Income Tax in Liechtenstein
Income Tax in LiechtensteinUpdated on Friday 31st July 2020
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The income tax in Liechtenstein applies to the income generated from the Principality by both companies and individuals. The rate is a fixed one for companies and that for individuals is a progressive one that also includes a municipality surcharge.
Our lawyers in Liechtenstein highlight the main issues to take into consideration about the income tax when you open a business or derive income from a self-employed activity as well as from other Liechtenstein sources.
Corporate income tax in Liechtenstein
Companies are taxed based on their residence. This means that a company that is incorporated in Liechtenstein (has its registered seat here) will be treated as a tax resident and will be taxed on its worldwide profits. An exemption applies to the income derived from foreign branches and that derived from foreign immovable property. At the same time, nonresident companies are taxed only on their income derived expressly from Liechtenstein, whether this is the income produced by a branch or income from Liechtenstein immovable property.
Our lawyers in Liechtenstein highlight the main taxes applicable to companies:
- 12.5%: this is the corporate income tax rate in Liechtenstein and an alternative minimum tax can be available to qualifying companies;
- 0% withholding tax: there is no tax on dividend distributions and no withholding tax on interest or royalties;
- 1% stamp duty: this is levied on contributions to Liechtenstein company equities; for the stamp duty tax Liechtenstein is considered part of Switzerland;
- 0.15% transfer tax: this applies to the transfer of securities by security dealers on Swiss and Liechtenstein securities; a lower rate of 0.3% applies in case of foreign securities;
- 7.7%: this is the standard value-added tax rate; certain types of goods and services are subject to lower rates of 3.7% (for the hotel industry) or 2.5% (for banking services and others).
You can reach out to the tax experts at our law firm in Liechtenstein for more details about corporate taxation in the Principality of Liechtenstein.
Individual taxation on income in Liechtenstein
Our lawyers in Liechtenstein are also able to provide you with information if you derive income following a self-employed activity, as an employee or from rent. For taxation matters it is relevant to note that the same residence principle also applies to individuals: one is taxed only on the income he derives from certain sources in Liechtenstein. This means that non-residents (those without a permanent or habitual residence here) are subject to personal income tax on income they derive from:
- employment in Liechtenstein or a self-employed activity;
- attendance fees or rental income as well as other activities that generate income.
The personal income tax rates vary and are progressive up to 8%. In addition to this, individuals need to take into consideration the municipal tax (also referred to as the communal tax) that varies according to the place of residence and it ranges between 150% and 250%. This surcharge is decided each year by the local authorities.
Adding up the two taxes (the national and the communal tax), the effective personal income tax in Liechtenstein can range between 2.5% to 22.4%.
Our team of tax lawyers in Liechtenstein can give you complete details on the taxes of personal income if receive income from a permanent establishment, a self-employed activity, rental income or otherwise.
Taxation compliance in Liechtenstein
Our attorneys in Liechtenstein outline the most important issues related to tax compliance and reporting:
- tax year: for companies in Liechtenstein this is the same as the accounting year;
- filing: the tax return is filed by 1 July the year following the one for which the assessment is made; the tax payments are due by August 31 following the tax year;
- consolidated returns: companies may choose a group taxation model when common ownership is of at least 50%;
- for individuals: the tax year is the same as the calendar year and filing is due in April the year following one for which the assessment is made.
Penalties apply to both legal and natural persons for late or incomplete tax filing as well as for failure to file the tax returns.
Understanding the principles of the income tax in Liechtenstein is important before starting a business of commencing an activity that produces income.
Our law firm in Liechtenstein offers complete legal services related to taxation and our team can answer any questions about the manner in which companies and individuals are subject to tax in the Principality. Contact us for more information on how we can assist you.