The Principality of Liechtenstein is known worldwide for its stable economy, attractive tax framework and the ability to manage assets effectively. Due to its geographical location between Switzerland and Austria and its close ties to both countries, Liechtenstein is often regarded as a tax haven. But what are the special features of tax law in this small Alpine country? In this article, we take a detailed look at the tax system, the role of foundations and the relevance for companies and private individuals operating internationally.
Introduction to the tax law of Liechtenstein
The Principality of Liechtenstein offers modern and flexible tax legislation that is attractive to both private individuals and companies. A key objective of the system is to create a business-friendly environment that encourages international investment. The main features of Liechtenstein tax law include low tax rates, a clear legal structure and the possibility of avoiding double taxation through international agreements.
Taxes in Liechtenstein: Overview
In Liechtenstein, the tax system is characterised by its clarity, simplicity and low tax burden. The system includes taxes on income, assets and corporate taxes and applies to both private individuals and companies.
The focus here is on combining national tax law with international regulations, in particular with Switzerland, Germany and Austria. These co-operations promote tax transparency and make it possible to avoid double taxation, which makes Liechtenstein an attractive location for international investments.
Taxes for private individuals
Private individuals living in Liechtenstein are subject to income tax and wealth tax. The tax system is characterised by its progressive structure: While lower incomes remain tax-free, the tax burden increases as income rises. This results in a fair distribution of the tax burden, which promotes social stability.
Main features of the taxation of private individuals:
- Income and assets:
Liechtenstein levies a tax on both income and assets.
Wealth tax is levied on net assets, whereby liabilities and debts are deducted. - Attractive allowances:
A significant proportion of income remains tax-free thanks to high tax allowances, especially for families or people on lower incomes. For example, capital gains or certain income from abroad may also be tax-privileged. - Special regulations for foreigners:
People from abroad who work in Liechtenstein often benefit from special tax concessions.
Tax liability only arises for income earned in the country, effectively avoiding double taxation. - Low tax burden in comparison:
Compared to countries such as the Federal Republic of Germany or Switzerland, the tax burden for private individuals in Liechtenstein remains moderate.
Taxes for companies
Liechtenstein offers a business-friendly tax environment that encourages companies to set up in the country. The corporate tax rate of just 12.5% is one of the lowest in Europe and makes the country particularly attractive for start-ups and multinationals. This tax policy, combined with the country’s political and economic stability, offers companies a clear competitive advantage.
Main advantages for companies:
- Liechtenstein Business:
Companies benefit from low tax rates, a simple tax structure and a stable legal framework.
This makes Liechtenstein a favoured location for setting up a company, particularly in the financial and service sectors. - Flexibility in taxation:
Tax incentives promote innovation and investment. For example, companies can claim depreciation on certain investments.
Holding companies enjoy special advantages and often pay reduced taxes on profits. - Avoidance of double taxation:
Bilateral agreements with many countries, including Switzerland, Germany and Austria, allow companies to avoid tax conflicts.
Profits realised abroad are often only taxed once, either in Liechtenstein or in the respective partner country. - Regulations for international companies:
International companies can realise considerable savings by using Liechtenstein tax law.
Profits from abroad can be optimised for tax purposes and taxed in Liechtenstein at the favourable local rates. - Attractive conditions for start-ups and SMEs:
In addition to multinational corporations, smaller companies and start-ups also benefit from low tax rates and uncomplicated tax regulations.
A particular focus is on promoting companies in the technology sector, as Liechtenstein supports innovation and research through tax incentives.
The role of foundations in Liechtenstein
A central element of Liechtenstein tax law is the promotion of foundations, particularly for the management of family assets. Liechtenstein foundations are often used to protect assets and plan for the long term.
The Liechtenstein Foundation
The Liechtenstein Foundation is a legal entity that manages assets and serves specific purposes. It plays a central role for wealthy families and companies who wish to preserve assets and optimise them for tax purposes.
Liechtenstein Family Foundation: This special type of foundation is designed to preserve family assets and provide long-term tax protection.
Tax advantages: Foundations enjoy considerable tax benefits in Liechtenstein.
Regulations for foundations
The tax regulations for foundations in Liechtenstein are attractive and offer numerous opportunities to structure assets effectively. The administrative costs are low and the legal system is designed for stability and longevity.
International connections and double taxation
Tax relations between Liechtenstein and other countries such as Switzerland, Austria and the Federal Republic of Germany are governed by various agreements. These agreements enable the efficient avoidance of double taxation, which makes Liechtenstein particularly attractive for international investors.
Liechtenstein and Switzerland
The close ties between Liechtenstein and the Swiss Confederation are particularly noteworthy in the area of tax law. Companies and private individuals benefit from clear regulations and a stable partnership.
Both countries have a common interest in promoting economic stability and tax transparency.
Liechtenstein and Germany
Tax cooperation between Liechtenstein and the Federal Republic of Germany is based on bilateral agreements that ensure transparency and fair taxation.
This agreement regulates the taxation of persons and companies with links to both countries.
Practical examples: Liechtenstein and tax optimisation
The combination of low tax rates and clearly defined regulations makes Liechtenstein a favoured location for private individuals and companies.
Example of asset management
A wealthy family that sets up a family foundation in Liechtenstein can protect its assets in the long term and minimise its tax burden at the same time.
- Foundations in Liechtenstein offer customised solutions for family assets.
- Income and assets can be optimally structured in order to utilise tax advantages.
Example for international companies
A company that operates in both Switzerland and Germany can benefit from the low corporate income tax and avoidance of double taxation by establishing a branch in Liechtenstein.
Tax advice and international optimisation
Anyone wishing to utilise the tax advantages of Liechtenstein should seek professional tax advice. The complexity of international tax law requires expert knowledge in order to utilise all the possibilities.
- Save taxes: With a well thought-out strategy, both private individuals and companies can significantly reduce their tax burden.
- International tax law: Liechtenstein offers customised solutions for cross-border activities.
Conclusion: Why Liechtenstein is attractive for taxes
The Principality of Liechtenstein combines low tax rates, clear legal regulations and a strong international network. Whether managing assets, founding a company or taking advantage of tax benefits, Liechtenstein is a favoured location for private individuals and companies who think long-term.
The combination of tax stability, attractive framework conditions and international agreements makes the country an important player in global tax law. With the right tax advice, investors and companies can achieve their goals effectively and save taxes at the same time.
