News Overview

In the summer of 2018, following pressure from the EU, Liechtenstein adjusted its tax law to European requirements and introduced specific anti-abuse provisions. The new switch-over clause is intended to prevent double non-taxation of income from participations. In certain cases, dividends and capital gains from holdings in legal persons are no longer exempt from taxation, but subject to corporate income tax liability in Liechtenstein.

The COVID-19 pandemic is on the rise and home offices are more relevant than ever. The recently concluded MoU between Liechtenstein and Switzerland emphasizes the high relevance of this topic from a tax point of view. This CONFIDA Info focuses on the tax treatment of home offices during the measures to combat the COVID-19 pandemic and highlights the results of the MoU reached on the Double Taxation Agreement between Liechtenstein and Switzerland.

The present COVID-19 pandemic has shown that, not least because of today's technical advances, working outside the employer's premises is possible and creates new forms of work. This also includes working from home, in the so-called home office.

On June 3, 2020, Liechtenstein and the Netherlands signed a Double Taxation Agreement. The agreement is based on international standards of the OECD and takes the results of the BEPS project into account. This CONFIDA Info summarizes the most important provisions of the agreement and the main differences to the OECD standards.

At the end of March 2020, changes to the agreement policy in Russia were announced. Following the current political course, dividends and interest from Russian sources should be taxed at a rate of 15%.

The protocol of amendment in relation to the double taxation agreement (DTA) between Liechtenstein and Switzerland was signed on July 14, 2020. It includes an anti-abuse clause which refers to the main purpose of an arrangement or transaction and thus ensures that the DTA is not abused. Moreover, the provision on the mutual agreement procedure is supplemented. The protocol of amendment implements the minimum standards resulting from the BEPS project.

Under pressure from the EU, many offshore jurisdictions, including the BVI, have introduced new substance requirements in their legal systems. This newsletter provides an overview of the most important aspects of the economic substance requirements in the BVI and shows how to respond to the stricter regulatory framework in the offshore jurisdictions from a Liechtenstein perspective.

The asymmetrical treatment of capital gains and losses from participations was already repealed from Liechtenstein tax law in 2018. Transitional provisions still ensure the taxation of the reversal of impairment on value-adjusted participations in the future. Now a possibility has been created for the early reversal of impairment losses on portfolio participations.

The MLI modifies Liechtenstein double taxation agreements in accordance with international standards. With the deposit of the instrument of ratification with the OECD on December 19, 2019, the MLI for Liechtenstein will enter into force on April 1, 2020 and take effect from 2021.

The recently introduced requirement to enter beneficial owners of Liechtenstein legal entities in an electronic register should serve to combat money laundering in accordance with the 4th EU Money Laundering Directive. The Act on the Register of Beneficial Owners of Domestic Legal Entities (RBO Act; VwEG) entered into force on 1 August 2019 and provides for a deadline about reporting required information by the end of January 2020.

The scheduled amendment to the CbC Act stipulates that the term "Group" in particular should be adjusted to the definition of the OECD.

Liechtenstein is rated "largely compliant" with international tax standards in the second round of peer reviews conducted by the Global Forum. The report concludes that Liechtenstein has made progress in addressing those deficiencies which were identified in the previous assessment. The Global Forum also provides recommendations, which Liechtenstein will most likely implement.

The agreement between Liechtenstein and Jersey for the elimination of double taxation and prevention of tax evasion and avoidance basically follows the OECD Model Tax Convention (2014) and takes into account the results of the BEPS project from 2015 as well as parts of the new OECD Model Tax Convention (2017). The agreement is applicable for tax years from 2019.

With its decision of 2 October 2018 the EU Economic and Financial Affairs Council (ECOFIN) removed Liechtenstein from the so-called “Grey List”. The EU thereby confirms that Liechtenstein complies with the EU criteria of tax transparency, fair business taxation and the implementation of the BEPS minimum standards.

This CONFIDA Info provides an overview of the proposed amendments to the Tax Act (SteG), in particular, the introduction of specific anti-avoidance rules in connection with the tax exemption of dividends and capital gains from participations, the notional interest deduction, and the elimination of the asymmetric treatment of capital gains and losses from participations. The details of the bill are discussed in the Government's Report and Proposal (BuA) No. 35/2018.

The OECD has developed a new approach to Transfer Pricing Documentation under the BEPS project. The statutory general requirement to document transfer prices was already introduced in Liechtenstein on 1 January 2017. The Tax Ordinance now regulates how transfer prices are to be determined and how their documentation must be prepared. The Tax Ordinance entered into force on 1 January 2018.

On 5 December 2017, the first EU list of non-cooperative jurisdictions in tax matters was published, naming 17 jurisdictions. Liechtenstein is not on the "EU blacklist of tax havens". Liechtenstein belongs to the jurisdictions that have committed to amend or abolish identified harmful tax regimes, therefore amendments to the Liechtenstein tax law for 2019 onwards are to be expected in 2018.

By amending the Act on International Administrative Assistance in Tax Matters (Tax Administrative Assistance Act; SteAHG) a legal basis for executing the spontaneous information exchange will be created in Liechtenstein. This newsletter is intended to provide a first overview of the planned amendments to the law. The details of the bill are set out in the Report and Motion (BuA) no. 51/2017.

Country-by-Country (CbC) Reporting is part of Action 13 of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Action Plan. CbC Reporting requirements apply to MNE groups with annual consolidated group revenue of CHF 900 million or more in the preceding fiscal year. For the implementation of CbC Reporting in Liechtenstein please see the following Newsletter.

In case VGH 2017/011 the Administrative Court of the Principality of Liechtenstein ruled whether a Liechtenstein foundation fulfills the requirements for taxation as a Private Asset Structure (PAS) under article 64 Tax Act. In particular, the question was whether a foundation with PAS status may participate in a German GmbH & Co. KG (limited partnership with a limited liability company as general partner).