New competitive tax system for Liechtenstein

A new competitive tax system in Liechtenstein means a flat rate of tax at 12.5% for all companies, the abolition of coupon and capital tax and the abolition of both inheritance and gift tax.

The government of the tiny European principality says it is one of the most modern and attractive in the world and fulfils current requirements for legislation that is both internationally compatible and in accordance with European law.

In a statement, Liechtenstein’s Prime Minister and Finance Minister Klaus Tschütscher emphasized the fact that the government had created a modern, attractive, competitive and efficient tax law, which is compatible with European law, and which also meets the demands of the 21st century.

He said it means that Liechtenstein will be able to respond successfully to global tax competition and it underlines the principality’s political credibility, its consistency and ability to reform and to strengthen itself in the ongoing drive towards globalization.

The new tax law will at the same time also serve to significantly improve the attractiveness and stability of Liechtenstein’s financial centre, he added.

The government’s tax law reform will serve to strengthen Liechtenstein’s position in terms of international competition, given that tax rates are one of the key factors in business location.

Drawn up in close collaboration with industry, the country’s new tax law is designed to provide companies located in Liechtenstein with legal, strategic and planning security, thus granting businesses better opportunities to structure themselves and to adapt to global competition.

Tschütscher highlighted the fact that the newly introduced 12.5% flat rate of tax will ensure that in future all companies will be taxed equally. A single, and by international comparison, lower rate of tax is an attractive signal for companies both at home and abroad, he stressed, noting that the unequal treatment of foreign and own capital has been removed with the introduction of the company own capital interest deduction.

Provisions on group taxation are also now included in the new law, as a result of the changes which came into force on 01 January 1. It means it is an even more attractive proposition to establish a new company in Liechtenstein.

The new law also increases legal certainty, in particular for financial intermediaries in Liechtenstein and for their customers. It reveals that existing requirements regarding domiciliary and holding companies, which have in the past been criticized from the point of view of European law, have been removed under the new tax law. Consequently, Liechtenstein’s tax policy now complies fully with all European standards without having reduced the attractiveness of the principality as a location.