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Double Tax Treaties in Liechtenstein

Double Tax Treaties in Liechtenstein

Liechtenstein doesn’t have a vast network of double tax treaties. The first treaty was signed with Austria in 1969, followed in 1995 by a treaty signed with Switzerland.

In 2009, two treaties were signed with Luxembourg and San Marino. The year 2010 has brought the last double tax treaties signed by Liechtenstein with Uruguay and Hong Kong.

The following taxes paid in Liechtenstein are covered by the anti-avoidance tax treaties:

  •          –       the personal income tax;
  •          –       the corporate income tax;
  •          –       the wealth tax;
  •          –       the corporation taxes;
  •          –       the coupon tax;
  •          –       the real estate capital gains tax.

The withholding taxes on dividends, interests, and royalties are also influenced by the provisions of the double tax agreements.

Our company formation agents in Liechtenstein can offer full information on the taxation system applicable in the Principality.

Who is covered by Liechtenstein’s double tax agreements?

All Liechtenstein double tax treaties cover both individuals and companies residing in one or the other contracting party. By residency, an agreement provides for the place where individuals own properties in which they live or countries where they pay their taxes, while in the case of companies, the country in which they have a management place.

Liechtenstein’s double taxation agreements also provide for special cases in which an individual residing in a partner country has an employment contract in Liechtenstein, or a Liechtenstein citizen works in a country with which the Principality signed a double taxation treaty. In order to avoid double taxation, the employee will usually be taxed in the country where the activity is carried out. The same provision applies to companies with a permanent establishment status, such as branch offices.

The video below offers information on Liechtenstein’s double tax agreements:

Withholding taxes in Liechtenstein’s double tax agreements

The double tax treaty signed with Austria is providing a 15% for dividends paid to an Austrian or Liechtenstein company, the interests are not taxed and a 5% or a 10% tax is charged on royalties paid to an Austrian or Liechtenstein company. The 5% is charged if the royalties are paid to a company with industrial production in Austria or Liechtenstein. The treaty signed with Switzerland is providing no withholding taxes on dividends and royalties and a 10% withholding tax applicable on the interests if the debt claims are secured by a mortgage.

The lowest taxes in Liechtenstein are provided by the treaty signed with Hong Kong. As a matter of fact, there is no tax on dividends or interests and only a 3% tax on royalties. The double tax treaties of Liechtenstein are also providing for the exchange of information clauses, signed with the purpose of avoiding the tax frauds.

However, the double tax treaties signed with Luxembourg, Hong Kong or San Marino are allowing these states to request exemptions from these clauses if the information is held by a financial institution, a bank or other relevant reasons.

Our company registration consultants in Liechtenstein can offer information on the country’s double tax treaties.

Tax information exchange agreements in Liechtenstein

Besides the above double tax treatiesLiechtenstein has signed tax information exchange agreements with the same purpose as the clause of the double tax treaties: to avoid tax frauds. The signatory states are: USA (2008), United Kingdom (2009), Andorra (2009), Germany (2009), France (2009), Monaco (2009), St. Vincent and the Grenadines (2009), Ireland (2009), Belgium (2009), Netherlands (2009), Antigua and Barbuda (2009) and St. Kitts and Nevis (2009).

To beneficiate from its provisions, the requester must submit an application containing the identification of the taxpayer, the period of time of the covered taxation, details regarding the necessary information and the form in which the requester wishes to receive it, the reason why the information is considered relevant, reason for believing the information is held by that authority, the name and address of the person which holds the information, a declaration that the request is not against the law, a statement that the requester has already made any attempt to get the information on his territory and didn’t succeed.

The latest changes in Liechtenstein’s double tax treaties

In the last 3 years, Liechtenstein added the following countries to its list of agreements on double taxation:

  • –       the double tax treaties with Andorra, Malta, Singapore, Switzerland and the UAE were renewed in 2015;
  • –       the agreements with the Czech Republic and Hungary entered into force in 2016;
  • –       Liechtenstein signed and enforced new agreements with Austria, Germany, Hong Kong and San Marino;
  • –       the latest additions to Liechtenstein’s double tax treaty list are Uruguay and the United Kingdom.

Avoidance of double taxation in Liechtenstein

In order to avoid double taxation, the agreements signed by Liechtenstein could provide for special provisions in case one or more taxes are levied twice. These are called foreign tax reliefs and apply under the following circumstances:

  •          –       if the income is generated in a country with which Liechtenstein has signed a double tax treaty with and a provision in which a tax credit must be offered against the tax levied twice;
  •          –       a tax exemption is granted if such provision is included in the double tax agreement signed by Liechtenstein;
  •          –       in case of reciprocity, it is applicable in both countries signing the agreement;
  •          –       a tax relief can also be granted to companies paying tax in other countries.

If you want to open a company in Liechtenstein and need assistance, please contact us. You can also ask our Liechtenstein company formation representatives about the latest double tax treaties the country has signed.