Is Liechtenstein Still a Tax Haven in 2023?

In the realm of low or zero-tax jurisdictions, Liechtenstein has long been an attractive option for businesses. But what types of businesses still consider Liechtenstein a viable option for these purposes? Furthermore, in light of global efforts to curb tax avoidance, is Liechtenstein still regarded as a tax haven in 2023?

Country profile

Nestled in the heart of the Alps between Switzerland and Austria, Liechtenstein is a picturesque microstate with a fascinating story to tell. With an area of just 160 square kilometers and a population of around 38,000, it’s one of the smallest countries in the world. But what Liechtenstein lacks in size, it more than makes up for in wealth and prosperity. It is considered one of the richest countries, with a nominal GDP per capita that’s among the highest in the world. This small nation is known for its thriving financial sector, low taxes, and a strong culture of entrepreneurship.

The picturesque principality of Liechtenstein in Europe is famous for its stunning alpine vistas and beautifully preserved medieval castles. What many people may not know is that this tiny nation is also a powerhouse in the financial world, boasting a remarkable GDP per capita of approximately USD 157,000. However, unlike other tax havens, Liechtenstein’s economy is diversified, with a strong emphasis on manufacturing. From precision engineering to high-tech production, Liechtenstein’s manufacturing sector plays a critical role in its economic success. 

The principality of Liechtenstein may not be a member of the European Union but it has close ties to the EU through its participation in the European Economic Area (EEA) and the Schengen Area. 

Liechtenstein’s economy has been awarded the prestigious AAA rating by numerous rating agencies, a testament to the country’s commitment to maintaining a stable financial climate. The government’s stringent budgetary policies have been instrumental in sustaining this economic stability, ensuring that Liechtenstein remains free of national debt and budget deficits.

Is Liechtenstein a tax haven in 2023?

Liechtenstein has long been known for its reputation as a low-tax jurisdiction, dating back to the 1920s. This tax haven has been attracting wealthy individuals seeking to reduce their tax liabilities for more than a century. However, unlike some offshore tax havens, Liechtenstein is a well-regulated and transparent jurisdiction. The standard tax rates for individuals and corporate profits are 8% and 12.5%, respectively, making it an attractive destination for businesses and HNWIs.

Is Liechtenstein still a tax haven in 2023? The answer is not so straightforward. While it does offer favorable tax rates, Liechtenstein has also taken steps to comply with international tax standards and has signed numerous tax treaties with other states. In late 2018, the European Union excluded Liechtenstein from its roster of tax havens after the country adopted legislation aligning its financial transparency requirements with EU norms to demonstrate a commitment to combating tax evasion and illicit financial activities. Nonetheless, its reputation as a low-tax a.k.a. midshore jurisdiction remains intact.

Liechtenstein’s tax haven status is attributed to its attractive tax policies for trusts and private property structures. These entities only pay a minimal income tax of CHF 1,800 per year, which is essentially a flat tax. To be recognized as a “private property structure,” a legal entity must apply with the tax authority. This flexible tax framework has made Liechtenstein a popular destination for HNWIs seeking to optimize their financial assets.

International Wealth customers enjoy a unique opportunity to set up EU bank accounts in Liechtenstein. 

Liechtenstein’s corporate law offers some interesting forms of ownership, namely “Anstalt” and “Stiftung.”

An Anstalt is a unique legal entity type that has no shareholders or board members. If an Anstalt is solely involved in investment activities, it is not subject to taxes.

On the other hand, a Stiftung is a foundation type in Liechtenstein that provides a high level of confidentiality to its beneficiaries. This is why it is popular among wealthy foreign individuals seeking to protect their assets.

Personal Income Tax

In Liechtenstein, taxation is impressively favorable. The jurisdiction comes with a progressive income tax system that is both lenient and efficient. If an individual earns an annual income below CHF 15,000, they are exempt from paying any taxes. If their earnings are above that threshold, a maximum tax rate of 8% is applied only to profits exceeding CHF 200,000. In addition to this, a communal tax is imposed as a surcharge to the tax rate. Depending on the individual’s income level, the latter ranges from 2.5% to 22.4%. Overall, Liechtenstein’s tax haven status makes it an attractive destination for businesses and HNWIs looking to optimize their tax obligations.

Here’s when an individual may become a Liechtenstein tax resident:

• they own properties in Liechtenstein registered as their permanent residence
• they are employees of a Liechtenstein company or run a business in the tax haven. 

Liechtenstein requires its residents to pay taxes on their income from all sources around the world. The tax on capital gains is treated as regular income, except for some property sales that are subject to a separate tax. Nonetheless, final tax payments in Liechtenstein come with generous personal deductions and allowances, including those for capital gains, which range from CHF 5,000 to CHF 11,000.

If curious about how you can set up a corporate bank account in Liechtenstein, you are welcome to read the article linked above.

Business taxation in Liechtenstein

To maintain their tax residency status in the tax haven, all legal entities in Liechtenstein are obligated to pay a minimum corporate tax of CHF 1,800 annually, regardless of their ownership structure. The prevailing rate of this tax stands at 12.5%. However, trusts and private asset structures are only required to pay a minimal flat-rate tax. Moreover, companies whose aggregate assets stood at less than CHF 500,000 over the past 3 years are 100% tax-exempt.

Additionally, resident companies in this tax haven are taxed on their worldwide income, except for passive income earned from foreign real estate.

In Liechtenstein, capital gains and dividends are usually not subject to taxation. However, if a foreign legal entity that pays dividends has over 50% of its revenue as passive income, resident companies of this tax haven are required to pay taxes on capital gains and dividend income. Additionally, there is a 12.5% standard rate for taxing royalty income.

Liechtenstein’s tax laws are in line with the international standards set by the OECD and the EU. It is widely recognized as a tax haven that could be part of the OECD’s BEPS 2.0 initiative. This initiative seeks to set a global minimum tax rate of 15%, which Liechtenstein may potentially participate in.

Go ahead and message the International Wealth consultants to set up an LLC in Liechtenstein, incorporate a trust or a fund in the above jurisdiction.

The email address info@offshore-pro.info is the one you are welcome to use to contact the International Wealth profs.