4. Taxation
A. Introduction And Developments
A new Tax Law came into force on 1 January 2011 and
replaced the Tax Act that dated back to 1961. The changes
are as follows.
I. Abolition Of The Special Company Tax
(sct)
The minimum annual SCT of CHF 1,000 formerly paid by
foundations, 'domiciliary' and holding companies will be abolished.
For such entities, there is now a possibility to benefit from a new
tax status if they fall within the definition of a 'Private Asset
Structure' (PAS) as to which please see below.
Existing entities will continue to pay the SCT for a
transitional period of three years after which they will either be
reclassified as a PAS or will be taxed at the new 'flat rate' (see
further below) of 12.5 per cent on income.
Ii. Private Asset Structures
In future, a corporate entity which does not carry out any
commercial activity and that only holds 'bankable assets' within
the meaning of the EU MiFiD (Markets in Financial Instruments
Directive) may obtain a tax privilege as a PAS. Holding of gold,
artwork, and other chattels is permissible for a PAS, as is the
holding of a participation in other companies provided that neither
the PAS nor its beneficial owner exercises any management control
over the subsidiary in question.
A PAS will have to pay a fixed tax of just CHF1,200 per
year.
Iii. Taxation Of Trusts
Trusts will also benefit from the minimum fixed tax rate of
CHF1,200 as long as they are governed by Liechtenstein law or
effectively managed from Liechtenstein or generate local
income.
Iv. New Flat-rate Tax
For all other commercially active corporate entities, there will
be a new flat-rate income tax of 12.5 per cent. In calculating the
taxable income, it is noteworthy that dividends and capital gains
on disposals of subsidiaries will be ignored, as will receipts from
foreign branches and foreign real estate.
In addition, both domestic and foreign subsidiaries of a
Liechtenstein parent company may opt to be taxed as a group in
Liechtenstein.
V. Abolition Of Coupon Tax And Capital Tax
The 4 per cent coupon tax on profit distributions from legal
entities has been abolished, as has the existing tax on authorised
capital. There is a favourable transitional system to cover
distribution of existing reserves.
B. Tax Information Exchange Agreements And Double
Taxation Agreements
In the last three years Liechtenstein signed numerous
OECD-compliant agreements on cooperation and exchange of
information in tax matters (TIEA) and double taxation agreements
(DTA). An updated overview of all existing agreements is available
at www.regierung.li. For the time being, Liechtenstein has TIEAs
and DTAs with the following countries:
- USA – TIEA
- UK – TIEA & MoU and JD (see below)
- Luxembourg – DTA
- Germany – TIEA
- Andorra – TIEA
- St Vincent – TIEA
- Monaco – TIEA
- Ireland – TIEA
- France – TIEA
- San Marino– DTA
- Belgium – TIEA
- Netherlands – TIEA
- Antigua and Barbuda – TIEA
- St Kitts & Nevis – TIEA
- Hong Kong – DTA
- Uruguay – DTA
- Faroe Islands – TIEA
- Greenland – TIEA
- Island – TIEA
- Norway – TIEA
- Finland – TIEA
- Sweden – TIEA
- Denmark – TIEA
These TIEAs and DTAs are designed to regulate the exchange of
information upon request in clearly justified cases.
I. The Special Tax Arrangement With The Uk
In August 2009, Liechtenstein and the UK signed a TIEA, as well
as a MoU and a First Joint Declaration. A Second Joint Declaration
was signed in 2010. The TIEA calls for an exchange of information
upon request and in clearly justified cases according to the OECD
standard. However, this TIEA foresees a unique protection from tax
information exchange for UK tax periods until 31 March 2015 for
Liechtenstein's clients. The MoU sets out the terms of a five-year
taxpayer assistance and compliance programme and a special
disclosure facility. The Joint Declaration sets out the context and
development opportunities (Double Taxation Convention in the
future) as well as the implicit recognition for Liechtenstein
structures.
The special disclosure facility, the so called 'Liechtenstein
Disclosure Facility' (LDF) offers UK residents with unpaid tax and
investments or assets in Liechtenstein the possibility to
regularise their tax affairs quickly and on favourable conditions.
The LDF runs from 1 September 2009 to 31 March 2015.
Not only existing clients of Liechtenstein financial
intermediaries can make use of the special disclosure arrangements
agreed with the UK in the LDF, but also new clients who establish
relevant connections with Liechtenstein.
The benefits of the LDF are:
- interest and penalty of 10 per cent on unpaid taxes up to April
2009
- the 'look back' period for undeclared tax will only go back to
April 1999
- the liability will be further limited for natural persons to 6
tax years as of the time of the disclosure application in cases of
an 'innocent error'
- no penalty in the case of an 'innocent error'
- assurance to the UK taxpayer against criminal investigations in
relation to the tax-related offence, in cases of full, accurate and
unprompted disclosures, unless the funds originate from 'criminal
property' (excluding tax evasion)
- option either to pay a single composite rate of tax at 40 per
cent for a UK tax year for each year up to April 2009 or to
calculate actual liability using applicable tax rates
- HMRC will accept reasonable offers for the payment of the tax
where it is only possible to estimate the liability, and
- exclusion of the UK taxpayer from the 'naming and shaming'
procedure announced by HMRC.
Ii. Who Can Benefit From The Ldf?
UK taxpayers with assets or interests (relevant property) in
Liechtenstein and undeclared UK tax liabilities can benefit from
the LDF.
Iii. What Are The Consequences Of A Participation
In The Ldf?
The UK taxpayer has to:
- disclose to HMRC
- declare all assets invested worldwide to the UK tax
authorities
- pay all outstanding tax obligations together with the
appropriate interest and penalties.