Liechtenstein

Tax residency – Companies registered in Liechtenstein or its place of effective management in Liechtenstein are deemed to be residents for tax purposes.

Basis – Corporate income tax is levied on worldwide profits. However, profits derived from foreign branches or permanent establishments, foreign real properties and profits undistributed by foreign subsidiaries may not be subject to taxation.

Tax rate – All companies are subject to a corporate tax of 12.5%.

A global minimum corporate tax of 15% would apply to a parent entity of a group with consolidated revenues of EUR 750 million or higher in the preceding two tax years in line with OECD’s Pillar 2 efforts.

An annual corporate minimum tax of 1,800 CHF to companies whose total assets have been CHF 500,000 or greater during the previous three years.

Capital gains – Capital gains from the disposal of shares are not subject to corporate taxes, unless more than 50% of the total income of the underlying legal entity consists of passive income and its taxable income is subject, directly or indirectly, to low taxation

Capital gains derived from the sale local properties are taxed separately under a real estate property tax of 24%

Dividends – Dividends received are usually tax-exempt, unless more than 50% of the total income of the paying entity consists of passive income and its taxable income is subject, directly or indirectly, to low taxation

Interests – Interests are subject to corporate income tax.

Royalties – Royalties are subject to corporate income tax.

Foreign-source income – Foreign-source income is taxable at standard rates, except dividend income, foreign real estate capital gains and income from foreign P.E. and branches.

Withholding taxes – There are no withholding taxes on dividends, interests, royalties, and fees paid to non-residents.

Losses – Losses arising from taxable income may be carried forward indefinitely. Carryback of losses is not allowed.

Inventory - Inventory may be valued at the lower of acquisition/production costs or market value. To determine costs are allowed First in first out (FIFO) or average cost methods.

Anti-avoidance rules – Transactions between related parties must be carried out on arm’s length terms. Transfer pricing documentation must be prepared by large companies. If a company exceeds at least two of the following three criteria, it qualifies as a large company (based on Liechtenstein company law):

• Total assets of CHF 25.9 million.
• Net revenue of CHF 51.8 million.
• Annual average of 250 full time employees.

Small companies are not required to prepare transfer pricing documentation.

There are no thin capitalization rules, nor controlled foreign company regulations. However, abusive tax structures may be disregarded if there are no economic or other substantial reasons for such tax structure.

Labor taxes – Employers and resident employees are required to make contributions to several social security insurance funds:

Old age, survivors’, and disability insurance (9.3%, 4.75% by the employer and 4.55% by the employee); Family compensation fund (1.9% by the employer); Unemployment insurance/supplementary unemployment insurance (1%, 0.5% by the employer and 0.5% by the employee); Occupational accident insurance (0.1% by the employer); Occupational pension scheme (depending on pension plan)

Tax credits and incentives – There are tax exemptions for entities that have an irrevocable charitable, cultural, or ideal purpose without commercial activity, as well as for dividend income and capital gains on participations.

Private Asset Structures may enjoy tax exemptions and are only subject to a minimum tax of CHF 1,800 per annum. To be eligible as a Private Asset Structure, the company must not conduct any economic activity, and its activity should be limited to acquiring, holding, administrating, and selling financial instruments according to the Liechtenstein assets management law as well as cash and bank accounts. Participations may only be held if it can be proved that the shareholders or beneficiaries have no influence on the administration of this company.

There is also a Notional Interest Deduction on Equity, which is a standardised deduction for interest on equity based on the multiplication of the modified equity by the interest rate.

Personal income tax – An individual is deemed to be tax resident in Liechtenstein, if he or she resides or intends to stay in Liechtenstein permanently.

Resident individuals are taxed on their worldwide income, except for profits from, and net wealth in, foreign businesses, foreign branches and foreign immovable property.

Tax rates are progressive up to 8%. There are municipal taxes, which are multiplies that range from 1.5 to 2.5.

Capital gains on movable assets are tax-exempt. Capital Gains derived from local real estate is subject to a Real Estate Profit Tax of 24%.

Other taxes – The sale and import of goods and services are subject to V.A.T. at a standard rate of 8.1%. Reduced rates and exemptions may apply.

A stamp tax is levied on the transfer of securities, tax rate is 0.15% for Swiss and Liechtenstein securities and 0.3% if is issued by non-resident.

A capital duty of 1% is levied on the issuance and increase of the equity of Liechtenstein corporations. However, the first CHF 1,000,000 of capital is exempt from capital duty.