LIECHTENSTEIN Law and Practice Contributed by: Andreas Schurti and Simon Oberhofer, Schurti Partners Attorneys at Law Ltd
2.9 Other Notable Taxes Value Added Tax
tenstein and foreign corporations are tax-free for indi - viduals residing in Liechtenstein. 3.5 Taxation of Individuals on Shares in Public Corporations For income from publicly traded companies, the same rule applies. Dividends and gains from the sale of shares in Liechtenstein and foreign companies are tax-free for individuals in Liechtenstein. 4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes Liechtenstein does not levy withholding taxes on divi - dends, interest or royalties. 4.2 Key Treaty Jurisdictions for Inbound Investment Since Liechtenstein does not levy withholding taxes, investors’ country of residence is not a factor. 4.3 Tax Authority Scrutiny of “Treaty Shopping” Practices Liechtenstein does not levy withholding taxes, so this is not relevant. 4.4 Transfer Pricing Issues for Inbound Investors Liechtenstein law does not provide for any specific rules or regulations governing transfer pricing; there is only a general rule that transfer prices between related parties must be in line with arm’s length principles. Liechtenstein applies the OECD guidelines on trans - fer pricing issues and has fully implemented BEPS Action 13. Inbound investors operating through a local entity must document the appropriateness of the transfer prices of significant transactions with related parties and permanent establishments. 4.5 Challenges to Related-Party Limited Risk Distribution Arrangements There are no specific rules with respect to the use of related-party limited risk distribution arrangements in Liechtenstein law. However, the Liechtenstein tax
Due to the Swiss–Liechtenstein Customs Treaty, a value added tax has been implemented in Liechten - stein, which is identical to the Swiss value added tax and is levied on goods and services and their import. The standard rate is 8.1%, with reduced rates of 3.8% applying to hotel accommodations and 2.6% applying to basic goods. 3. Corporations and Non-Corporate Businesses 3.1 Form of Closely Held Local Businesses Closely Held Local Businesses Most closely held local businesses operate in a cor - porate form. Only micro-enterprises operate in a non- corporate form. 3.2 Individual and Corporate Rates There are no specific rules to prevent individual pro - fessionals such as architects, doctors, engineers, consultants, accountants and lawyers from earning income at the corporate rate. However, if they are residing or domiciled in Liechtenstein, they are subject to taxation on their respective worldwide net assets, which include their corporate entity. Professionals who have not incorporated their busi - nesses are generally taxed as self-employed persons and are subject to income and wealth tax. 3.3 Restrictions on Retention of Earnings by Closely Held Corporations There are no regulations or restrictions prohibiting the accumulation of earnings for investment purposes. The accumulation of the profits increases the value of the entity, thereby also increasing the basis for the wealth tax of the individual as owner of the entity. 3.4 Taxation of Individuals on Shares in Closely Held Corporations Investments in legal entities are subject to wealth tax. According to Liechtenstein tax law, any income derived from assets subject to wealth tax is not con - sidered taxable income. Therefore, dividends and gains from the sale of shares in closely held Liech -
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