Tax

Residence and domicile

How does an individual become taxable in your jurisdiction?

The Liechtenstein tax system is based on a general wealth tax with supplementary income tax for individuals and an income tax for legal entities. Liechtenstein nationals are taxed on their worldwide income and assets if they are domiciled in Liechtenstein.

The Liechtenstein Tax Act is primarily applicable to natural persons who have their domicile in Liechtenstein or who reside in Liechtenstein for the purpose of employment.

The general tax rate is calculated based on the taxable income, including the assets converted into an income, as follows:

  • less than 15,000 Swiss francs per annum: zero per cent;
  • between 15,001 and 20,000 Swiss francs: 1 per cent (minus 150 Swiss francs);
  • between 20,001 and 40,000 Swiss francs: 3 per cent (minus 550 Swiss francs);
  • between 40,001 and 70,000 Swiss francs: 4 per cent (minus 950 Swiss francs);
  • between 70,001 and 100,000 Swiss francs: 5 per cent (minus 1,650 Swiss francs);
  • between 100,001 and 130,000 Swiss francs: 6 per cent (minus 2,650 Swiss francs);
  • between 130,001 and 160,000 Swiss francs: 6.5 per cent (minus 3,300 Swiss francs);
  • between 160,001 and 200,000 Swiss francs: 7 per cent (minus 4,100 Swiss francs); and
  • more than 200,000 Swiss francs: 8 per cent (minus 6,100 Swiss francs).

The tax for single parents and married couples may be calculated differently. The tax rate shall be reduced by a specific tax-free amount as follows: individuals are either taxed as a single person, a single parent or with their spouse as a married couple. Spouses have different tax levels and higher tax-free amounts than single persons and single parents.

In addition to the state tax, each municipality imposes a municipal surcharge equal to a certain percentage of the state tax amount. The municipal supplement amounts to between 150 and 250 per cent of the state tax amount (eg, for an income of 110,000 Swiss francs, domestic tax of 5 per cent minus the tax-free amount of 1,950 Swiss francs amounts to 3,550 Swiss francs state tax, plus a municipal surcharge of 150 per cent amounts to total tax of 8,875 Swiss francs).

Income

What, if any, taxes apply to an individual’s income?

In Liechtenstein, individuals are subject to income and wealth tax. Income tax is calculated based on the taxable income. Wealth tax applies to all kinds of assets, including movable and immovable assets. With regard to income and profit taxation, Liechtenstein recognises the taxation of liquid funds and monetary gains. Many proceeds are not subject to profit and income tax, but are subject to wealth tax (no double taxation). Even though general taxpayers have full (global) tax liability, their taxable income does not include, inter alia, income from the management of foreign land used for agricultural and forestry purposes or rental and leasing income from property located abroad (net taxable income). Furthermore, taxable income does not include, inter alia, capital obtained from inheritance, legacy or gifts.

Capital gains

What, if any, taxes apply to an individual’s capital gains?

Liechtenstein does not have a typical capital gains tax. Net taxable income for taxpayers with unlimited tax liability does not include, inter alia, capital gains obtained from inheritance, legacy, gifts, or deposits in foundations or institutions similar to foundations. Taxpayers with limited tax liability may claim such deductions when determining the taxable net income only to the extent that they are able to deduct domestic income in accordance with provisions stated in the Tax Act.

Lifetime gifts

What, if any, taxes apply if an individual makes lifetime gifts?

As of 1 January 2011, there is no gift tax in Liechtenstein. There is still, however, a legal obligation to disclose the donation or receipt of gifts exceeding the value of 10,000 Swiss francs. Individuals are obliged to list all endowments and benefits given or received during the taxable year in their annual tax declaration (see article 96 of the Tax Act).

Inheritance

What, if any, taxes apply to an individual’s transfers on death and to his or her estate following death?

Liechtenstein abolished the inheritance tax with effect from 1 January 2011. There is still a legal obligation to disclose inherited assets. Heirs must include details of their inheritance in their annual tax declaration if the inheritance exceeds 10,000 Swiss francs (see article 96 of the Tax Act).

Real property

What, if any, taxes apply to an individual’s real property?

Liechtenstein levies property gains tax, which shall be paid by individuals selling the whole or parts of their domestic property. Specific regulations exist to avoid double taxation.

The tax must be paid by the seller as he or she receives the final profit of the disposal. The tax burden consists of the calculated tax amount plus a levy of 200 per cent of this calculated amount. Municipal tax is not applicable on real estate transactions.

Non-cash assets

What, if any, taxes apply on the import or export, for personal use and enjoyment, of assets other than cash by an individual to your jurisdiction?

Regarding taxation on imported products, Liechtenstein is subject to Swiss and European Economic Area (EEA) regulations because of its EEA membership. An individual is entitled to bring goods with a value of up to 300 Swiss francs across the border for personal use or as gifts without paying any tax or customs on imported products (duty-free limit). Each individual (including children) may use the duty-free limit once a day (eg, four persons may import goods with a value of 1,200 Swiss francs, which would be 300 Swiss francs each). Lower duty-free limits apply to alcohol, tobacco products and certain agricultural products (eg, meat). Value added tax (VAT) must be paid for all goods.

Other taxes

What, if any, other taxes may be particularly relevant to an individual?

In addition to the above-mentioned taxes, motor vehicle tax may be relevant to resident individuals.

Concerning VAT, Swiss regulations are applicable. VAT is applicable in Liechtenstein at a general rate of 7.7 per cent. A reduced VAT rate of 2.5 per cent applies, for instance, to the delivery of goods, such as water in pipes, livestock, poultry, fish or cereals. Some services are VAT-exempt, such as the transportation of items or medical treatment.

The tax on accommodation services is 3.7 per cent (special rate). Accommodation services include the provision of accommodation including breakfast, even if this is charged separately.

Trusts and other holding vehicles

What, if any, taxes apply to trusts or other asset-holding vehicles in your jurisdiction, and how are such taxes imposed?

According to article 44 of the Tax Act, all legal entities (in particular corporations, establishments, foundations, investment firms and registered trusts) are subject to income tax if they are domiciled in Liechtenstein or if their place of actual administration is in Liechtenstein (unlimited tax liability). Furthermore, foreign legal entities and special dedications of assets without legal personality are subject to income tax with their domestic income (limited tax liability).

Income tax amounts to 12.5 per cent of the taxable net income. The minimum income tax is 1,800 Swiss francs. The minimum income tax does not apply to legal entities whose sole purpose is operating a commercial business, if their total assets, on average for the past three years, have not exceeded 500,000 Swiss francs (see article 62 paragraph 3 of the Tax Act). Liechtenstein trusts are subject to the minimum income tax of 1,800 Swiss francs.

All legal entities (legal persons) that exclusively manage private assets in pursuit of their purpose and do not carry on commercial or economic activity may apply for private asset structure (PVS) status, which guarantees favourable tax treatment. A legal entity that has received the status of PVS is subject to a flat tax of 1,800 Swiss francs.

In addition to the requirement of not performing any economic activity, the law requires, in essence, the fulfilment of the following additional prerequisites for classification of a legal entity as a PVS:

  • its stocks or shares are not permitted to be placed publicly and cannot be traded on a stock exchange;
  • it is not allowed to advertise for any shareholders or investors, nor receive from shareholders, investors or third parties payments or reimbursements of costs for its non-economic activities; and
  • the restrictions for a PVS must be stipulated in its articles of association.

The application is usually made when the legal entity is set up or before the start of a new tax year. If the Liechtenstein tax authorities are satisfied that all preconditions prescribed by law have been fulfilled, they will grant the PVS status.

The transfer of assets to trusts, foundations or other asset-holding vehicles is not subject to tax in Liechtenstein.

Charities

How are charities taxed in your jurisdiction?

Charities are tax-exempt. Non-profit institutions, foundations and other non-profit organisations can apply for tax exemption if the main purpose of the organisation is non-profit-oriented and for charitable objectives.

Anti-avoidance and anti-abuse provisions

What anti-avoidance and anti-abuse tax provisions apply in the context of private client wealth management?

The Liechtenstein Tax Act includes a general anti-abuse provision, which stipulates that if a legal structure ‘seems inadequate’ and its sole purpose is exploiting tax advantages, the tax authorities shall levy the tax based on the actual economic reality (article 3 Tax Act). Other than that, Liechtenstein tax law does not contain any specific provisions dealing with anti-tax avoidance. Unlike the EU, the EEA does not have the competence to issue directives such as the Anti-Tax Avoidance Directives (cf EU Directive 2016/1164 and EU Directive 2017/952).