Liechtenstein is one of the most favorable countries for foreign investments from a taxation point of view. This is one of the main reasons tax minimization can be employed here in an effective manner. Most foreign enterprisers and citizens working here would even say that tax minimization is not even necessary, because of the low corporate tax and the salary-related deductions Liechtenstein offers.
Tax minimization can also be referred to as tax planning which implies making use of every financial facility offered by the Liechtenstein Government in order to reduce the taxes a company or an individual must pay. Our Liechtenstein company formation agents can offer more information on the taxation system of the Principality.
One of the most important steps to take when planning how to minimize the taxes to pay in Liechtenstein is to hire an accountant who will provide the necessary information about the local taxation system.
Foreign investors who want to move to Liechtenstein will benefit from various incentives by setting up special purpose vehicles through investments in research and development activities can be subject to various tax deductions. The same applies to the income deriving from intellectual property rights which benefit from tax deductions of up to 80%.
It should be noted that Liechtenstein does not acknowledge the tax residency status, but it relies on the domicile statuses for both companies and individuals.
Our company registration consultants in Liechtenstein can explain the requirements for domiciliation in the Principality.
Below, you can watch our vide on tax minimization in Liechtenstein:
First of all, the advantageous tax system applies only to tax residents of Liechtenstein. For this purpose, a company must have a registered address in the Principality of Liechtenstein, while foreign citizens must pay the taxes related to their employment here. Liechtenstein companies will benefit from a 12.5% corporate tax rate, which is one of the lowest in Europe which already a great tax minimization solution.
Employees of companies Liechtenstein, on the other hand, can deduct many of the costs related to the employment. Among these are living, commute and education costs. These are very advantageous tax minimization solutions for foreign managers of companies in Liechtenstein.
It is also good to know that Liechtenstein does not levy any gift or property taxes compared to other European countries, which is why owning real estate is a very useful tax minimization tool in Liechtenstein.
Double taxation agreements are one of the most employed solutions for minimizing taxes in Liechtenstein. Most foreign companies with subsidiaries or branch offices can claim the taxes paid in Liechtenstein in their home country in accordance with the provisions of the double tax treaties. The foreign tax relief can be granted as a credit or an exemption.
Also, Liechtenstein does not impose any interest or royalties taxes, while dividend payments are subject to a 2.5% tax rate if they were accrued before January 1st, 2011.
Liechtenstein is the only country in Europe which recognized trusts in the Companies Law. The trust is an excellent tax planning and succession tool for both local and foreign citizens. The trust has no limitations when it comes to its uses. Moreover, the trust can be considered a legal entity and benefit from the one of the lowest corporate taxes applicable in Europe. The minimum amount a trust will pay as a tax is 1,200 CHF. Also, the trust is subject to minimum accounting requirements.
The foundation can also be an important tax minimization solution as it is subject to an annual income tax of 1,200 CHF. The same minimum accounting and reporting requirements apply to foundations, just as in the case of trusts. Foreign citizens have several types of foundation to choose from, however the private one is the most favorable from a taxation point of view.
For full information on all the tax minimization solutions available in the Principality or if you want to open a company in Liechtenstein, please feel free to contact our company registration representatives.