| Offshore
Legal And Tax Regimes |
The
term 'offshore' is not used in Liechtenstein legislation or
in describing company forms. Use of special 'holding' or 'domiciliary'
company forms is 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 offer 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 is to adapt the existing tax law
so that Liechtenstein will 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 government
in May 2010 and are expected to go before parliament later
in the year.
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 will remain at 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.
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Liechtenstein
Forms of Offshore Operation
Offshore operations may
take place within the following forms:
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Liechtenstein
Tax Treatment of Offshore Operations
See Domestic
Corporate Taxes for the general principles of Liechtenstein
taxation; these apply to offshore entities unless otherwise
mentioned.
'Offshore' ('low
tax' would be a better expression) entities are taxed as
follows:
- Holding and domiciliary
companies (often called exempt companies) do not pay
profits or property tax; the net worth tax is 0.1% of
taxable capital subject to a minimum of SFr 1,000. This
tax is payable annually, in advance. Holding or domiciliary
status precludes a company from taking advantage of
the double tax treaty
with Austria, unless 51% of its capital is held by Liechtenstein
citizens.
- The Establishment (Anstalt)
is taxed on the same basis as holding and domiciliary
companies, if it has similar types of activity. Stamp
duty is reduced to 0.5% for capital exceeding SFr 5m,
and 0.3% for capital exceeding SFr 10m.
- The Foundation (Stiftung)
and the Trust are taxed on the same basis as holding
and domiciliary companies, but the rate of tax is 0.075%
if capital is between SFr 2m and 10m, and 0.05% if capital
is over SFr 10m. Payment to non-resident beneficiaries
of a Stiftung or Trust are free of withholding tax.
Family foundations pay a reduced rate of stamp duty
of 0.2% on their formation capital.
-
Non-resident
companies, which are companies active only outside
Liechtenstein, even though they may have a Liechtenstein
headquarters (not always easy to distinguish from
domiciliary companies) are taxed in the same way as
holding and domiciliary companies; income remitted
to Liechtenstein may be taxable, however.
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Liechtenstein's
Inclusion on FATF Blacklist
In June 2000, Liechtenstein
was identified by the FATF as a non-cooperative and harmful
tax haven. The FATF released its next annual report in
June 2001, in which the organisation revised its list
of countries and territories deemed non-cooperative. Only
four were removed from the list, including Liechtenstein
(the other three being the Cayman Islands, the Bahamas
and Panama). Liechtenstein was praised by the FATF for
its substantial efforts to conform to forty recommendations
set out by the FATF in a code of good practice governing
money laundering.
By July, 2002, the FATF
was able to say that Liechtenstein was 'no longer on its
radar'.
On
the issue of 'lists,' Liechtenstein was elevated from
the OECD's 'grey list' to its 'white list' after signing
a number of Tax Information Exchange Agreements in 2009,
meaning that it complied with internationally agreed standards
of tax transparency and information exchange.
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Liechtenstein
Taxation of Foreign and Non Resident Employees
In Liechtenstein
the taxation of individuals is based entirely on the concept
of residence, regardless of nationality. The general principles
of individual taxation in Liechtenstein also apply to the
resident employees of non-resident entities, with the difference
that a non-resident employer will not operate the 'PAYE'-style
withholding system of employment taxation, so that the resident
employee will need to pay taxes directly to the tax authorities.
Generally, individuals
are considered to be resident when they maintain a residence
in Liechtenstein with the intention of remaining other than
temporarily, or if they are residing in Liechtenstein and
performing an activity for gain, whether employed or self-employed.
Non-resident
employees of Liechtenstein employers are liable for tax
only on income arising in Liechtenstein or recieved in the
country.
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Liechtenstein
Exchange Control
Liechtenstein has no exchange controls.
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Liechtenstein
Offshore Activities
'Offshore',
ie low-tax, activity in Liechtenstein is possible only through
the various specialised forms and statuses listed above.
Broadly speaking, commercial activity (ie non-investment
activity) is not permitted within Liechtenstein to any of
the 'offshore' entities.
The 'holding'
entity is not limited as to where it holds assets, and can
therefore operate within Liechtenstein as long as it sticks
to holding activities.
The 'domiciliary'
entity is limited to external trading operations, but is
permitted certain internal activities.
The establishment
(Anstalt) can operate freely within Liechtenstein on an
exempt basis as long as it sticks to (non-commercial) holding
and investment-type operations.
The foundation
(Stiftung) and the Trust are not limited from a tax point
of view as regards holding and investment activities, and
can carry these out in Liechtenstein as well as outside.
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Liechtenstein
Employment and Residence
There are no
special privileges or disabilities for the employees of
non-resident or offshore operations as such. Non-Liechtenstein
citizens require residence and work permits for any extended
stay in the country. Liechtenstein's membership of the EEA
gives additional rights for freedom of movement and work
to EEA citizens.
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