| 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 contains the essential
guidelines and basic ideas for a reform of Liechtenstein tax
law. Concrete draft amendment proposals were expected by the
government to be published by the end of 2007.
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
FL Tax Roadmap sets out the framework for the concrete development
of a tax reform concept, but it does not contain any further
details. The constitutional preconditions and the tax policy
principles of the Government serve as the foundation. However,
the Government's tax policy principles include the criteria
of "revenue and decision neutrality, competitiveness
and performance, conformity with European law, and international
compatibility." The tax reform criteria stipulate that
simplicity and transparency be the over-arching objectives,
meaning that the number of taxes in Liechtenstein could be
reduced.
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 is at the rate of 15%, of which 75% will be handed over
to the member states concerned.
The
country also agreed, along with Switzerland, to provide mutual
assistance in cases of tax fraud, although the legislation
to allow this was controversial.
Forms of Offshore Operation
Offshore
operations may take place within the following forms:
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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.
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'.
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Taxation of Foreign and Non Resident Employees
In
Liechtenstein the taxation of individuals is based entirely
on the concept of residence, regardless of nationality. See
Domestic Personal Taxes for the
general principles of individual taxation in Liechtenstein,
which 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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Exchange
Control
Liechtenstein has
no exchange controls.
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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, as explained
in Offshore Business Sectors.
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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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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