Doing Business in - JHI

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Doing Business in Liechtenstein Income tax Taxable sources of income are the net profit from selfemployed work, the salary of an employee, donations from foundations (if taxed as holding company), pensions and capital gains. Interest payments, dividend income and loans are tax-free. Tax burden Because of the peculiarities in the Liechtenstein tax system, it is difficult to compare the tax burden with foreign countries. The highest tax rate of 16% is reached at an income of CHF 350,000. The following example will provide you a good idea about the Liechtenstein tax dimensions: through a CHF 100,000 residential building support and a CHF 500,000 bank loan. Cash and other assets amount to CHF 250,000. The tax burden for this family amounts to roughly CHF 12,575 or 8.3% of the gross income. Example: A family with 2 children earns a gross income of CHF 150,000. The family owns a flat (purchase price: CHF 700,000, tax relevant valuation: CHF 350,000) financed Pensioner tax The pensioner tax 7 is an expense-based form of taxation that can be chosen by people living or having residence in Liechtenstein without working there. For the planning of a domicile, Liechtenstein can only be considered in very few cases. This is due to the tight restrictions to obtain a residential permit. Further to this the pensioner tax is not really attractive. 7 Art. 56 ff. tax law Real estate profit tax Real estate property is extremely limited in Liechtenstein. Even Liechtenstein people have to justify their need to acquire real estate. From a fiscal viewpoint the holding of real estate is privileged. However, if real estate is for sale after a very short holding period, a high real estate gain tax is due to prevent speculative motives. Everyone who realises capital gains through the sale of local real estate is taxable in Liechtenstein. From the real estate gain an amount of CHF 1,500 is tax exempt. The tax rate corresponds with the income tax rate. If the real estate was less than three years in a person’s ownership, the rate will be doubled. If the holding period is between three and five years, the tax surcharge amounts to 2/3 and for the holding period between five and ten years an additional 1/3 has to be paid. PAGE 22 | DOING BUSINESS IN LIECHTENSTEIN
Doing Business in Liechtenstein Inheritance and endowment tax The inheritance and endowment taxes 8 are relevant for assets if the person at the time of his death was subject to income and profit tax in Liechtenstein, as well as in cases of endowments and inheritances to Liechtenstein people. The tax level depends on the amount and the degree of relationship to the heir or beneficiary. 8 Art. 89 ff. tax law Stamp Duty/Formation Duty Upon formation of juridical persons whose capital is divided into shares (company limited by shares, limited liability company, co-operative society) the stamp duty amounts to 1% if the capital exceeds CHF 1 Mio. The same duty will be due if capital is increased or if bearers of participation rights make contributions without increasing the capital (e.g. if assets are contributed to the reserves), upon the transfer of the domicile from abroad and in case of so called change of hands of participation rights in economically liquidated companies. In case of the establishment, the foundation and the trust enterprise a formation duty amounting to 1% of the capital, which exceeds CHF 1 Mio., as determined in the articles, becomes due upon formation. The same duty will be applied whenever the capital is increased and when a change of hands takes place (as mentioned in the previous paragraph). The contribution into reserves however is not liable to tax. Upon petition, this duty may be reduced to 0.5 % for capital exceeding of CHF 5 Mio., and to 0.3% for capital exceeding of CHF 10 Mio.. There is a further reduction for ecclesiastical, charitable and family foundations whose sole purpose is the administration of assets, the participation or permanent administration of participations in other companies, provided commercial activities are not pursued. Upon application the formation duty then amounts to 2% or at least CHF 200. In these cases, upon petition, this duty may be reduced to 1% for capital exceeding of CHF 5 Mio., and to 0.6% for capital exceeding of CHF 10 Mio.. The formation duty is not applicable to the trust settlement. Turnover Tax on Securities In general, this tax amounts to 0.15% on turnover of domestic securities (Switzerland and Liechtenstein) and 0.3% on foreign securities. The banks and brokers are normally liable for settlement; the same applies to other persons, in so far as they professionally pursue the acquisition and sale of securities. In addition, holding companies are deemed, under certain prerequisites, to be registered dealers in securities. PAGE 23 | DOING BUSINESS IN LIECHTENSTEIN
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