Double tax treaties in Liechtenstein

Starting with 2009, Liechtenstein recognized the International Tax Cooperation Standards using a model established by the OECD. One year later, the country created a legal basis for cross- border administrative assistance in tax matters and it started creating double tax treaties and tax information exchange treaties with other European countries and with countries outside the EU.

Double tax treaties are meant to prevent double taxation. Sometimes, double taxation relief is extent to tax paid by subsidiaries of foreign companies and other forms of foreign affiliates in terms of economic definition.

Usually, double tax treaties provide tax relief as tax deductions, tax exemptions, credits or allocation of expenses.

List of countries that have signed double tax treaties with Liechtenstein

The following countries have signed double taxation agreements with Liechtenstein: Uruguay, Hong Kong, San Marino, Luxemburg, Switzerland, Czech Republic, Singapore, Guernsey, Malta, Georgia, Bahrain and Austria.

The following countries have signed tax information exchange agreements: Denmark, Sweden, Finland, Norway, Iceland, Greenland, Faroes, St. Kitts and Nevis, Antigua and Barbuda, Netherlands, Belgium, Ireland, St. Vincent and the Grenadines, France, Monaco, Andorra, Germany, United Kingdom, Italy, China, Mexico, India, Canada, Japan, Australia, South Africa and USA.

The reason why Liechtenstein does not have such a vast network of double tax treaties is due tot the fact that the country already has a very advantageous fiscal system. However, over the last years, Liechtenstein has continuously extended its double tax treaties network, with various other treaties in preparation. The local fiscal system grants no withholding taxes on interests, dividends and royalties paid to non – residents as well as a low corporate tax.

Provisions of double tax treaties

The provisions included in the double tax treaties are referring to the personal income tax, the corporate income tax, the corporation taxes, the wealth tax, the real estate capital gains tax and the coupon tax.

The usual corporate tax in Liechtenstein is of 12.5% or a minimum of 1,200 CHF, except for small businesses. Due to these treaties, this tax is exempt or credit in the country of origin for foreign companies.

Furthermore, withholding taxes paid by legal entities to local Liechtenstein companies are exempt or at least minimized by the provisions of the double tax treaties. Interests, royalties or dividends paid to foreign companies or other entities by Liechtenstein companies are exempt by law.

How to benefit from the provisions of double tax treaties

In order to benefit from the provisions stipulated by double tax treaties, the applicant must deliver the tax authorities in Liechtenstein a tax certificate issued in the country of residence, proving that the taxes are already paid in the respective country.

Tax information exchange treaties

To prevent tax frauds, the double tax treaties signed by Liechtenstein also contain provisions regarding the tax information exchange, if they are elaborated following the OECD model. According to this model, tax authorities in Liechtenstein may require information related to taxpayers from partner countries and vice versa.

For the same purpose, of avoiding tax frauds, Liechtenstein has signed various tax information exchange agreements.

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