupon tax is also open to associations wishing to remain under the previous tax regime.
Further information on the new Liechtenstein tax law can be found in the new ATU-Bulletin No. 22 as well as in the information letter “ATU-Info” (only available in German). Both publications can be downloaded below:
ATU Bulletin N° 22
ATU Info March 2011 (only available in German)
The information published on this website serves for information purposes and aims to give a topical overview. ATU offers no guarantee that the information provided on this website is complete, up to date or correct. The information given does not constitute legal, financial, fiscal or any other form of advice. ATU accepts no liability whatsoever for loss or damages of any kind, including direct, indirect or consequential losses, which may have arisen from using or accessing the information published on this website.