Liechtenstein tax system - taxation of Liechtenstein AG companies and individuals: VAT, income tax and capital gains. Tax treaties of Liechtenstein.

Liechtenstein tax residents pay tax on their worldwide income and non-residents on income from sources in Liechtenstein.

Income tax is paid at the national and municipal level.

Tax rates at the national level are different for single individuals, married couples, and single parents with children.

For a taxpayer who is single, tax rates are:

• Income below CHF 15 000 – 0%;
• Income from CHF 15 000 to 20 000 – 1%;
• Income from CHF 20 000 to 40 000 – 3%;
• Income from CHF 40 000 to 70 000 – 4%;
• Income from CHF 70 000 to 100 000 – 5%;
• Income from CHF 100 000 to 130 000 – 6%;
• Income from CHF 130 000 to 160 000 – 6.5%;
• Income from CHF 160 000 to 200 000 – 7%;
• Income over CHF 200 000 – 8%.

Municipal income tax is calculated as a percentage (from 150% to 250%) of the national tax.

Thus, the total national and municipal tax rate varies from 2,5% to 22,4%, depending on the level of income and place of residence.

For people who have moved to Liechtenstein, it is possible to apply a tax calculated on the basis of their living costs. In this case, one cannot work in Liechtenstein and must meet some other conditions.

The profit from the sale of shares in local and foreign companies is tax exempt. The exemption does not apply to shares that constitute a commercial asset if more than 50% of the foreign company's income is passive income and the company is taxed at low rates.

Dividend income is tax exempt. If dividends are paid by a company with at least 25% participation, the shares of which constitute a commercial asset of the taxpayer, such dividends should not be deducted by the paying party for tax purposes (this requirement does not apply if the shares are a personal asset of an individual). The exemption does not apply to dividends on shares of a foreign company if more than 50% of its income consists of passive income and the company is taxed at low rates.

Companies pay corporate income tax at the rate of 12,5%.

There is a minimum tax of CHF 1 800 which can be credited against the corporate income tax.

The profit from the sale of shares is tax exempt. The exemption does not apply if more than 50% of the income of the foreign company whose shares are being sold is passive income and the company is taxed at low rates.

Dividend income is tax exempt. If the income comes from a company with at least 25% participation, such dividends should not be deducted by the paying party for corporate income tax purposes. The exemption does not apply if more than 50% of the income of the foreign company distributing the dividend consists of passive income and the company is taxed at low rates.

Liechtenstein has no CFC rules as such.

However, it should be noted that the use of structures aimed at tax evasion may have negative tax consequences.

Liechtenstein does not levy withholding tax.

The standard VAT rate is 7,7%.

The VAT rates of 2,5% and 3,7% apply to some goods and services.

Movable and immovable assets are subject to tax.

Generally, the tax base is a percentage (in 2021, 4%) of the market value of the assets. Such notional income is subject to ordinary income tax.

When transferring assets to a non-taxable entity or under circumstances that make the assets no longer subject to wealth tax, the transferor pays a 3,5% tax on the value of the assets (together with municipal tax, the rate can be up to 10,5%).

There is no inheritance or gift tax.

The following social security contributions are paid:

• Old age insurance, disability insurance – 9,991% (5,291% by the employer and 4,7% by the employee);
• Family compensation fund – 1,9% (by the employer);
• Unemployment insurance – 1% (by the employer and employee in equal shares);
• Occupational accident insurance – about 0,1% (by the employer);
• Pension insurance – contributions depend on the pension plan.

Stamp duty is payable when a company is formed or when its capital is increased.

The rate is 1% of the nominal and additional capital. The first CHF 1 000 000 is exempt.

There are also other cases where tax is charged at the establishment of legal entities.

The tax on securities transactions involving a dealer is 0,15% for Swiss and Liechtenstein securities and 0,3% for foreign securities.

Liechtenstein has signed 24 Double Tax Treaties (DTC) and 29 Tax Information Exchange Agreement (TIEA) with the following jurisdictions:

24 DTCs: Andorra, Austria, Bahrain, Czech Republic, Georgia, Germany, Guernsey, Hong Kong, Hungary, Iceland, Italy, Jersey, Lithuania, Luxembourg, Malta, Monaco, Netherlands, Romania, San Marino, Singapore, Switzerland, United Arab Emirates, United Kingdom, Uruguay.

29 TIEAs: Andorra, Antigua and Barbuda, Australia, Austria, Belgium, Canada, China, Denmark, Faroe Island, Finland, France, Germany, Greenland, Iceland, India, Ireland, Italy, Japan, Liechtenstein, Mexico, Monaco, Netherlands, Norway, South Africa, St. Kitts and Nevis, St. Vincent and Grenadines, Sweden, United Kingdom, United States of America.

Liechtenstein has also signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The Multilateral Convention entered into force for Liechtenstein on April 1, 2020.

Liechtenstein has no exchange control.