LIECHTENSTEIN Law and Practice Contributed by: Andreas Schurti and Simon Oberhofer, Schurti Partners Attorneys at Law Ltd
2.3 Special Incentives Private Asset Structure
proportional profit is subject to corporate income tax by the corporation. Progressive Rates up to 22.4% for Individual’s Business Businesses owned by an individual directly or through a transparent entity are taxed solely on the level of the individuals or the partners. The personal income tax rate of such individual or partner depends on their income, wealth, deductibles and place of residency (municipality) within Liechtenstein. The progressive income tax rates can reach 22.4%. The Persons and Companies Act ( Personen- und Gesellschaftsrecht ) requires incorporated business - es to maintain proper accounting records using the accrual basis. Taxable Income Taxable income is the accounting profit minus tax- free income (ie, income from dividends and capital gains from the sale of shares in legal entities, foreign real estate, and permanent establishments abroad) and minus the notional interest deduction on equity. Taxable income is taxed at a rate of 12.5%. In addi - tion, positive taxable net income for the year can be reduced by the loss brought forward by a maximum of 70% of the taxable net income. Notional Interest Deduction on Equity All ordinary taxed companies can claim a deduction for notional interest on equity of 4% of modified equi - ty. The equity interest deduction cannot result in a current loss or increase a current loss. 2.2 Technology Investments Patent Box Currently, there are no tax incentives or benefits for R&D expenditures in Liechtenstein, such as a patent box. As technology tax incentives can be a potential tool for profit shifting, all tax incentives for technology investments have been abolished in Liechtenstein. 2. Corporate Tax Regime 2.1 Taxable Profits Accrual Basis
Any legal entity (domestic or foreign) that is resident for tax purposes in Liechtenstein can apply for treat - ment as a Private Asset Structure if it does not pursue active commercial activities but just invests its assets as a passive investor. Benefits Private Asset Structures do not have to file accounts and tax returns; they just have to pay the minimum tax of CHF1,800 per year. Activities Private Asset Structures may not conduct commer - cial activities. Typically, they hold “bankable assets” on their own behalf, real estate for their owners or beneficiaries, and art collections, liquid funds or par - ticipations. Participations held by Private Asset Structures Private Asset Structures or their shareholders or beneficiaries must not exert actual control over the management of participations by means of direct or indirect influence. However, the mere use of the share - holder’s voting rights is not harmful. The shares or ownership interests (if any) of a Private Asset Structure may not be publicly placed or traded. Private Asset Structures are often used as top holdings of compa - nies that are not run by members of the family of the founder and beneficiaries. Typical use Private Asset Structures are frequently used by pas - sive private investors/wealthy individuals. They can also benefit from the lack of withholding taxes on any kind of distributions (dividends from companies lim - ited by shares, distributions from foundations, estab- lishments, etc). EFTA Surveillance Authority approval The favourable taxation of Private Asset Structures was approved by the EFTA Surveillance Authority as being compliant with European competition law. Trusts Liechtenstein trusts are subject to the minimum corporate income tax of CHF1,800. As opposed to
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