Foundation of a Holding Company in Liechtenstein
Holding Companies in Liechtenstein
A Holding Company in Liechtenstein is a legal person with its registered office in Liechtenstein. It is not a distinct legal structure. The purpose of a Holding Company in Liechtenstein is exclusively or almost exclusively the holding and administration of, for example, investments, incorporeal rights and real estate. The Liechtenstein legal structures which are especially suited to the taking on of holding functions include the foundation, the establishment and the trust enter- prise (Trust reg.).
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The Forms of a Holding Company in Liechtenstein
To understand the functions of a Holding Company in Liechtenstein, a distinction must be made between the different types of Holding Companies. The various types of Holding Company in Liechtenstein include: the operational holding which is commercially active; the management holding which exercises compe- tence in all financial and strategic questions and which does not undertake any operative activity itself; the finance holding where the Holding Company is ex- clusively responsible for financial questions and the organisation holding which is similarly so and which deals with complex firm structuring.
Foundation of a Holding Company in Liechtenstein
The formation-, service- and separation- models are used in the forming of a Holding Company in Liechtenstein. A holding in Liechtenstein may be formed through the formation and acquisition of investments, through the contribution of already existing investments or may be formed through the separation and transfer of assets to a subsidiary company. The legal form in which the Holding Company is set up will determine what the particular formation requirements are.
Tax Advantages of a Holding Company in Liechtenstein
Preferential Taxation of Holding Companies in Liechtenstein
Following the coming into force of Liechtenstein’s new tax law on January 1st, 2011, no tax any longer requires to be paid by a Holding Company in Liechten- stein on its net investment proceeds. This is irrespective of the amount and the holding period of the said investment. Consequently, no tax must be paid on dividends and capital gains gained through investments sold to legal persons in or outwith Liechtenstein.
Corporate Income Tax
A Holding Company in Liechtenstein must pay corporate income tax annually at a single rate of 12.5% on its taxable income. The foreign permanent establish- ment profits; rental profits from foreign real estate; dividends and capital gains of a Holding Company in Liechtenstein are not subject to corporate income tax in Liechtenstein. Moreover, when calculating the tax liability of a company in Liechtenstein, a deduction of 4% is to be deducted due to the interest deduction on equity capital. It is required that a Holding Company in Liechtenstein pay at least 1,200 Swiss Francs in corporate income tax each year.
A transitional period applies to those domiciled- and holding companies in Liech- tenstein which were in existence as at 31st December, 2010. For the said com- panies, they are required only to pay corporate income tax of 1,200 Swiss Francs until the transition period ends on 31 December, 2013. After the tran- sition period, they will be subject to the corporate income tax requirements outlined above.
Preferrential Taxation of Private Asset Structures (PAS)
A Holding Company in Liechtenstein which qualifies as a Private Asset Struc- ture (PAS) under Liechtenstein‘s new tax law is required only to pay corporate income tax annually of 1,200 Swiss Francs. This preferential taxation is appli- cable only to legal persons whose sole purpose is the management of assets and who do not undertake any commercial activity.
Exemption from Taxation
As a result of Liechtenstein‘s tax reforms, the capital tax was abolished as was the corporate income- and coupon taxes distribution surcharge. Notwithstan- ding this, the coupon tax exemption does not apply to those old reserves that were in existence as at 31st December, 2010. Consequently, the distribution of the old reserves were subject to the reduced tax rate of 2% in 2011 and 2012 and are subject to a tax rate of 4% in the years thereafter.
Furthermore, income from intellectual property rights created or acquired on or after January 1st, 2011 is subject to an 80% tax exemption. The said income is consequently subject to an effective tax rate of 2.5%.
The Carrying Forward of Losses and Group Taxation
Liechtenstein‘s tax reform has made it possible for losses to be carried forward without any time restriction. Moreover, the gains and losses made by group companies in Liechtenstein are able to be set off against each other. However, it is required that the legal person making such an application be subject to un- limited tax liability in Liechtenstein and consequently be domiciled or have its actual place of central management and control in Liechtenstein. The said legal person must further hold a majority shareholding in legal persons in or outwith Liechtenstein. Where the legal person making the application is subject to only limited tax liability in Liechtenstein, it is required that it have a branch in Liech- tenstein to which the investments can be allocated.