LIECHTENSTEIN Law and Practice Contributed by: Andreas Schurti and Simon Oberhofer, Schurti Partners Attorneys at Law Ltd
• the prevention of treaty abuse; • country-by-country reporting; • dispute resolution mechanisms; and • implementation of the global minimum taxation. Impact The new tax law, introduced in 2011, was designed to be in line with international and European standards. Therefore, for example, the Liechtenstein government was keen to get the approval of the EFTA Surveillance Authority in relation to Private Asset Structures. At the same time, it was possible to adopt attractive and competitive rules and a reasonable tax rate of 12.5%. The new Liechtenstein tax rules essentially fulfil all OECD requirements, so only the following few chang - es had to be made for the implementation of BEPS: • the abolition of the IP Box; • the abolition of the asymmetric treatment of capital gains and losses from participations; • the introduction of an anti-abuse provision; and • implementation of the GloBE Act with effect from 1 January 2024 to ensure the minimum taxation of 15%. 9.3 International Tax Political System Given Liechtenstein’s highly international orientation, international taxation has a significant impact. Due to Liechtenstein’s grass roots democracy (referen - dum and initiative), people are interested in and are monitoring the new tax legislation. This has triggered a cautious approach by the government, with inter - national taxation earning public attention. Internation - al tax rules could potentially undermine the (direct) Nevertheless, the Liechtenstein people know that their country is embedded in an international system, with the manufacturing industry accounting for about 39% of all jobs, and almost 100% of what is produced in Liechtenstein being exported. Likewise, the Liechten - stein financial industry – supported by the Swiss franc as the national currency – attracts clients from most parts of the world. Therefore, it is understood and democracy. Economics
accepted that compliance with international stand - ards is key. 9.4 Competitive Tax Policy Objectives Liechtenstein is aware of the necessity to implement international standards (BEPS), and will continue to implement them in the future. Nevertheless, Liechtenstein is an extremely attractive place in terms of tax and corporate law: it has modern, new and attractive tax rules that are adjusted regularly to international standards, and it has no debts, despite a reasonable corporate tax rate of 12.5% and progres - sive tax rates for individuals of up to 22.4%. Liech - tenstein has no need to increase taxes. If it should be forced to increase the level of taxation, it would keep its competitive edge as long as there is a level playing field. 9.5 The Competitive Tax System The income tax rate of 12.5% in Liechtenstein is below the minimum tax rate under Pillar Two. With the imple - mentation of Pillar Two from 1 January 2024, compa - nies that are members of a group with a consolidated revenue of at least EUR750 million are subject to a minimum tax rate of 15%. 9.6 Hybrid Instruments and BEPS Implementation Hybrid instruments are of minor importance in Liech - tenstein. To avoid tax structuring with these instru - ments, dividend payments from affiliated companies are taxable if they can claim the distribution as an expense for tax purposes. 9.7 Interest Deductibility and Territorial Tax Regime In principle, Liechtenstein applies a worldwide tax regime. Territoriality applies only in certain areas, such as foreign branches, subsidiaries or real estate. Cur - rently, no interest deduction restrictions in line with BEPS Action 4 have been implemented, nor are any expected to be implemented. 9.8 Controlled Foreign Corporation Reform Liechtenstein does not have CFC legislation, as Liech - tenstein residents are not taxed on profits earned by foreign legal entities. Dividends from foreign legal
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