Doing Business in - JHI

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Doing Business in Liechtenstein Captives An insurance company standing under the insurance supervisory law that runs exclusively a self-insurance business pays a tax of 1% on the equity. The rate is reduced to 0.75% for capital exceeding CHF 50 Mio. and to 0.5% for equity exceeding CHF 100 Mio.. equity and profit. A captive can also choose to be regularly taxed on capital and profit. Dividends paid out from captives are tax-exempt. For further information, please see the section about coupon tax. If a captive underwrites additional insurance policies with third parties, it underlies for this part the tax on Holding companies The holding company is defined in the tax law of Liechtenstein by a single article 3 . The interpretation is considerably more flexible than in other countries. Examples for holding companies are the legally registered persons as well as the non-registered foundations, whose purposes mainly focus on asset management, the holding or continuous administration of participations in other companies. Holding companies Domicile companies These companies are not only holding companies, but additionally practice a business or commercial activity abroad. As long as this activity does not relate to local business, the company is exempted from the tax on profit and pays, like the holding company, a tax on equity of 1%, but at least CHF 1,000. Foundations As described earlier, foundations are normally subject to the regulations of the holding companies. Nevertheless, regarding the tax burden, a relief exists. For foundations with net assets exceeding CHF 2 Mio. the tax rate is are exempt from the tax on capital and profit. They only pay a tax on the equity of 1%, but at least CHF 1,000. The tax law also includes the possibility of a mixed holding. In practice, this option is not of importance. 3 Art. 83 tax law A domicile company can hold or run its own office as well as employ its own staff in Liechtenstein. reduced to 0.75% and, for foundations with net assets exceeding CHF 10 Mio., a rate of 0.5% is applicable. Investment companies For investment companies (mutual funds) the tax on net assets is reduced for funds exceeding CHF 2 Mio. to 0.4%. PAGE 20 | DOING BUSINESS IN LIECHTENSTEIN
Doing Business in Liechtenstein Coupon tax The Coupon tax 4 is a non-recoverable withholding tax on the coupon from nationally issued security papers and similar documents. The tax amounts to 4% and has to be paid by the company, but it is borne by the beneficiary of the coupon. duration of two years, in case that at least one party is registered in the public register or practices a commercial business. Thereof, mortgages are excluded. As mentioned earlier, dividends from captives are exempt from Coupon tax. The tax will be claimed on 5 : Interests on bonds and the like Dividends Interest payments on loans from domestic debtors of more than CHF 50,000 combined with a minimum 4 Art. 88a ff. tax law 5 Only the most important cases are compiled below. For the complete enumeration see tax law art. 88b to e Wealth and income tax General The wealth and income tax has to be paid by natural persons, collective and limited partnerships and others. 6 The tax rate is determined progressively and the tax declaration has always to be submitted in based on the previous year. Employers will subtract the necessary amount of tax directly from the salary. Among others, the Prince of Liechtenstein, non-profit organisations such a certain foundations, establishments or associations etc. as well as the state, are exempt from the tax duty. Contrary to modern tax laws, the asset and income tax is strongly based on the taxation of assets and leaves some other income sources such as income from interest payments and rents tax free. 6 Art. 31 tax law Wealth tax All domestic and foreign owned assets less the sum of debts are subject to tax. Foreign real estate property is treated separately under the exemption of tax progression. market value. To calculate the effective tax exposure, the assets are combined with the sources of income. The tax on net assets of CHF 1,000,000 equals the tax burden of an income of CHF 50,000. The tax relevant value of wealth like real estate, personal belongings or company shares lies significantly below its PAGE 21 | DOING BUSINESS IN LIECHTENSTEIN
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