Liechtenstein: Corporate Taxation For Non-Resident Liechtenstein Companies

Originally published on 11 March 2002

Liechtenstein tax law distinguishes between companies which actively carry on business in Liechtenstein and non-resident companies. The latter are commercially inactive or only active abroad notwithstanding that their corporate headquarters are in Liechtenstein. Non-resident companies or holding and domiciliary companies are special tax concepts and are not dependent on any particular special corporate structure as set forth in the company law.

For tax-purposes holding companies are defined as legal entities entered in the trade registry as well as non-registered foundations whose objects consist primarily or exclusively of portfolio management, the acquisition of equity participations in other corporate entities or the long term management of other legal entities. Holding companies may own and administer movable and immovable property located within or outside Liechtenstein, including patents, real estate, trade-marks, copyrights, models and so forth.
Domiciliary companies are defined as legal entities entered in the public register which merely maintain a domicile that is to say an address with an agent for service in Liechtenstein. Whether or not such companies maintain actual offices is irrelevant. Domiciliary companies may under no circumstances carry on business or engage in any commercial activities in Liechtenstein. Their commercial activities must be internationally oriented.

Companies which qualify as holding or domiciliary companies are exempt from property, income and capital earnings taxes. They are merely required to remit an annual capital tax which is calculated as 0.1 percent of the paid-up capital and other assets held by the company, including retained earnings and taking into account any accrued losses. However, the tax may not be less than CHF. 1.000,-- in a year.

The essential requirement that a domiciliary company refrain from any type of commercial activity in Liechtenstein is interpreted pragmatically by the tax authorities. International trading companies can maintain offices in Liechtenstein for the purpose of importing and exporting, provided they do not sell, manufacture or finish any of their products in Liechtenstein, do not maintain inventory in Liechtenstein and do not solicit business there. Domiciliary companies may, however, purchase personal services, retain agents on a free lance basis (who may not be active abroad), entertain customers from abroad and hold meetings at their Liechtenstein offices. The intent of this policy is clear: companies which benefit from preferential tax treatment may not compete with domestic companies whose tax burden is somewhat more onerous. At least one member of the Board of Directors of a domiciliary company must be a Liechtenstein resident and an agent must be appointed for service in Liechtenstein.

Please contact Arcomm Trust Company directly for an update on the subject matter.