Foundation of a Trading Companiy in Liechtenstein

The purpose of a Trading Company in Liechtenstein is the carrying on of com- mercial activities. A Trading Company in Liechtenstein may be formed as a legal person or as a partnership. Commercial activity is defined as being activity which is carried out independently and regularly with the intention of producing a profit or other economic advantage. Legal persons in Liechtenstein (companies with legal personality) include private corporations such as the Public Limited Company (PLC., Corp:); the Limited Liability Company (LLC., Ltd.); the Estab- lishment; the Foundation and the Trust Enterprise (Trust reg.). Partnerships in Liechtenstein (companies without legal personality) include, amongst others, the Limited Liability Partnership and the General Partnership.

Foundation

It is required that a licence be applied for at the Office of Economic Affairs for a Trading Company in Liechtenstein to carry on commercial activities. Professional groups such as lawyers; doctors; other health professionals; asset managers; trustees; architects and engineers are exempt from this licence requirement. It is required by law that these professional groups obtain a separate, special licence.

A Trading Company in Liechtenstein is not required to apply for a permit if it is only a domiciled company, namely a company that has its registered office in Liechtenstein, which does not undertake any commercial activities in Liechtenstein.

The legal form in which a Trading Company is set up will determine what the particular formation requirements are.

Tax Advantages in Liechtenstein 1. Corporate Income Tax

A Trading 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 Trading Company in Liechtenstein are not subject to corporate income tax in Liechtenstein. Moreover, when calculating the tax liability of a Trading Company in Liechtenstein, a deduction of 4% is applicable due to the interest deduction on equity capital. It is required that a Trading Company in Liechtenstein pay at least 1,200 Swiss Francs in corporate income tax each year.

Transitional Period

A transitional period applies to those domiciled- and trading 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.

Special Taxation of Private Asset Structures (PAS)

A Trading Company in Liechtenstein that qualifies as a Private Asset Structure (PAS) under Liechtenstein‘s tax law of January 1st, 2011, is required only to pay corporate income tax annually of 1,200 Swiss Francs. This special taxation is ap- plicable 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 have its registered office 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 Liechtenstein to which the investments can be allocated.

Value-added Tax (VAT.)

In Liechtenstein, value-added tax (VAT) at a standard rate of 8% requires to be paid on the provision of taxable goods and services. A reduced rate of value- added tax (VAT) of 3.8% and 2.5% respectively is payable on certain items which are everyday necessities.