Value-added tax (VAT)
Liechtenstein has adopted the VAT law of Switzerland, while having its own VAT administration.
The general VAT rate is 7.7%. A reduced rate of 2.5% is applicable to deliveries of food, drugs, newspapers, magazines, and books. Furthermore, lodging/accommodation is taxed at a reduced rate of 3.7%. Note that various services are VAT-exempt (e.g. health, social security, education, banking, insurance).
Any person who, irrespective of legal form, carries on a business is liable for VAT. Any person liable for VAT that is involved in domestic entrepreneurial activity with a taxable turnover that is less than CHF 100,000 within a financial year can be exempted from taxation. Special regulations apply for non-profit institutions as well as for non-profit sport or cultural clubs. Reverse charge is applicable for services and certain deliveries from an entity domiciled abroad.
Customs duties/import tariffs
Based on the customs union treaty of 1923 between Liechtenstein and Switzerland, Switzerland customs duties and import tariffs are applicable for Liechtenstein as well. The tariffs and duties depend on various specific attributes of the products and are listed on comprehensive tariffs and duties lists; consequently, the specific tariffs and duties must be checked for every case individually.
Several excise taxes apply in Liechtenstein (e.g. petroleum tax, tobacco tax, car tax, performance-related heavy vehicle fee, beer tax, taxation of distilled spirits).
No property taxes are applicable in Liechtenstein.
Based on the customs union treaty of 1923 between Switzerland and Liechtenstein, the Swiss stamp duty tax law of 27 June 1927 is applicable in Liechtenstein. The stamp duty law, inter alia, includes the issuance stamp tax and the security transfer tax.
Issuance stamp tax
Upon the formation of legal entities whose capital is divided into shares (e.g. company limited by shares, limited liability company, establishment with capital divided into shares), the stamp duty amounts to 1% of the nominal value or the higher amount effectively paid (above par). The first CHF 1 million is tax exempt.
The same duty also becomes due when the capital is increased or when the shareholders make contributions without increasing the capital. There is no stamp duty tax on bonds and money market certificates.
Various exemptions should also be considered.
Security transfer tax
Security transfer tax is due on all transactions of qualifying securities if a security dealer is involved. The tax amounts to 0.15% for domestic securities (Switzerland and Liechtenstein) and 0.3% for foreign securities.
In particular, banks and financial intermediaries qualify as security dealers and are liable for the payment of the security transfer tax. Furthermore, legal entities with qualifying securities with a book value of more than CHF 10 million also qualify as security dealers and are also liable for the payment of the security transfer tax.
Formation tax (Gründungsabgabe)
Unless Swiss stamp duty law applies, a formation tax in the amount of 1% of the statutory nominal capital is levied upon the formation or relocation of legal companies in Liechtenstein (e.g. foundation, establishment) as well as for capital increases.
The general tax rate of 1% is reduced to 0.5% for amounts greater than CHF 5 million and to 0.3% for amounts greater than CHF 10 million. The first CHF 1 million is tax exempt.
Foundations are subject to the formation tax at a tax rate of 0.2%, but at least CHF 200.
Real estate profit tax
Capital gains from the sale of real estate, or equivalent actions with the same result, are subject to a separately assessed real estate profit tax. The taxable gain is generally the difference between proceeds of the sale and the original purchase price of the property plus any capital expenditure incurred. The basic tax rate can be up to 24%, depending on the amount of taxable real estate gain. The transfer of the economic ownership of real estate (e.g. via the sale of the majority of the shares in a real estate company) may trigger real estate tax as well.
Liechtenstein’s environment-related taxes include the mineral oil tax on motor fuels and combustibles, the mineral oil tax surcharge on motor fuels, the CO2-yield on fuel sales, the climate cent, the automobile tax, the motor vehicle tax, the performance-based heavy vehicle fee, the incentive tax on extra light heating oil, diesel, and gasoline, and the incentive tax on volatile organic compounds. All these taxes are consumer born levies and fees and are levied on the sales price upon sale of such products to the end consumer. Based on the 2019 tax statistics, the tax income from such environmental taxes amounted for some 3.9% of Liechtenstein’s total tax income.
Tax on insurance premiums
Liechtenstein levies a tax on certain insurance premiums. The tax rate amounts to 5% of the cash premium (2.5% for life insurance). Cash premiums in foreign currency have to be converted to Swiss francs at the time the tax claims arise.
Various exemptions should also be considered.
Social security contributions
Employers, in general, are required to account for social security contributions on the salaries of their employees. If the employee is subject to the Liechtenstein social security system, the following compulsory social security contributions are concerned:
- Old age, survivors’, and disability insurance (9.6%, the employer’s share is 4.9% and the employee’s share is 4.70%).
- Family compensation fund (1.9%, fully employer financed).
- Unemployment insurance/supplementary unemployment insurance (1%, the employer’s share is one half).
- Occupational accident insurance (approximately 0.1%, fully employer financed).
- Occupational pension scheme (2nd pillar) (contributions depend on pension plan, the employer’s share is usually one half).