New Tax Law 2011 – A tax revolution – Liechtenstein

A deduction for licence fees of 80% of the income deriving from immaterial rights will be available. The restructuring of legal entities are intended to become possible without adverse tax implications.

Group taxation is granted if a group of entities has a Liechtenstein participant. Losses of foreign participations may be deducted in Liechtenstein if they are not deducted elsewhere.

Private Investment Structures – PIS (Privatvermögensstrukturen)

This new type of taxation applies for structures (Foundations, Trusts etc.) that hold bankable assets only. They have to be absolutely independent from investors and beneficiaries. If this is the case, they will be taxed with an 'all in' Tax of 1,200 Swiss Francs only. This is regulated in article 64 of the new tax act. This concept is so revolutionary that it will be effective only if the EFTA Surveillance Authority has approved this kind of taxation and confirmed it to be compliant with the EEA and EU laws.

There will be a minimum tax for all legal entities of CHF1,200 (US$1,252) a year. Small commercial entities will not even have to pay the minimum tax.

Capital tax

The capital tax will be eliminated.

Old 'offshore companies'

All current special tax regimes will cease within a grace period of three years.

Commercial active companies are now subject to the 12.5% Flat Tax Rate. Those who qualify as Private Investment Structures (PIS) will pay a yearly tax of 1,200 Swiss Francs per year (payable in advance).

Coupon tax

The 4% coupon tax on the reserves of a company will be eliminated. For 'old reserves', a special tax regime will apply. If the reserves are taxed voluntarily in the tax years 2011 or 2012, the coupon tax will be only 2%; for later years it will increase again to 4%.

Individual taxation

The inheritance tax and gift taxes will be eliminated. There will also be changes to the taxation of profits from the sale of real estate.

High net-worth individuals

Non Liechtenstein citizens, having not been domiciled in Liechtenstein for the last 10 years, may apply for taxation based on their yearly expenses (Aufwandbesteuerung) and not their income. This usually is fixed by the Liechtenstein Inland Revenue on the basis of yearly costs for housing multiplied by the factor five – a lump sum for high net worth individuals.

Advantages

Liechtenstein has now one of the lowest tax rates worldwide and it complies with OECD and FATF rules.

The new tax regime will make Liechtenstein a first choice country for multinational companies in terms of establishing a holding company in Liechtenstein and applying for group taxation. Banks, financial institutions, funds and insurance companies likewise will benefit from the new Liechtenstein tax law.

Further changes in Liechtenstein

For more than 90 years, Liechtenstein followed a policy of strict secrecy on tax information.

On March 12 2009, Liechtenstein declared, in the 'Liechtenstein Declaration', to cooperate in tax matters in accordance with OECD and international standards and to help prosecute people who do not comply with the tax rules in their own country.

Cooperation in tax matters

Since then, 19 tax information exchange agreements and six double tax treaties with information exchange clauses have been concluded.

One goal was to negotiate OECD level double tax treaties.

Negotiations are going on with many other governments, including those of Germany, Austria and the US. Tax information will be exchanged with most of the states, effective January 1 2010.

A taxpayer-favourable agreement was reached with the UK. Until March 31 2015, it grants taxpayers with the ability to become tax compliant. The two governments signed a TIEA and a memorandum of understanding (MOU) and issued a joint declaration.

The MOU offers a disclosure opportunity to persons with a connection to Liechtenstein.

It started in September 2009 for persons with a Liechtenstein connection. Other persons may use the disclosure procedure starting in December 2009 by transferring assets or part of their company structures to Liechtenstein.

The tax will be assessed regarding the last 10 years (for all years after and including 1999), along with interest and, in most cases, a 10% fine. If different taxes are involved, taxpayers may pay a composite tax rate of 40% for all taxes due in a UK tax year.

On October 11, Liechtenstein and the UK signed a second joint declaration concerning the MOU. Until September 11 2011, Liechtenstein financial intermediaries must identify all clients with an English tax background.

The goal of the agreements is to have no undeclared funds deriving from taxable sources in the UK remaining in Liechtenstein by 2015.

VAT

Liechtenstein has had a new VAT law in place since January 1 2011. This is also applicable in Switzerland. Every commercial unit or entity must now apply the VAT law, except for those with yearly turnover under CHF100,000 (US$104,000) who never charge VAT and have never applied for a VAT number.

Since January 1 2011, VAT rates have increased. The ordinary rate will increase from 7.6% to 8%, the rate for basic products will increase from 2.4% to 2.5%, and the rate for tourism businesses (hotels etc.) will increase from 3.6% to 3.8%. If the period when the activity is performed is in 2010, the basic rate would be 7.6%; if it is performed in 2011, the rate would be 8%.

Markus H Wanger

WANGER Law & Trust in Liechtenstein

Dr. iur. Markus H Wanger, Rechtsanwalt, FCIArb, TEP, MIoD. Born in 1955; Studies of Laws in Innsbruck, Austria. Doctor of Laws 1991.

He is the founder of the international commercial Law Firm WANGER in Vaduz, Liechtenstein with worldwide offices.

Markus H Wanger is Fellow of the Chartered Institute of Arbitrators (FCIArb), London und member of major international professional organisations, e.g. for Arbitration. Markus Wanger was Judge at the High Administrative Court in Liechtenstein and is Member of the Board of Examination of Lawyers; he was lecturer for Liechtenstein Company and Tax law at the Hochschule für Technik und Wirtschaft HTW Chur, Schweiz und is Arbitrator at the Court of Arbitration for Sports, Lausanne, (CAS, TAS).

Markus H Wanger is Chairman of WANGER Trust Company Ltd, an international trust and consulting company focusing on commercial and financial consulting and providing family office services.

Markus H Wanger is Editor of 'Commentaries and Treatises on Liechtenstein and International Law' and author of a wide range of professional publications and articles.

Markus H Wanger is known and respected as a lecturer at seminars.

He is well regarded as a professional in the art world and has invented the 3-D Structuralism, a new patented painting technique. As a professional in both worlds, he combines Jurisprudence and Art and advises artists in all legal matters arising.

Dr Markus H Wanger

Rechtsanwalt

9490 Vaduz

Liechtenstein

www.wanger.net

[email protected]