Global Tax Alert | 5 September 2013

Liechtenstein transitional regulations regarding holding and domiciliary company status expire on 31 December 2013

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Executive summary

With the revision of the Liechtenstein tax law entering into force as of 1 January 2011, the provisions regarding special tax statuses (domiciliary company or holding company) were abolished. For holding and domiciliary companies that existed before the law change a grandfathering period of three years (until 31 December 2013) was introduced. In this period, holding and domiciliary companies are only subject to a capital tax of minimum CHF 1,200.1 As the end of the grandfathering period approaches, it is important for companies to analyze future taxation alternatives.

Ordinary taxation

If a company that has benefited from the grandfathering period does not take any action, it will be subject to ordinary taxation as of 1 January 2014 forward. The ordinary tax rate (calculated on profit before taxes) is 12.5%, with a minimum tax of at least CHF 1,200 (with the Parliament discussing an increase to CHF 1,900). However, depending on the composition of the income, the tax burden may not increase substantially under certain circumstances. The following exemptions and deductions for tax purposes which have been introduced by the new Liechtenstein tax law may be relevant:

  • Exemption of dividend income and capital gains from taxation in Liechtenstein: Pure holding companies with only dividend income from participations and/or capital gains from the sale of participations will still be taxed at the minimum tax burden of CHF 1,200.
  • Deemed interest deduction on equity: Equity financed companies may benefit from a reduced tax burden due to the notional interest deduction.
  • Patent box regime: Intellectual property (IP) companies may reduce taxable income by a deemed deduction of 80% on qualifying income from IP (referred to as patent income). As a result of this regime, an effective tax burden of less than 2.5% may be feasible.
  • Exemption for foreign real estate and branches: Foreign real estate and foreign branches are excluded from taxation in Liechtenstein.

Private wealth structure

For private asset companies which are not economically active, the Principality of Liechtenstein introduced the concept of private wealth structure (PWS). A PWS is only subject to minimum tax, which is currently CHF 1,200 p.a.

The PWS status is only granted upon a written ruling request. The criteria under which such ruling is granted are as follows:

  • Investors must be individuals (or intermediary entities) whereas the sole purpose of the PWS (and the intermediary entities) is the administering of the private wealth of these individuals.
  • No commercial activity of the PWS.

  • PWS may only hold participations in corporations, cash and cash equivalents, and financial instruments according to Art. 4 Para. 1 lit. g. of the Liechtenstein asset management act.
  • Owners/beneficiaries may only exercise voting rights in participation (e.g., they may not take management decisions on behalf of the participation). Owners/beneficiaries may generally not be members of the board of directors of participations.
  • No recharge of costs (or invoicing of any fees) to the shareholder or to third parties.
  • Special restrictions for private wealth structures have to be included in the bylaws


Companies which are currently taxed as a holding or domiciliary company under the grandfathering period in Liechtenstein should carefully analyze their taxation situation and evaluate whether the ordinary taxation or the taxation as a PWS shall be applied as of 2014. With respect to the ordinary taxation further structuring alternatives may be considered (financing, IP allocation, etc.).

As outlined, for the taxation as a PWS, a ruling request has to be filed with the Liechtenstein tax authorities (by 30 September 2013 for calendar year 2014). Furthermore, amendments of the bylaws may be necessary. It is therefore recommended to initiate such process as early as possible.


1. Approximately US$1300.

For additional information with respect to this Alert, please contact the following:

Ernst & Young AG, St. Gallen, Switzerland
  • Roger Krapf
    +41 58 286 21 25

EYG no. CM3785