LIECHTENSTEIN Law and Practice Contributed by: Andreas Schurti and Simon Oberhofer, Schurti Partners Attorneys at Law Ltd
Private Asset Structures, trusts do not have to fulfil certain prerequisites and are not subject to certain restrictions, including in relation to the holding of par - ticipations. 2.4 Loss Relief Loss Carried Forward Losses carried forward from (all) former years can be set off against 70% of the profits of the respective current year. Losses carried forward are not subject to a time limit and can therefore be carried forward without restriction. Losses from activities that are not subject to taxation, such as the sale of participations in legal entities, can - not be set off against taxable income. Loss Carried Back Liechtenstein does not provide for carried back loss. 2.5 Deduction of Interest Imposed Limits on Deduction of Interest There are no specific thin capitalisation rules in Liech - tenstein. However, interest payments to related parties must be at arm’s length. In the event of over-indebted - ness, interest charged by affiliated companies on the amount of excessive debt is not tax deductible. The Liechtenstein tax authority issues safe harbour inter - est rates for various currencies annually, in relation to related parties. Due to the fact that a 4% notional interest deduction can be applied and because there are no thin capi - talisation rules, there is no great incentive to pay high interest rates. 2.6 Consolidated Tax Grouping Group Taxation Upon application, affiliated legal entities can form a group of entities for tax purposes and offset the losses incurred within one year against the profits of other group members generated in the same year. The compensation takes place by way of the losses from the group members being attributed to the group parent or – if there is a loss after offsetting any attrib - utable losses against the taxable net income of the group parent – the losses from the group parent being
attributed to a group member that is fully taxable in Liechtenstein. The following conditions apply to group taxation, among others: • the parent entity must reside in Liechtenstein for tax purposes (either because it is registered in Liechtenstein or because it is managed out of Liechtenstein); and • the parent entity must hold at least 50% of the voting rights and the capital of the (domestic or foreign) subsidiaries as of the beginning of the respective year. 2.7 Capital Gains Capital Gains on Legal Entities Capital gains from the sale of or the liquidation of interest in legal entities are tax-exempt, provided the anti-avoidance rules do not apply. Anti-Avoidance Rules In order to be tax-exempt, the anti-avoidance rules require – in relation to holdings of foreign entities – either that the total gross revenue of the respective foreign entity derived from passive sources is less than 50% of the overall income or that the net profits of the respective foreign entity are not subject to over - all low taxation (considering potential foreign taxes). Low taxation is assumed if the total tax burden abroad is less than half of that which would result from a com - parable situation in Liechtenstein. In practice, the anti- avoidance rules disadvantage participations in typical (Caribbean) offshore jurisdictions where there is hardly any taxation (less than 6.25%). Real Estate Profits earned on the sale of domestic real estate are subject to a special tax, with a maximum rate of 24%. Foreign real estate is not subject to taxation in Liech - tenstein. 2.8 Other Taxes on Transactions Stamp Duties On the basis of the Swiss–Liechtenstein Customs Treaty, Swiss stamp duties are levied in Liechtenstein. Stamp duties are payable on the issue and transfer of certain securities.
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