Doing Business in - JHI

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Doing Business in Liechtenstein Taxation Introduction Nearly everybody who has ever heard about Liechtenstein knows that the tax exposure in Liechtenstein is low and attractive. Indeed, many people think that there is no tax burden in the Principality at all. The fact is that hardly anybody is familiar with the peculiarities of the Liechtenstein tax law. The Liechtenstein tax system, like most tax regimes around the world, is undergoing regular changes and reformation processes. Consequently, in case of specific questions, you should always contact a local specialist. Tax on Capital and Profit General The tax on capital and profit is regularised in art. 73ff. of the Liechtenstein tax law. These taxes are imposed on companies (legal entities) following a commercial business. Normally, these are the active limited company based in Liechtenstein, Establishment, Trust enterprise or the foreign company which runs a branch there. Tax on capital The tax on capital amounts to 2%. It is levied on the taxable equity at the end of the tax period. The profit of the year has to be deducted. PAGE 18 | DOING BUSINESS IN LIECHTENSTEIN
Doing Business in Liechtenstein Tax on profit The tax on profit is levied on the net profit for the period less the losses accrued over the five preceding years. Only the effectively paid taxes may be deducted. The tax rate is 50% of the yield on the taxable capital. The effective tax exposure is at least 7.5% and amounts to maximum 15% of the profit. For the calculation of the tax, fractions of 0.5% have to be rounded up. The tax rate on profit increases if the annual dividend exceeds 8% of the taxable capital (see table below). 1% if the distribution amounts to more than 8% of the taxable capital 1.5% if the distribution amounts to more than 10% of the taxable capital 2% if the distribution amounts to more than 12% of the taxable capital 2.5% if the distribution amounts to more than 14% of the taxable capital 3% if the distribution amounts to more than 16% of the taxable capital 3.5% if the distribution amounts to more than 18% of the taxable capital 4% if the distribution amounts to more than 20% of the taxable capital 4.5% if the distribution amounts to more than 22% of the taxable capital 5% if the distribution amounts to more than 24% of the taxable capital (source: LGBI 1961, nr. 7 (please make sure that you always check for any modifications)) Special company taxes General This section of the tax law 2 covers the details in relation to the foreign insurance companies doing business in the country, the captives and domicile companies, as well as foundations. Foreign insurance companies First, it has to be mentioned that in recent years the strongly increased number of Liechtenstein-based insurance companies are not eligible to this special tax. They have to pay the regular tax on capital and profit. 2 Art. 82ff. tax law and profit, a tax of 1% on the premium of life and pension insurance policies and 2% on all other policies sold in the Principality. Foreign insurance companies that are active in the Liechtenstein market pay, instead of the tax on capital PAGE 19 | DOING BUSINESS IN LIECHTENSTEIN
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