LIECHTENSTEIN Law and Practice Contributed by: Andreas Schurti and Simon Oberhofer, Schurti Partners Attorneys at Law Ltd
authority can review and challenge such an arrange - ment based on the arm’s length principle. 4.6 Local Transfer Pricing Rules and OECD Standards Liechtenstein has modelled its local transfer pricing rules and enforcement on the OECD standards for transfer pricing issues. 4.7 Transfer Pricing Disputes and Mutual Although the tax authority has placed greater focus on transfer pricing in recent years, it has not adopted an aggressive approach. Providing appropriate docu - mentation is still an effective way to prove that prices are in line with market conditions. Number of Disputes Agreement Procedures Focus on Transfer Pricing Normally, fewer than ten cases per year require the initiation of a mutual agreement procedure based on a double taxation treaty due to transfer pricing issues. Tax Authority’s View The tax authority considers mutual agreement proce - dures to be a useful tool in discussing double taxa - tion issues with the respective partner state. In most cases, an agreement with the partner state can be reached. 5. Taxation of Non-Local Corporations 5.1 Compensating Adjustments The tax assessment is adjusted according to the out - come of the mutual agreement procedure. 5.2 Local Branches and Local Subsidiaries The profits of both the local subsidiaries of non-local corporations and the local branches of non-local cor - porations are subject to the same corporate income tax rules, and are therefore taxed similarly. 5.3 Capital Gains of Non-Residents Capital gains of non-residents on the sale of stock in local corporations are not subject to any taxation in Liechtenstein. Liechtenstein does not levy withholding
taxes on dividends and capital gains from the sale of shares in legal entities. 5.4 Tax Implications of Change of Control In Liechtenstein, there are no change of control pro - visions triggering tax or duty charges. However, it should be noted that Swiss stamp duty may be pay - able on the sale of shares in legal entities. 5.5 Formula-Based Income Attribution There are no specific formulas to determine the income of foreign-owned local affiliates. 5.6 Deductibility of Intra-Group Management and Administrative Charges Payments by local affiliates for management and administrative expenses incurred by a non-local affili - ate are deductible to the extent that they are economi - cally related to the domestic income of the paying domestic affiliate. Management and administrative services must be charged at arm’s length. 5.7 Restraints on Related-Party Borrowing Interest Barrier Apart from the arm’s length test, there are no restric - tions regarding borrowings between related parties in relation to payable interest. However, if a company is over-indebted, interest expenses up to the amount of the over-indebtedness are not deductible for tax purposes. Safe Harbour Rules The tax authority issues safe harbour interest rates for interest rates applied between related parties. 6. Taxation of Foreign Income of Local Corporations 6.1 Foreign Income Exemptions Resident corporations are subject to unlimited tax liability on their worldwide income, except for income generated by foreign permanent establishments, income from the management of foreign real estate, and distributions and capital gains from foreign par - ticipations (see 2.7 Capital Gains ).
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