Resident and non-resident corporations have the possibility to opt for group taxation (i.e. tax group) if they meet the legal requirements (e.g. more than 50% of capital and 50% of voting rights). The ultimate group leader must either be a corporation domiciled in Liechtenstein or with the effective place of management in Liechtenstein.
In order to form multi-level group structures, sub-groups may also be built. The same rules are applicable for the group leader of the sub-group as for the primary group leader.
A written application for forming a tax group must designate the group leader and group members to be filed with the tax authorities. It is not necessary that all associated companies have to become group members. The group leader can decide, for each company that fulfils the conditions, which company will be included in the group or not. The group leader and the group members need to have uniform business years.
Losses of group members can be offset against profits of the (sub) group leader within the same year. The offsetting is only possible under the following conditions:
- Only losses incurred after the option for group taxation can be considered.
- Losses need to be calculated according to Liechtenstein profit calculation rules.
The losses are allocated to the (sub) group leader according to the direct participation quota of the (sub) group leader to the group member whose losses should be offset. If the losses cannot be used at the level of the (sub) group leader, they can be allocated to other group members. However, the minimum tax is applicable for each group member.
Losses that have been attributed to the (sub) group leader must be adjusted in the following cases:
- Losses can be offset against profits on the level of the group member.
- Exit of group member from the group.
- Reduction of participation quota of a group member.
- Depreciation is made on a participation due to losses.
The (sub) group leader must provide evidence annually that no adjustment needs to be made. Even if the conditions for adjustment are not fulfilled, losses that have been attributed to the (sub) group leader must be adjusted five years after attribution.
Until 1 January 2017, Liechtenstein did not have specific transfer pricing rules apart from the rule that intra-group transactions are carried out at arm’s-length terms. However, since the tax law amendments entered into force on 1 January 2017, all companies will be obligated to provide, upon request by the tax authorities (i.e. no periodical filing), documentation regarding the adequacy of transfer prices of transactions with related companies or PEs. Large companies have to prepare the transfer pricing documentation based on an internationally accepted standard. If a company exceeds at least two of the following three criteria, it qualifies as a large company (based on Liechtenstein company law):
- Total assets of CHF 25.9 million.
- Net revenue of CHF 51.8 million.
- Annual average of 250 full time employees.
Small companies (i.e. not exceeding two of the above criteria) are not required to prepare transfer pricing documentation in accordance with an international accepted standard.
Country-by-country (CbC) reporting
The CbC reporting law entered into force on 1 January 2017. CbC reporting is applicable for Liechtenstein group holding companies with a consolidated turnover of at least CHF 900 million. The legal basis of the CbC reporting law is the Convention on Mutual Administrative Assistance in Tax Matters (MAC). The MAC entered into force on 1 December 2016 and is applicable for tax years starting 1 January 2017.
Liechtenstein does not have thin capitalisation rules.
Controlled foreign companies (CFCs)
Liechtenstein does not have specific CFC rules. However, legal or actual structures that appear inappropriate to the economic circumstances and whose sole economic purpose consists in attaining tax advantages are considered abusive if:
- the granting of this tax advantage would violate the object and purpose of the tax law, and
- the taxpayer is unable to present any economic or other substantial reasons for the choice of this structure and if the structure does not yield any independent economic consequences.