On September 23, 2010 the Liechtenstein Parliament approved a new Law on National and Municipal Taxes (Tax Act), which entered into force on January 1, 2011. The new Tax Act replaces the Tax Act of 1961, which no longer met the demands of a simple and transparent tax law.
For the taxation of natural persons, the new Tax Act continues to provide a combination of a wealth tax and personal income tax. Instead of the existing asset exemption limit and the household deduction, a new increased tax exemption from overall income is granted (CHF 15,000 or CHF 30,000). The existing progressive tax schedule has been replaced by a 7-bracket schedule in which tax transparency is significantly enhanced. Dividends and other income on capital such as interest, leases, rents, etc. will not be taxed separately, but rather via the taxation of wealth. Under the new Tax Act, taxation of capital gains as well as the estate, inheritance and gift tax have been abolished.
Under the new Tax Act, legal persons taxable in Liechtenstein and engaged in economic activities are only subject to a corporate income tax in the amount of 12.5%. The existing capital tax has been abolished. Income and gains from participations are tax-exempt, and losses carried over are no longer subject to a time limit. In addition, a notional interest deduction has been introduced. Other important innovations include group taxation for affiliated companies and deductions for income from intellectual property rights. The new Tax Act also contains provisions on the tax treatment of national and cross-border restructurings.
The new tax regime further provides for the elimination of the "special company taxes" for domiciliary companies, since this special tax type threatened to violate the EEA Agreement with respect to the prohibition of State aid. As a consequence, the new Tax Act contains a private asset structure, which facilitates taxation of asset management companies that is attractive yet compatible with European law.
Eventually, the coupon tax has been abolished under the new Tax Act, with the exception of old reserves. Old reserves can be distributed or declared without distribution in the first two years after January 1, 2011 at a lower tax rate of 2%. Afterwards, the coupon tax on distributed old reserves will again be 4%.
A more detailled summary of taxes in Liechtenstein including VAT will be available shortly. The wording of the new Tax Act as well as the Tax Ordinance in English are available at:
Law on National and Municipal Taxes (Tax Act) - unofficial Translation
Ordinance on National and Municipal Taxes (Tax Ordinance) - unofficial Translation
For information regarding international tax treaties please refer to www.liechtenstein.li.