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Tax laws for funds in Liechtenstein

Since the beginning of 2011, a completely revised tax act is in force in Liechtenstein. It fulfils the requirements of a modern law compatible with European rules, which does justice to the increasing interconnectedness within the financial industry, and which strengthens the competitiveness of Liechtenstein – particularly as a financial location as well.

Investment funds domiciled in Liechtenstein are attractive investment options from the tax perspective. Both UCITS and AIF are subject to unlimited tax liability in Liechtenstein pursuant to Art. 44 para. 1 lit. b Tax Act (SteG) and thus generally have to meet the same information obligations as any other corporation subject to taxation. However, income from the managed assets of Liechtenstein funds are exempt from taxation under Art. 48 para. 1 lit. g Tax Act. As a result, Liechtenstein based funds are in effect not taxed. Moreover, distributions by the fund to its investors are not subject to any withholding taxes. This means investors only have to pay the taxes imposed in their home countries / tax domicile.

These rules apply to all legal forms that a fund can have in Liechtenstein:
- Corporate form (investment company, SICAV, SICAF, LP, LLP, etc.)
- Contractual form (FCP, special fund)
- Trust form (collective trusteeship, unit trust)

Liechtenstein Tax Act
Act of September 23rd, 2010 on national and community taxes

Liechtenstein Tax Regulation
Regulation of December 21st, 2010 on national and community taxes

Liechtenstein's intergovernmental agreement with the USA
On May 16th, 2014, the government of Liechtenstein signed the intergovernmental agreement on the implementation of the Foreign Account Tax Compliance Act (FATCA) with the USA, according to so-called model 1 approach concluded.

IGA with annex 1 and annex 2

Fund status as non-reporting financial institutions
The special regulations from annex 2 to the intergovernmental agreement state that investment funds from Liechtenstein are effectively excluded in certain cases from their reporting obligations. These regulations are found in sections IV. E. and F. of annex 2 under the headings „E. Collective Investment Vehicles (CIV)“ and „F. Special Rules“. All investment funds from Liechtenstein, which comply with the conditions set forth in these sections, are considered, according to the agreement, to be so-called non-reporting financial institutions. These in turn are considered to be FFIs 'deemed compliant' and already excluded from the reporting obligations according to IRS provisions.

Final regulations of the IRS (unofficial PWC version – purposefully formatted)

The legal result is that on the part of investment funds from Liechtenstein – be it an AIF, UCITS or IU – no FATCA-related reports are to be drawn up. Instead, it is important for the relevant W8-BEN-E form of the IRS to be filled in. The relevant 'instructions' of the IRS were published on the IRS website.

IRS instructions
W8 BEN-E form

Investment funds with investment fund share register as exception
An exception are such investment funds, for which on the level of the management company, a share register is kept. These are subject to the full extent to obligatory FATCA reporting duties.

Management companies
Just as for investment funds, for management companies there stems from the agreement itself no obligation to register with the IRS. However, management companies tend to register voluntarily, in order to receive as a result a GIIN number, which may bring advantages on the international market.

Implementation act
In order to create the legal basis for the reports due according to model 1 to the tax authority of the Principality of Liechtenstein, as well as for the information exchange taking place directly between this tax authority and the IRTS, an implementation act is required. A draft of such an implementation act is already available.

DTA and TIEA lists
Liechtenstein's international cooperation with other countries in the area of taxation is governed by various agreements. A list of all Double Taxation Agreements (DTA) and Tax Information Exchange Agreements (TIEA) you can find on the homepage of the state administration of the Principality of Liechtenstein.

List of all Double Taxation Agreements (DTA) and Tax Information Exchange Agreements (TIEA)

The Global Forum on Transparency and Exchange of Information for Tax Purposes (OECD) gave Liechtenstein good grades within the context of its 2015 country assessments, declaring that it was “largely compliant”. This means Liechtenstein has the same rating as e.g. Germany and the United Kingdom.

Liechtenstein has for years pursued a rigorous tax conformity strategy, and has already concluded bilateral tax treaties with over 50 states around the world: 
With the United Kingdom (August 2009), Germany (September 2009), France (September 2009), the Netherlands (November 2009), the USA (December 2008), Australia (June 2011), Japan (July 2012) and Canada (January 2013),
to mention just a few. List of Liechtenstein`s tax treaties

Administrative Assistance Convention as the basis for the exchange of information upon request

On 21 November 2013 the Principality of Liechtenstein signed the Multilateral Convention of the OECD and the European Council on Reciprocal Administrative Assistance in Tax Matters (MAC), and ratified this on 22 August 2016. The MAC enables the contracting parties to provide administrative assistance in respect of a wide range of taxes. The exchange of information upon request and the spontaneous exchange of information have been applicable since the beginning of 2017. The MAC is simultaneously the basis for the Multilateral Competent Authority Agreement (MCAA), which implements global AEOI standards.

Automatic Exchange of Information (AEOI)

The OECD's AEOI standard includes the obligation to exchange specific information about financial accounts in tax matters. Liechtenstein signed the Multilateral Competent Authority Agreement (MCAA) with 50 further states on 29 October 2014.

Liechtenstein joined the early-adopter initiative of the G5 states (Germany, France, United Kingdom, Italy, Spain) concerning the earlier introduction of the AEOI. In a bilateral tax transparency agreement between Liechtenstein and the EU, the introduction of the AEOI was agreed from 2016 with practically all EU member states.

Since November 2016, the Liechtenstein Parliament has approved the activation of the AEOI with a further 60 partner States. Including the EU States, the AEOI in Liechtenstein thus currently comprises 88 countries. In 2020, the expansion by a further 20 agreements to 108 is planned.

These measures consequently mean that investors do not suffer any tax disadvantages when acquiring Liechtenstein investment funds. On the contrary: Liechtenstein investment funds are subject to unrestricted tax liability in Liechtenstein and therefore essentially have the same declaration and cooperation obligations as other taxable companies. Income generated by the assets managed by Liechtenstein investment funds is, however, exempt from tax (Art. 48 Para.1 Letter g of the Tax Act (“Steuergesetz”). As a consequence, Liechtenstein investment funds are effectively not subject to tax. Furthermore, Liechtenstein does not impose withholding tax on investment fund distributions, nor does it impose “taxe d’abonnement” (subscription tax). This means investors only have to pay the taxes imposed in their home countries.