LIECHTENSTEIN Law and Practice Contributed by: Andreas Schurti and Simon Oberhofer, Schurti Partners Attorneys at Law Ltd
1. Corporate Structures, Residence and Tax Treatment 1.1 Corporate Forms and Their Tax Treatment Liechtenstein Incorporated In Liechtenstein, most businesses adopt a corporate form, which is always taxed on its profits as a sepa - rate legal entity. The most frequently used corporate forms are: • the company limited by shares ( Aktiengesellschaft ); • the establishment ( Anstalt ); • the trust enterprise ( Treuunternehmen ); and • the limited liability company ( Gesellschaft mit beschränkter Haftung ). The company limited by shares and the limited liability company are subject to and fully compliant with the European rules and regulations. The establishment and the trust enterprise are more flexible and less severely regulated, and are therefore less costly to administer. Due to Liechtenstein’s membership of the EEA, Euro - pean companies ( Europäische Aktiengesellschaft ) and European co-operatives ( Europäische Genos- senschaft ) can also be established in Liechtenstein. Foundation One of the most common types of legal entities in Liechtenstein is the foundation ( Stiftung ). Foundations are not established to run businesses, but rather for estate planning in general, as well as for passing busi - nesses and specific assets on to the next generation. Foundations also serve as holding entities and voting trusts. They are taxed as all other legal entities. Taxation All businesses incorporated in Liechtenstein are sub - ject to corporate income tax on their entire taxable income. The corporate income tax rate is 12.5%. Trusts The (common law type) trust serves similar needs as the foundation. It is subject to an annual minimum tax of CHF1,800 only, and is not subject to (tax) filing duties.
Transparent Partnerships In addition to legal entities, there are legal forms of sole proprietorships ( Einzelunternehmen ) and partner - ships ( Personengesellschaften ). These undertakings are transparent and are not taxed, but their income is attributed to their owner(s) or partners, respectively. Transparent entities have their seat in Liechtenstein if: • they are governed by Liechtenstein law; • they have their main place of management in Liechtenstein; • they conduct an important part of their business in Liechtenstein; or • at least half of the partners are residing in Liechten - stein. 1.2 Use and Taxation of Transparent Business Structures Transparent entities are rare in practice. The most commonly used transparent entities are sole propri - etorships ( Einzelunternehmen ) for small businesses, and simple partnerships ( einfache Gesellschaft ) and general partnerships ( Kollektivgesellschaft ) for profes - sionals. The limited partnership ( Kommanditgesells- chaft ) is used for investment purposes where non- Liechtenstein (tax and other) rules put non-transparent legal entities at a disadvantage. In general, transpar - ent entities are not heavily used. 1.3 Tests for Determining Tax Residence Incorporated businesses (legal entities) are consid - ered to reside in Liechtenstein if their statutory seat or their place of effective management is in Liech - tenstein. The statutory seat is where the entity is reg - istered, while the place of effective management is where the strategic management decisions are taken. 1.4 Applicable Corporate and Individual Tax Rates 12.5% Corporate Rate Corporations in Liechtenstein are taxed at a rate of 12.5%. However, apart from some small businesses, every incorporated business has to pay a minimum tax of CHF1,800 per year. Transparent companies, however, are taxed proportionally at owner level. If the owner of a transparent entity is a corporation, the
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