Are you looking for a country to relocate to with low taxation and significant tax benefits?
Many individuals seek tax-efficient countries to optimize their financial strategies. Liechtenstein is a tax haven for individuals seeking low or zero taxation under specific regimes.
Liechtenstein offers a great environment for entrepreneurs. Its friendly tax policies include a lump sum taxation system and allow asset contributions to foundations.
Additionally, it has various double tax treaties (DTTs) that help avoid double taxation.
You can legally improve your tax strategy by knowing the tax rules. This includes understanding anti-avoidance rules like Controlled Foreign Corporation (CFC) laws and exit tax rules.
At TaxMove, we help people navigate Liechtenstein’s tax system. We ensure compliance and find ways to save on taxes.
Tax Residency Rules in Liechtenstein
Individuals qualify as tax residents in Liechtenstein if they maintain a permanent home in the country or stay for more than 183 days within a tax year.
As tax residents, they are subject to worldwide income taxation.
General Tax Rates in Liechtenstein
Liechtenstein has a simple and efficient tax system for individuals. This makes it attractive for people who want to manage their taxes easily. Here is an overview of individual tax rates.
Overview of Individual Income Tax
Liechtenstein’s tax system is designed to be simple and efficient.
The country has low taxes on individuals. This makes it appealing to expatriates and high-net-worth people.
Residents are taxed on their worldwide income.
Non-residents are only taxed on Liechtenstein-source income.
Taxable Income Categories
Income subject to taxation includes:
Employment income (salaries and wages from work).
Business income (profits from self-employment or business activities).
Social security benefits (such as pensions and other allowances).
Pensions (retirement income)
Capital income (from movable and immovable property, calculated as a national income of 4% of net wealth).
Other sources (e.g., alimony, maintenance payments.
Personal Income Tax Rates
National Tax
Liechtenstein’s national tax system follows a progressive structure, ensuring fair taxation based on income and marital status.
The personal exemption is set at CHF 15,855 for single individuals, CHF 23,783 for single parents, and CHF 31,710 for married couples.
Tax rates begin at 1% for incomes up to CHF 21,140 for single taxpayers and gradually increase through various brackets, reaching 8% for incomes exceeding CHF 211,401.
Communal Tax
Communal tax is applied as a surcharge on the national income tax owed. Local municipalities set this surcharge annually, ranging between 150% and 180% of the national tax amount.
As a result, the total tax rate combines both national and communal taxes, leading to an overall tax rate that varies from 2.5% to 22.4%.
Wealth Tax
Wealth tax is incorporated into the income tax system.
The taxable net wealth is calculated by applying a standard rate of 4%, and the resulting amount is added to the taxable income. Both income tax and net wealth tax are assessed and collected by the Fiscal Authority in collaboration with municipal tax offices.
This integrated approach ensures a streamlined taxation process while maintaining compliance and efficiency in wealth taxation.
Inheritance and gift taxes
Inheritance and gift tax weres abolished in 2011.
Exempt Income
Certain types of income are tax-free in Liechtenstein, such as:
Dividends and interest (if subject to net wealth tax).
Capital gains from shares and investments.
Social distributions and certain pension benefits.
Insurance payments for health and accident.
The Lump Sum Regime: A Path to Lower Taxes
Liechtenstein has a lump sum tax regime for wealthy people moving there. This tax structure works well for people with a lot of investment income. With this, they can keep their full earnings private.
How the Lump Sum Regime Works
Individuals in Liechtenstein pay a fixed amount based on their living expenses, not on worldwide income. The amount is negotiated with the tax authorities but usually represents a significant tax saving.
In Liechtenstein, the taxable amount for individuals opting for the lump-sum taxation system is calculated by multiplying their living costs by a flat tax rate of 25%.
According to the practices of the Liechtenstein tax administration, the lump-sum tax must be substantial; if it is deemed insufficient, the individual will be subject to the regular tax regime instead.
Lump Sum Regime Requirements
- Individuals are domiciled or reside in Liechtenstein but are not citizens of the country.
- They do not engage in any gainful activity within Liechtenstein.
- They rely on income from assets or other payments received from foreign sources.
Benefits of the Lump Sum Taxation
The following are the benefits of the Lump Sum taxation for individuals in Liechtenstein.
- No need to disclose global income.
No additional taxes are to be paid (including wealth tax).
Lower effective tax rate.
Simplified tax compliance.
Ideal for retirees and wealthy expatriates.
Liechtenstein Foundation for Asset Protection
Liechtenstein Foundation for Asset Protection
A Liechtenstein foundation is a legal entity used for wealth management, inheritance planning, and tax optimization. These structures keep things private and protect assets. This makes them a popular choice for wealthy people.
Tax Treatment of Foundations
- A foundation is not subject to income tax on investment income.
- Foundations are typically taxed on their corporate income at a flat rate of 12.5%.
- The founder’s wealth is shielded from personal taxation.
- Contributions to a foundation may be exempt from income tax.
How a Foundation Helps Cut Taxes
Assets held in a foundation are not part of an individual’s taxable estate.
Dividends and capital gains remain untaxed within the foundation.
Beneficiaries can receive tax-efficient distributions taxed at the regular rates.
Double Tax Treaties and Anti-Avoidance Measure
The following are the tax treaties and anti-avoidance measures to reduce the individual tax burden in Liechtenstein:
Double Tax Treaties (DTTs)
Liechtenstein has in place more than 20 DTTs to prevent double taxation and ensure fair taxation for individuals with international income. Key countries having DTTs with Liechtenstein include Germany, Austria, and Switzerland.
Anti-Avoidance Rules
While Liechtenstein offers tax advantages, it has introduced anti-avoidance regulations to prevent tax abuse:
Controlled Foreign Company (CFC) Rules: It prevents individuals from using offshore entities to evade taxation.
Exit Tax: Liechtenstein’s exit tax applies to unrealized capital gains on certain assets when individuals or businesses relocate abroad, ensuring taxation on wealth accumulated before departure.
Economic Substance Requirements: These requirements ensure that entities conducting business in Liechtenstein have a genuine presence and are not merely set up for tax advantages
How Can TaxMove Help You?
In our opinion, if structured well, Liechtenstein is one of our favorite jurisdictions for wealthy individuals, together with Malta, UAE, Panama and Cyprus.
At TaxMove, we help you legally reduce taxes while fully complying with Liechtenstein’s tax laws.
Whether you need support with individual taxes, lump sum taxation, or foundation setups, our experts guide you at every step to maximize savings and avoid risks.
Submit the form to get tailored advice from our experts
What are the tax residency rules in Liechtenstein?
Individuals qualify as tax residents in Liechtenstein if they maintain a permanent home in the country or stay for more than 183 days within a tax year.
What are the personal income tax rates in Liechtenstein?
Tax rates range from 1% to 8%, with an additional 150%–180% communal tax surcharge, leading to an overall tax burden of 2.5% to 22.4%.
Does Liechtenstein have a wealth tax?
Yes, a 4% notional return on net wealth is added to taxable income.
What is the Liechtenstein Lump Sum Taxation system?
Non-citizens who do not work in Liechtenstein can negotiate a fixed tax based on living expenses, typically at 25%.
How are Liechtenstein foundations taxed?
Foundations pay a 12.5% flat corporate income tax but are not taxed on passive income, such as dividends and capital gains. They also shield assets from personal taxation.
Are there inheritance or gift taxes in Liechtenstein?
No, inheritance and gift taxes were abolished in 2011.
