Liechtenstein Information
Joined: 13 Oct 2006
Posts: 15
Home Country: liechtenstein
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 Posted: Fri Oct 13, 2006 7:19 am Post subject: DOING BUSINESS IN LIECHTENSTEIN |
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DOING BUSINESS IN LIECHTENSTEIN
Business entities in Liechtenstein
The following forms are possible:
1. Company limited by shares
(a) General
EU-Law is applicable. Therefore, the legislation regarding companies limited by shares is not substantially different from other EEA-countries or EU-countries. Depending on the size of the company, different obligations exist regarding annual accounts, publications etc.
(b) Authorisation required
Offshore companies need no authorisation. Onshore companies depending on their intended activity either have to obtain a permit or solely are obliged to inform the competent government authority which business they commence.
(c) Name
Basically, any name may be used unless the same or a very similar name has already been registered in the Public Register. A company name must contain at least three letters.
(d) Availability of companies
The formation and registration of a company limited by shares is basically possible within one week.
(e) Share capital
The capital of a company limited by shares must be paid up to at least 20 per cent and at least CHF 50,000 in cash or contributed assets.
(f) Shares
The shares may be bearer or registered shares. Bearer shares, however, may only be issued if and when the full nominal value of the shares has been paid up.
(g) Increase in capital
The capital needed for the increase may be paid in as cash or as assets by the old and possibly new shareholders or be furnished from the company’s own resources.
(h) Reduction in capital
A repayment or reduction of the share capital on account of losses may only be carried out when the liquidation balance-sheet shows that the liabilities are covered by the assets.
(i) Shareholders
A company limited by shares may be formed by two or more persons who may be either individuals or corporations. The shareholders do not have any other obligation than the paying in of the share capital. The person(s) acting as founder-shareholder(s) may also be wholly or partly trustee(s). Shareholders do not need to be recorded in the Public Register.
(j) Meetings
The General Meeting of the shareholders is the highest executive body of the company and its decisions are binding for both the shareholders and the executive bodies.
In accordance with the law, its powers include:
* appointment and release of the Directors and of the Auditors
* approval of the Balance Sheet and Profit and Loss Account and the distribution of the dividends
* dissolution of the company
The Ordinary General Meeting must take place annually within six months of the closing of the financial year.
(k) Directors
The Board of Directors may consist of one or more persons who need not be shareholders of the company. The Board of Directors transacts all business and decides in all matters which are not expressly assigned to any other body either by the articles or by law.
Companies limited by shares which benefit from the offshore status (tax privilege) have to have at least one director who is resident in Liechtenstein.
The General Meeting may at any time remove members of the Board of Directors and appoint new members.
(l) Representative / Registered Office
The representative entered in the Public Register is the person authorised to accept services on behalf of the company limited by shares. He has the authority to make declarations to and receive communications of any kind from all national authorities and courts. A representative is compulsory where more than half of the directors are not resident in Liechtenstein.
(m) Object of company
In most cases, the purpose of a company limited by shares is the performance of a trade, manufacturing or other commercial activity; it may also act as a holding company.
(n) Audit
The General Meeting must appoint auditors.
(o) Information on public record
Anyone can demand an extract from the entry in the Public Register containing the following information:
* name of company
* registered office
* date of articles of association
* object
* share capital
* nominal value or quoted price of shares and the paid up capital
* type of shares
* name and address of the Board members
* authorised signatories
* signatory rights
* act of notification
2. Foundations
A foundation may be defined as trust with an own separate legal personality. With this, it is separated from the founder’s personal assets and henceforth forms the assets of an independent legal entity.
The foundation may be formed by natural or juridical persons, citizens of Liechtenstein or foreigners by the donation of assets for a specific purpose. The donation may be made:
* in the form of a deed (unilateral, legal transaction, inter vivos)
* by last will and testament
* by inheritance agreement
The minimum capital of a foundation shall amount to CHF 30,000 and shall be donated by the founder upon formation. The participants in a foundation are the founder, the foundation board or council and the assignees or beneficiaries.
Once the foundation has been set up, the founder no longer has the status of a body of the foundation unless he is a member of the Council. The foundation bodies shall not have a determinatory function. The beneficiaries shall be appointed by the founder or by the competent body determined in the foundation deed, the Statutes or in an implementation clause. In practice, beneficiaries are usually appointed in an implementation clause which may be revocable or irrevocable.
If provision is made accordingly in the foundation statutes, a foundation may be converted into an establishment or a trust enterprise.
3. The establishment (Anstalt)
The Anstalt is a legal form with a separate legal personality which allows the founder to organise it in a very flexible way. Therefore it is possible in specific cases to organise it similar to a foundation and in others similar to a company limited by shares.
In practice, the normal form which the Anstalt takes is that of a non-share company, i.e. the capital is not divided into shares or parts. The rights of the supreme body are vested in the founder. He possesses the same rights as the general meeting of companies limited by shares. An Anstalt may be founded either by an individual or a corporation. Only one founder is required and there are no legal stipulations regarding nationality or place of residence. An Anstalt may also be established for a third party by power of attorney or by trusteeship. The minimum capital requirement is CHF30,000. — if the capital is not sub-divided into parts or shares and CHF.50,000. — if the capital is divided into parts or shares. The minimum capital requirement must be fully paid up at the time of formation.
The Anstalt must be registered in the Liechtenstein Public Register. The bodies of the Anstalt are the owner of the founder rights as supreme body, the Board of Directors, and the Auditors.
The Board of the Anstalt may comprise one or more individuals, but at least one member must fulfill the legal requisites and qualifications in order to act as director. The Board of Directors transacts all business and has the power of decision in all matters which are not expressly assigned to any other body either by the articles or by law.
Auditors must be appointed if the Anstalt’s objects include trade or business activities.
The law allows that the owner of the founder’s rights appoints beneficiaries which may be different from him. If no beneficiaries are specifically nominated, the owner of the founder rights is the beneficiary.
4. Limited company (Gesellchaft mit beschränkter Haftung [GmbH])
The main difference towards the company limited by shares is that a GbmH may be formed by one single person.
5. Branch of a foreign company
The registration of a branch of a foreign company in the Liechtenstein Public Register is subject to the same regulations as Liechtenstein companies.
However, it is a condition of registration that a business branch with an independent business management is actually established in the country. For the registration of the branch, a reference to the registration of the parent company is also necessary.
Recognition of trusts
Liechtenstein is the only country in continental Europe to have dealt with the institution of the trust (common law trust) by statute law. Unlike the Anglo-Saxon trust, Liechtenstein law does not contain any prohibition of accumulation of income or any rule against perpetuities, therefore allowing the creation of a trust with an unlimited duration. A trust is established when a natural or legal person (author, settlor, trustor) transfers an asset, object or a right (trust property, trust res) to the trustee, who will thereafter in accordance with the provisions of the trust instrument hold or make use of the trust property in relation to all others in his own name as an independent legal owner on behalf of one or more third parties (beneficiaries, cestui que trust). No new legal person is created when a trust is formed.
Establishing an office in Liechtenstein
It is necessary to distinguish between onshore and offshore companies. The only difference from the permitted field of activity is that offshore companies are not allowed to sell their goods or to supply their services to Liechtenstein persons or entities.
(a) Onshore companies
Any citizens and/or residents of Liechtenstein, Switzerland, Norway, Iceland or any of the EU countries may establish an office in Liechtenstein. Other citizens only may do so when they are resident in Liechtenstein. In practice, the process of establishment is not complicated.
(b) Offshore companies
Offshore companies only may be formed by licensed Liechtenstein fiduciaries. The process of formation takes about 2-3 days. At least on licensed Liechtenstein fiduciary or attorney at law (Liechtenstein Professional) has to be a member of the board of an offshore company.
Immigration
One might think that it must be very easy for citizens of an EU country to take up residency in Liechtenstein (freedom of residency within the European Economic Area). However, this is not the case, because Liechtenstein managed to negotiate special treatment with the EU. This special treatment is valid until the end of 2007 and then will be reconsidered. Therefore, it still is very difficult to become resident in Liechtenstein.
Confidentiality
Liechtenstein law offers corporate structures permitting confidentiality to the clients. Also, banking and professional secrecy provisions exist. Although, in cases of money laundering and / or other criminal offences Liechtenstein Professionals may be forced by court order to supply information. If a Liechtenstein Professional has suspicion that an entity or trust he administers might be involved in illegal activities he is even obliged to notify the competent governmental authority. The same applies to Liechtenstein banks concerning bank accounts undertaken with them.
Taxation in Liechtenstein
Liechtenstein tax law includes the following principal taxes:
* wealth tax
* income tax
* corporation taxes
* capital and profit tax
* special corporation tax
* dividend tax (coupon tax)
* property transfer tax
* inheritance tax
* car tax
* value added tax (VAT)
* stamp duty
Direct taxation
(a) Individuals
Natural persons residing in the country are subject to a progressive wealth and income tax. Capital yields such as interest, rent, dividends, etc. are tax-free but capital gains fall under the wealth and income tax. The maximum rate payable under this tax is 17%.
(b) Corporations
In principle, all companies or enterprises which carry on any trade or business conducted on commercial lines in Liechtenstein itself (onshore companies) are subject to capital and profits tax.
Capital tax
The basis of capital tax is the paid up ordinary or contributed capital, plus the accumulated reserves. The rate of tax is two per thousand of the taxable capital at the end of the financial year. An increase in capital (either by legal increase of capital or by an increase in reserves) during the year is not subject to tax in the year in which the increase took place.
Profits tax
Profits tax is calculated on the net income of the business year, including capital and liquidation profits. Taxes paid, with the exception of dividend tax (which is to be abolished anyway, see thereto below), are deductible from the net yield. The rate of profits tax is equal to half of the percentage that the net yield accounts for as a percentage of the taxable capital, but is a minimum of 7.5% and a maximum of 15% of the net profit. The profits tax rate is subject to an increase of between 1—5% if the dividend payments of the company exceed 8% of the taxable capital. The highest increase of 5% applies if payment exceeds 24% of the taxable capital.
Dividend tax (coupon tax) [presumably to be abolished in 2001]
This tax is levied at source on distributed income such as dividends, profit sharing and other monetary payments. It affects only those companies whose capital is divided into shares and normally applies only to limited companies.
The rate of dividend tax is 4%. The tax is not levied on establishments (Anstalten) and trust enterprises if their capital is not divided into shares
(c) Deductions and other adjustments
The legally permissible depreciation rates are governed by a decree on tax legislation and amount to 3 — 35% depending on the assets in question. Interest payments generally are considered as operating costs. Regarding interest payments to related parties the allowable tax rate is fixed by the tax authorities annually. There are no regulations concerning a ‘debt equity ratio’. Wages and salaries of workers and employees are considered as operating costs. If a shareholder or a person who has close connections with the company is employed by the company, his remuneration is to be fixed according to his position and responsibilities. The regulations concerning reserves are likewise governed by a decree on taxation. This rules the provisions to be made for stocks, debtors, anticipated losses, etc.
(d) Tax privileged status
Tax privileges
In Liechtenstein, as in many other countries, holding companies and domiciliary enterprises (offshore entities and trusts) enjoy special tax privileges. These comprise:
* exemption from all taxes on assets and income
* reduction in capital tax
* complete exemption from all taxes on profits
* absolute secrecy concerning tax matters
Capital tax
Capital tax is levied, without regard to the form of the entity or trust, at the rate of one per thousand on the capital plus reserves but at a minimum of CHF 1,000 per year (reduced rates for foundations, captive insurance companies and investment funds). Capital tax is payable yearly in advance. In practice, offshore entities and trusts pay CHF 1'000 tax per year.
Profits tax
Liechtenstein offshore entities and trusts in principle are not subject to profits tax. If, however, such companies hold an interest in a commercially active Liechtenstein company or unit, the capital thus invested and the profits thereon will be subject to taxation in the same way as for operating companies.
(e) Taxation of trusts
If the assets of a trust are foreign assets, an annual capital tax of 1% but at least CHF 1,000 — is due (in practice, all trusts pay CHF 1,000 – tax p.a.). Beneficiaries resident or domiciled outside Liechtenstein are not subject to tax on the distributions they receive from their beneficial interest. No taxes are due in Liechtenstein either from the transfer of assets when the beneficial interest is conceded or terminated for other reasons.
(f) Withholding taxes
Liechtenstein tax legislation makes no provision for withholding taxes. Although, the 4% coupon tax may be considered as withholding tax.
(g) Double taxation treaties
Apart from a double taxation convention concluded with Austria, the Principality of Liechtenstein has concluded no such agreement with any other country.
(h) Credit for overseas taxes
In the absence of double taxation treaties, Liechtenstein offshore companies cannot claim in Liechtenstein for taxes paid abroad. Ordinarily taxed Liechtenstein companies may claim exemption for profits which were already taxed abroad.
Estate duty, inheritance and gift taxes
Inheritance tax and estate duty
If a person resident abroad inherits assets in Liechtenstein, it must first be established whether these are movables or immovables.
The inheritance of movable assets located in Liechtenstein (e.g., shares, bank accounts, etc.) is only subject to taxation in Liechtenstein when the last place of residence of the deceased was in Liechtenstein.
In contrast to this, the inheritance of immovable property located in Liechtenstein is subject to Liechtenstein taxation irrespective of the last place of residence of the deceased.
The rate of inheritance tax applicable is calculated from the total estate and is between 1.5% and 27%, depending on the degree of relationship and the value of the total estate.
Gift taxes
Since gift taxes have to be paid by the person receiving the gifts, persons residing abroad do not have to pay gift taxes in Liechtenstein.
Indirect taxes
(a) Stamp duty and turnover duty
Stamp duty is levied at the time of the formation on the capital of companies and on capital increases of companies. There exists a free amount of CHF 250,000. The tax rate is 1%.
For companies limited by shares, turnover duty (0.3%) may become due if such a company is holding participations in the value of more than CHF 10 Mio. The taxation system is the same as in Switzerland. This tax does not apply for other company forms.
(b) Value Added Tax (VAT)
The rate of Liechtenstein VAT is 7.6%. The VAT system is the same as in Switzerland.
Social security contributions
The contribution for social security is 11.336%. The employer contributes 6.936% and the employee has to contribute 4.4%.
Exchange control
By virtue of the Customs Treaty with Switzerland, there are no exchange controls or they are the same as in Switzerland. |
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