Offshore - Liechtenstein
Liechtenstein and Switzerland signed a tariff and trade agreement in 1924, which evolved into an economic, monetary and postal union. As a result of this agreement, the border between Switzerland and Liechtenstein is open and the legal currency of Liechtenstein is the Swiss franc.
In 1978, Liechtenstein joined the Council of Europe, the UN in 1990, the European Free Trade Association (EFTA) in 1991 and the European Economic Area (EFA) in 1995.
Liechenstein was blacklisted by the Financial Action Task Force (FATF) in 2000 as ‘non-ooperative’ in the fight against money laundering. But, following significant changes to Liechtenstein’s legislation and supervision of the financial sector, in 2001 the FATF removed the country from its blacklist . - NEW 2008 TAX TREATY WITH THE US - Current Treaty
The responsibilities of Liechtenstein’s Financial Market Supervisory Authority (FMSA), which began operations early in 2005, integrates the supervisory tasks that are currently assumed by the government, the Financial Services Authority, the Office of Economic Affairs (Insurance Division), and the Due Diligence Unit.
Applications to set up a business are made to government's department for the national economy. All documents must be submitted in German, and since they are submitted as part of the application must be translated and officially certified. Corporate bodies are formed under the Law on Persons and Companies act of 1926, as amended. The legislation allows the formation of a limited company by shares (AG/Ltd.), a limited company by shares (AG/Ltd.) structured as an offshore company (minimum fully paid up capital Sfr50,000 and the minimum annual capital tax is Sfr1,000). Companies formed as joint-stock companies must have an initial capital of at least Sfr50,000, which is divided into either bearer or registered shares.
Companies formed as establishments, trust corporations or foundations must have initial capital of Sfr30,000. Establishments do not have to have their initial capital to be divided into shares. Companies that are formed as foundations may be either family foundations or ecclesiastical foundations. Presently, there are 73,700 holding companies registered in Liechtenstein.
Financial service providers fall into four categories: banks and finance companies, investment undertakings, professional trustees, lawyers, auditors, and Insurance undertakings. The Financial Services Authority (FSA) is responsible for the supervision of banks, finance companies, investment undertakings, lawyers, professional trustees, patent attorneys and auditors. Financial institutions, which are primarily banks, are required to meet the accounting guidelines of the Swiss Federal Banking Commission.
The Law on Banks and Finance Companies of 1992, as amended, regulates banks and finance companies. Finance companies may not accept client deposits.
The Investment Undertakings Act 1996 is the main legislation for collective investment schemes. A distinction is made in the legislation between investment funds and investment companies. An investment fund is formed as a trusteeship under the Persons And Companies Act. Under this act, an investment company is an investment undertaking in the legal form of a joint-stock company. Investment undertakings may be formed for securities for 'other values' or for real estate.
Trust enterprises are formed under the Law Concerning the Trust Enterprise 1928. Professional trustees may found legal entities, serve on boards of directors and perform accounting and auditing services. Under Liechtenstein law a trust may be established for an indefinite period. The Insurance Supervision Act 1996 established Liechtenstein as a location for insurance businesses.
At the end of 2003, there were 16 banks, one finance company and eight audit firms licensed under the Banking Act, along with 107 Liechtenstein investment undertakings and 192 foreign investment undertakings. There were also 10 audit firms licensed under the Investment Undertakings Act. There were also 79 licensed trustees, 279 trust companies, 20 auditors, 28 audit firms, 12 audit companies, 103 lawyers and 27 law firms doing business in the country.
The Criminal Code contains provisions punishing both money laundering and organized crime. Supplementing these provisions is a new offence of terrorist financing is scheduled to enter into force. In addition, the Due Diligence Act and the Due Diligence Ordinance established rules governing financial transactions. The Due Diligence Act includes comprehensive customer ID requirements. Financial intermediaries are obliged under the law to know and identify their clients.
Commercial operations in Liechtenstein are subject to capital and profits taxes. A formation tax (stamp duty), is payable upon formation of a company and a capital increase is assessed at 1% or with a tax-free allowance of Sfr250,000. Foreign companies operating a branch in Liechtenstein are subjected to the capital and profits tax requirement. The tax rate for capital taxes is 0.2%. Profits taxes are assessed on entire annual net profit. The profits tax rate depends on the ratio of net profit to capital and lies between 7.5% and 15%. The tax rate may be increased by 1% to at most 5% depending on the relation between distribution and taxable capital. The maximum profits tax is therefore 20%.
Holding companies, domiciliary companies, and investment companies domiciled in Liechtenstein pay no profits taxes, but pay capital taxes of 0.1% of the paid-up capital or assets invested in the company or Sfr1000 annually, whichever is higher. For foundations, the capital tax for the amount of assets including reserves exceeding Sfr2 million is reduced to 0.075% and for the amount of assets including reserves exceeding Sfr10 million to 0.050%. For Liechtenstein investment companies, the tax is also reduced to 0.040% for the amount of assets including reserves exceeding Sfr2 million.
Insurance companies under the Insurance Supervision Act exclusively operating as captives pay a capital tax of 0.1% on the company's equity. The tax rate for equity exceeding Sfr50 million is reduced to 0.075% and for equity exceeding Sfr100 million francs to 0.050%. Insurance companies operating both as captives and for third parties are subject to capital and profits taxes for the part arising from the insurance of third parties.
Indirect taxes in Liechtenstein include estate, inheritance, and gift tax, value added tax, stamp duties and a coupon tax. The coupon tax, which is levied on capital interest coupons from legal persons, bonds and other entities, is payable at a rate of 4%. The stamp duty on domestic equities is usually 1% with a tax-free allowance of Sfr250,000. The transaction duty on transfers of securities is 1.5 or 3%.
Residents and those employed in Liechtenstein must pay both property and income taxes. General partnerships and limited partnerships are also subject to property and income taxes, along with legal entities and trusteeships not subject to company taxes (i.e., capital and profits taxes and special company taxes). There is also a municipal tax surcharge. When calculated along with the average municipal tax surcharge, the minimum property tax rate is currently 0.162% with the maximum at 0.8505%. The minimum Income tax is currently 3.24%, while the maximum is 17.01%. Employers must deduct a basic amount of the income tax from an employee's monthly salary and wage payments and forward it to the Liechtenstein Tax Authority.
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