Initial coin offerings (ICOs) in Liechtenstein

At a glance
• An initial coin offering (ICO) or a token sale is when a company sells a predefined number of digital tokens to the public in a limited period of time.
• The ICO market has grown very rapidly in recent months and has been a new avenue for blockchain-based start-ups and projects to get the funding needed to launch their projects.
• In September 2017, the Financial Market Authority Liechtenstein (FMA) published a fact sheet on ICOs which stated that depending on their specifications, tokens may constitute financial instruments subject to financial market law.

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In detail
1. What are ICOs?
Initial coin offering (“ICO”, also referred to as token generation event, token launch or token offering) is a term describing a limited period in which a company sells a predefined number of digital tokens (crypto coins) to the public, typically in exchange for major crypto-currencies (as of today, mostly Bitcoin and Ether). On the side of the token issuer, the collected funds are typically used to finance a project (e.g. the building of a software/ blockchain-based platform). In exchange for the financing, the investor receives a token which may be connected with the right to receive a dividend, a voting right, a licence, a property right or a right to participate in the future performance of the issuer. Usually, tokens are tradable on cryptocurrency exchanges.

2. Token characteristics 
Tokens (coins) can have different functions, which triggers the way in which we treat them from a legal and regulatory perspective. Four main forms exist to date (including many hybrid combinations).

  • Security token
    Tokens with a security character (e.g. debt, equity or derivatives) with an income generating component and potential rights vis-à-vis the issuer (e.g. governance, participation, ownership).
  • Digital currency
    Tokens with an attributed value. They can be used to buy and sell goods and services and can be used to store value (although they can be very volatile).
  • Asset-backed token
    Tokens that provide underlying exposure to real world assets (e.g. gold, diamond, securities, cash, real estate, etc.)
  • Utility token
    Tokens with a utility character provide access to a blockchain-based platform, product or service. They are not primarily designed as a means of an investment.

3. What are the characteristics of an ICO?
In general, an ICO has the following structure:

  • Publication of a white paper describing a project or product as well as the funding via ICO. The white paper also describes the intended use of the tokens to be issued. Software and the technical specifications are published on open source platforms like GitHub.
  • A smart contract is set up, usually based on the Ethereum blockchain. The smart contract is needed to generate and distribute the tokens later on.
  • During a fixed time period, cryptocurrency payments (usually Ether or Bitcoin) are accepted by way of the smart contract.
  • Using the public key for those payments (similar to a digital account number), the smart contract generates the new tokens and makes them available to investors.
  • The tokens may be stored by third parties (wallet providers) and/or made tradable with the help of cryptocurrency trading platforms.
  • Once the funded project is complete, the investor can sell the tokens or exchange them for services.

4. What are the key challenges of an ICO?
Regulators worldwide are starting to look into ICOs, but only few have actually taken action (e.g. China, USA, Singapore). It is expected that the US SEC/EU ESMA and other major regulators will soon regulate the ICO space, particularly from a capital markets, tax and KYC/AML perspective. A further challenge is that many ICOs still lack proper cybersecurity, which can represent a major threat for investors. As most ICOs raise money in the form of cryptocurrencies, high volume transactions provide an attractive target for criminals. Besides ICOs, several cryptocurrency wallets (where tokens/coins get stored) have been hacked recently.

5. How does Liechtenstein treat ICOs from a legal/regulatory
perspective?
In September 2017, the Financial Market Authority Liechtenstein (FMA) published a fact sheet on ICOs which stated that depending on their specifications, tokens may constitute financial instruments subject to financial market law. This may include tokens that have characteristics of equity securities or other investments. In principle, activities relating to financial instruments are subject to licensing by the FMA on the basis of special legislation and may require publication of a prospectus. In all cases, the specific design and de facto function of the tokens are decisive. Any AML/KYC obligations also depend on the specific design. Connecting factors for FMA jurisdiction exist, for instance, if a company’s registered office or branch is in Liechtenstein and/or if relevant activities are pursued on the Liechtenstein market.

6. How is an ICO taxed in Liechtenstein?
Liechtenstein offers a favourable tax system with modest tax rates for issuers of tokens (typically using a foundation structure or a special purpose vehicle), for ICO entrepreneurs and for investors. Careful structuring of the ICO is necessary to manage potential issuance stamp tax consequences (in case of issuance of equity tokens) as well as VAT and corporate income tax consequences (in case of issuance of utility tokens). Since there is no gift tax in Liechtenstein, employing a charitable foundation structure is an option worth considering in detail. Taxation of ICO entrepreneurs and investors domiciled in Liechtenstein depends on the categorisation of a specific token. Capital gains on digital currency tokens should generally be exempt from income tax (due to taxation of notional income from wealth instead of effective investment income).

Contacts

Guenther Dobrauz
Partner, Leader of PwC Legal Switzerland
Office: +41 58 792 14 97
Email: guenther.dobrauz@pwc.com

Martin Meyer
Director, Leader of Financial and Private Wealth Services PwC
Liechtenstein
Office: +41 58 792 42 96
Email: martin.meyer@ch.pwc.com

Mark Schrackmann
Assistant Manager, PwC Legal Switzerland
Office: +41 58 792 25 60
Email: mark.schrackmann@ch.pwc.com

Orkan Sahin
Assistant Manager, PwC Legal Switzerland
Office: +41 58 792 19 94
Email: orkan.sahin@ch.pwc.com

Far-reaching consequences of disruptive innovations for the Liechtenstein financial market

The Liechtenstein financial market has demonstrated its ability to adapt in recent years by keeping pace with changing framework conditions. Financial industry stakeholders manage more assets today than before the outbreak of the financial crisis. Liechtenstein remains as attractive as ever as a location for private banking and wealth management. The Principality of Liechtenstein is not the only country in which the financial sector is undergoing fundamental change. Digitisation is the main driver of this transformation, and banks are the hardest hit. More and more so-called “digital disruptors” are offering banking services without actually choosing to adopt a banking model themselves.

The challenge of digitisation

Customer behaviour and expectations have evolved. New competitors (e.g. FinTechs) and new technologies (e.g. blockchain) are provoking a fundamental shift in the business model of banks. Digitisation offers new opportunities, but also generates risks. Traditionally structured banks operate an integrated business. They sell products that they have developed themselves via their own distribution channels. All transaction and support services are provided internally. In contrast, new technologies enable a high degree of standardisation to be achieved, leading to a fragmentation of the value chain. According to the PwC Global FinTech Report 2017, 82% of the study participants questioned want to enter into partnerships with FinTech companies within the next three to five years. 77% expect blockchain technology to have become a part of their company’s productive system environment by 2020. Banks in Liechtenstein will not be able to escape this development. They need to carefully analyse the strategic options for action before putting appropriate measures into practice.

Attractive framework conditions

The government is supporting technological change by means of its “Impuls Liechtenstein” programme and the “Regulatory Laboratory” set up within the Financial Market Authority Liechtenstein (FMA). The FMA pursues a forward-looking regulation policy in line with European law. The team of experts from the Regulatory Laboratory advises financial intermediaries at the interface between regulations and the market. At statutory level, modifications have been made to banking legislation which permit the needs-based approval of service providers. Furthermore, there are specific statutory provisions applicable to payment and electronic money institutions. In addition, service providers and organisations benefit from private initiatives which help to establish extensive networking within the FinTech industry in Liechtenstein.

Healthy prospects

There are healthy prospects for overcoming the technological transformation. Liechtenstein as a financial centre has significant expertise in the field of finance, responds rapidly thanks to its short decision-making channels, and is capable of implementing practical solutions. This creates stability and legal certainty. These are good basic conditions to ensure its continued survival in a competitive environment in such fast-moving times. In the future, financial intermediaries will however be required to prove their ability to adapt more than ever before.

Contact

Martin_Meyer_09723
Claudio Tettamanti
PwC | Partner | Market Leader Liechtenstein
Office: +423 233 10 02
Mobile: +41 79 696 45 89
Email
PricewaterhouseCoopers GmbH
Austrasse 52 | Postfach | FL-9490 Vaduz

More appealing the regime of taxation of the Italian source dividends received by companies resident in Liechtenstein.

This is one of the implications arising from the recent inclusion of the Principality in the so called Italian “White List”.

The regime of taxation of the dividends paid by the Italian companies to companies resident in  Liechtenstein has become more appealing as a consequence of the recent inclusion of the Country in the Italian so called White List.

As a matter of fact, a preferential WHT (at rate of 1,20 per cent instead of 26 per cent) could be applied to the above-mentioned Italian source dividends, provided that some conditions are met.

a) Background.

(i) The Decree 9 August 2016 has significantly extended the number of countries included in the so-called Italian “White-list” i.e. a list of countries in which agreements allowing information exchange are in force.

(ii) In general terms, from a financial perspective, the inclusion in the White list has relevant consequences both on “incoming financial income”, i.e. paid by subjects resident in a white-list country, and on “outgoing financial income”, i.e. received by subjects resident in those countries, thus making it more profitable for them to invest in domestic financial activities.

In particular, by this article we will focus on the consequences on the tax regime of the Italian source dividends paid to the companies resident in the Principality of the Liechtenstein arising from the inclusion of the same Country in the Italian White List.

b) The preferential withholding tax.

(i)  In general terms, the dividends paid by Italian entities to non-resident entities are subject to the Italian withholding tax at rate of 26 per cent.

The above-mentioned WHT can be mitigated according to the Double Tax Treaty in force between Italy and the Country of the recipient[1].

(ii)   In addition, a reduced 1,20 per cent[2]  WHT applies on dividends paid to:

  • entities which are subject to a corporate income tax in an EU State Member or EEA and
  • belong to the White List.

In particular, the WHT at reduced rate of 1,20 per cent refers to the dividends accrued starting from FY 2017 and aid from FY 2018 onwards (previously a reduced 1,375 per cent WHT was applicable on dividends paid starting from FY 2008).

(iii) At this regard, please consider that, in light of the clarifications issued by the Italian Tax Authority, the tax  payer in order to benefit of the above-mentioned reduced withholding tax shall prove that[3]:

a) the dividends were paid after the year 2004;

b) the request of the refund was submitted within 48 months after each dividend payment;

c) the company receiving the Italian dividends is subject to corporation tax[4].

d) the company receiving the Italian dividends must not have recovered integrally (or claimed for the reimbursement) the withholding taxes suffered in Italy (by means of deduction from the tax due in the State of residence or by the refund of the tax credit) neither according to the internal law nor according to the provisions of the Double Tax Treatment.

e) the dividend distribution does not constitute an “abusive” transaction.

Furthermore, please consider that the Italian Tax Authority has clarified that the claimant company must held “non qualified” shareholdings according to the Directive 90/435/EEC of  July 23rd, 1990 (so called “Parent – Subsidiary” Directive)[5].

As a matter of fact, in the above-mentioned case, on the dividends paid by the resident subsidiaries to EU Parent companies is not applicable the withholding tax of 1,20%, but must be applied the “Parent – Subsidiary” Directive  which provides, on request, the full refund of the withholding tax.

c) The case of the Liechtenstein.

(i) In light of above, the receiving companies resident in  Liechtenstein could benefit of  WHT at rate  of 1,20 per cent  (instead of 26 per cent) on dividends paid by Italian companies since the above-mentioned Country (EEA member) has been now included in the Italian “White List”.

However, in order to benefit of the above-mentioned preferential tax regime, the receiving companies must be subject to a corporate income tax and also other above-mentioned conditions have to be met.

(ii) Otherwise, should the Withholding Agent (even if all above-mentioned conditions are met)  apply a WHT on such dividends at higher tax rate (eg 26 per cent) the companies resident in Liechtenstein could ask the Italian Tax Office for the refund of the difference between the applied WHT and 1,20%.

In case of any questions, please do not hesitate to contact us.

Contact

Martin Meyer
PwC Liechtenstein| Director
Office: +41 58 792 42 96
Mobile: +41 79 348 36 13
Email: martin.meyer@ch.pwc.com
PricewaterhouseCoopers GmbH
Austrasse 52 | Postfach | FL-9490 Vaduz

 

Author

Davide Settembre
PwC TLS Avvocati e Commercialisti | Senior Manager
Office: +39 02 91605608
Mobile: +39 347 1004237
Email: davide.settembre@it.pwc.com
TLS Associazione Professionale di Avvocati e Commercialisti
Via Monte Rosa, 91, 20149 Milano, Italy
www.pwc.com/it


[1] Please consider that there is no DTA in force between Italy and Liechtenstein.

[2] The Finance Bill for 2016 has provided a reduction of the corporate income tax from 27.5% to 24% with effect from 2017.

Following such reduction, starting from FY 2018 Italian dividends paid to non resident companies and entities which are subject to a corporate income tax in an EU State Member or EEA and belonging to the White List, will be subject to a WHT lower tax rate at 1.20% (instead of 1.375%)

[3] Please see the Circular Letter no. 26/E of 21 May 2009 and no. 32/E of July 8 2011.

[4] More in detail, the Italian Tax Authority has clarified that the foreign companies can invoke the more favourable regime when they are subject to taxation even if they concretely benefit of specific exemptions. Consequently the requirement has to be interpreted “as general liability to taxation” and it is satisfied even where the entity is generally/potentially subject-to-tax, but there is a specific exemption e.g. for the particular kind of income realized.

[5] More precisely, the claimant Company must held shareholdings different in respect of those held by the Companies (so called Parent Companies) which satisfy some subjective and objective conditions provided for by law and which have a minimum share in a company resident in another Member State (which meet the same conditions).

Latvia removes Liechtenstein from its black list

On 27 October 2017 the Government of the Principality of Liechtenstein issued a press release stating that Liechtenstein has been removed from the Latvian black list of zero or low tax countries.

Due to the agreement on the exchange of information in tax matters, Liechtenstein is no longer regarded as a zero or low tax country in Latvia. Thus, dividend distributions, interest and royalty payments of a company resident in Latvia to a Liechtenstein company are exempt from Latvian withholding tax. In addition, at the level of a Latvian company, a tax exemption for dividend income from Liechtenstein shareholdings now applies.

The removal from the Latvian black list further contributes to strengthening Liechtenstein as a business location.

Contacts

Martin_Meyer_09723
Martin Meyer
PwC | Director
Office: +41 58 792 42 96
Mobile: +41 79 348 36 13
Email
PricewaterhouseCoopers GmbH
Austrasse 52 | Postfach | FL-9490 Vaduz

 

 

Bieri_Ralph_70735
Ralph Bieri
PwC | Senior Manager
Office: +41 58 792 72 76
Mobile: +41 79 643 14 37
Email
PricewaterhouseCoopers AG
Vadianstrasse 25a | Neumarkt 5 | 9001 St. Gallen

Conditions for Liechtenstein Foundations, Establishments and Trust Enterprises to apply double taxation agreement between Switzerland and Liechtenstein

The double taxation agreement between Switzerland and Liechtenstein (DTA CH-LI ) is applicable since 1 January 2017. To benefit from the agreement, an entity or individual has to be resident in one or both of the contracting states. The term “resident” requires closer inspection when used in connection with a Foundation (Stiftung), Establishment (Anstalt) or Trust Enterprise (Trust reg.) according to Liechtenstein law.

General considerations

According to the DTA CH-LI, a resident of a contracting state may be either an individual or other person (company) with domicile or place of effective management situated in its territory.

The term “company” includes all legal persons (corporations) that are treated as a corporate body for tax purposes and includes in principle the Liechtenstein Foundation, Establishment and Trust Enterprise. These entities are entitled to apply the DTA CH-LI if they meet the following conditions:

Foundations with a Swiss settlor or beneficiaries

The protocol to the DTA CH-LI lists four criteria that need to be cumulatively fulfilled for a foundation with a Swiss settlor or Swiss beneficiaries to be considered as resident:

    • The foundation is irrevocable, i.e. the settlor has not reserved the right in the formation documents to revoke the foundation.
    • The settlor has not reserved the right to change foundation documents.
    • Neither the settlor nor a related party to the settlor have the right to give instructions to the foundation council.

The beneficiaries have no legal claim to payments/benefits from the foundation.

These criteria constitute minimum requirements. Swiss cantons may establish additional criteria for determining residency based on their own legal practice.

Foundations without a Swiss settlor or beneficiaries

Based on a mutual agreement between Switzerland and Liechtenstein, the aforementioned criteria for determining tax residency are not applicable for foundations without a Swiss settlor and without Swiss beneficiaries. The conditions for such foundations to be considered resident are as follows:

  • The foundation is subject to unlimited tax liability in Liechtenstein (i.e. is not subject only to minimum taxation, see below).
  • The foundation is irrevocable (i.e. the foundation is irrevocable based on Liechtenstein rules and legal practice).
  • The structure does not qualify as a tax-abusive structure based on the provisions of the DTA CH-LI.

If the settlor of the foundation has passed away, the foundation is generally considered resident provided that the beneficiaries do not have the right (based on the foundation documents) to give instructions to the foundation council or have a legal claim on payments/benefits from the foundation.

Establishments and Trust Enterprises

Liechtenstein Establishments and Trust Enterprises are highly flexible legal forms. They may be set up similar to a Foundation or similar to a corporation.

According to the protocol to the DTA CH-LI, the conditions for Foundations to be considered resident are applicable mutatis mutandis to Establishments and Trust Enterprises that are similar to Foundations (see criteria described above). Establishments and Trust Enterprises that are set up similar to a corporation are however in principle considered as resident and thus able to apply the DTA CH-LI.

Distinguishing between corporate entities and foundation-like entities is not easy since the criteria are not yet clearly defined. Tax authorities and courts of law will have an important role in laying down the guidelines. Distinctive features for the qualification are, among others, the existence of shares, the possibility of the settlor or trustor to exercise influence, and the rights of potential beneficiaries.

Minimum taxation

Persons and entities that are subject solely to minimum taxation in Liechtenstein are not considered as resident based on the DTA CH-LI. This means in particular that entities benefiting from the private wealth structure regime may not apply the DTA CH-LI.

Conclusion

The conditions agreed between Switzerland and Liechtenstein regarding the definition of residence of Foundations, Establishments and Trust Enterprises correspond largely to the existing Swiss legal practice. Although the rules are seemingly clear, an interpretation of the rules may be necessary in individual cases to reflect the situational factors.

With regard to existing structures, we would recommend checking the residence of the entities based on the rules of the DTA CH-LI and, if necessary, taking the necessary measures to qualify as resident. In view of the future setup of Foundations, Establishments and Trust Enterprises, it would be advisable to have the residency confirmed by the tax authorities with a tax ruling.

Contacts

Martin_Meyer_09723
Martin Meyer
PwC | Director
Office: +41 58 792 42 96
Mobile: +41 79 348 36 13
Email
PricewaterhouseCoopers GmbH
Austrasse 52 | Postfach | FL-9490 Vaduz

 

 

Stadler_Yves_58957
Yves Stadler
PwC | Manager
Office: +41 58 792 74 55
Mobile: +41 76 570 05 09
Email
PricewaterhouseCoopers AG
Vadianstrasse 25a | Neumarkt 5 | 9001 St. Gallen

Liechtenstein has signed an additional DTA with Monaco

On 29 June 2017 the Government of the Principality of Liechtenstein issued a press release stating that Liechtenstein has signed an additional Double Taxation Agreement (DTA) with Monaco. The DTA between Liechtenstein and Monaco is intended to increase the legal certainty for investors and strengthen the close cooperation between the two countries.

The DTA is based on the current international OECD standard. It takes into account the results of the OECD/G20 BEPS project, which is intended to prevent tax avoidance in a cross-border context. The exchange of information is regulated based on international standards, whereby the automatic exchange of information (AEOI) will be carried out in accordance with the framework of the Multilateral Competent Authority Agreement (MCAA).

We assume that the new DTA with Monaco will be approved this year by the Landtag of the Principality of Liechtenstein, which would allow it to enter into effect as of 1 January 2018.

Contacts

Martin_Meyer_09723
Martin Meyer
PwC | Director
Office: +41 58 792 42 96
Mobile: +41 79 348 36 13
Email
PricewaterhouseCoopers GmbH
Austrasse 52 | Postfach | FL-9490 Vaduz

 

 

Bieri_Ralph_70735
Ralph Bieri
PwC | Senior Manager
Office: +41 58 792 72 76
Mobile: +41 79 643 14 37
Email
PricewaterhouseCoopers AG
Vadianstrasse 25a | Neumarkt 5 | 9001 St. Gallen

Poland removes Liechtenstein from its black list

On 9 June 2017 the Government of the Principality of Liechtenstein issued a press release stating that Liechtenstein has been removed from the Polish black list of low-tax countries.

Removing Liechtenstein from the black list is a consequence of the signing of the agreement between Liechtenstein and the EU Member States to exchange information on tax matters automatically and upon request. This agreement is in force since 1 January 2016.

The removal from the Polish black list further contributes to strengthening Liechtenstein as a business location. In particular, it helps Liechtenstein based companies in the areas of transfer pricing documentation and controlled-foreign-company regulation. Liechtenstein based companies no longer automatically fall within the scope of these anti-abuse rules. Thus, anti-abuse rules only apply if the specific preconditions based on Polish legislation are fulfilled.

Contacts

Martin_Meyer_09723
Martin Meyer
PwC | Director
Office: +41 58 792 42 96
Mobile: +41 79 348 36 13
Email
PricewaterhouseCoopers GmbH
Austrasse 52 | Postfach | FL-9490 Vaduz

 

 

Bieri_Ralph_70735
Ralph Bieri
PwC | Senior Manager
Office: +41 58 792 72 76
Mobile: +41 79 643 14 37
Email
PricewaterhouseCoopers AG
Vadianstrasse 25a | Neumarkt 5 | 9001 St. Gallen

Liechtenstein – The fund location

A modern fund location in the very heart of Europe

The financial world order is in a state of upheaval. Established financial centres are being challenged by regulatory and political developments. Financial centres must transform to stay competitive. This influences fund providers and asset managers in their choice of location. In this way, the Principality of Liechtenstein has moved increasingly into the foreground. It has succeeded by creating an internationally recognised regulatory framework, combined with an attractive and compliant tax system, and full access to the key financial markets.

Read more…

In case of any questions please contact me:
Martin_Meyer_09723
Claudio Tettamanti
PwC | Partner | Market Leader Liechtenstein
Office: +423 233 10 02
Mobile: +41 79 696 45 89
Email
PricewaterhouseCoopers GmbH
Austrasse 52 | Postfach | FL-9490 Vaduz

Double Tax Treaty between Switzerland and Liechtenstein

On 1 January 2017 the new double tax treaty between Switzerland and Liechtenstein (“DTT CH-FL”) entered into force. This treaty facilitates access of Swiss based companies to the EU market (because Liechtenstein is part of the European Economic Area “EEA”) and makes it much more attractive for Liechtenstein based holding companies and individuals to own shares in Swiss companies (due to a reduction of WHT to 0%/15%).

There is an increasing interest in Liechtenstein also as a holding location for companies based in other countries, in addition to the new DTT CH-FL, mainly due to the following characteristics:

  • 0% WHT on dividend, interest and royalty payments paid by Liechtenstein companies based on unilateral Liechtenstein law
  • 12.5% corporate income tax rate, participation exemption and 4% notional interest deduction
  • No CFC-regulation, however correspondence principle for hybrid financing
  • Application of EU fundamental freedoms (goods, persons, services and capital)
  • BEPS conformity (minimum standards implemented on 1 January 2017)
  • Growing network of double tax treaties with major economies (UK, Germany, Austria, Luxembourg, Malta, Singapore, Hong Kong, etc.)

Furthermore, please note that due to the EEA agreement (i.e. the 4 freedoms) and the tax information exchange agreements (TIEAs) with various EU member states no withholding tax should be applied on dividends, interests and royalties received from a subsidiary established in these EU member states.
Due to the on-going BEPS discussions, traditional holding company locations such as Luxemburg, Netherlands and the UK face challenges that were also addressed in Liechtenstein. This is how Liechtenstein meets the challenges:

  • Substance: There is a consensus that local substance will be key to apply double tax treaties. Because Liechtenstein is close to Zurich (approx. 90 min), qualified employees can relatively easy be recruited or shared between Swiss and Liechtenstein based group companies (e.g. with split working contracts). Creating financial substance (i.e. equity financing) is highly attractive for Liechtenstein based companies in the current low-interest environment due to a 4% notional interest deduction.
  • Hybrid mismatch: Because Liechtenstein does not levy WHT on dividends, interest and royalties, there is no need to employ hybrid instruments. With the implementation of the correspondence principle for hybrid financing, Liechtenstein meets the BEPS minimum standard (BEPS action 2)
  • CFC-rules/Substantial interest rules: Liechtenstein does not have CFC regulation.
  • Black Lists: Liechtenstein’s efforts in tax transparency (implementation of AEOI, TIEAs with 27 countries etc.) have led to Liechtenstein being removed from the most prominent black lists (e.g. FATF-blacklist and Italian financial transaction tax black list)
  • EU State aid: Since its inception in 2011, the goal of the Liechtenstein tax law has been compliance with EEA regulations. In fact, the EFTA-supervisory authority reviewed certain elements of Liechtenstein tax law in 2011 and 2012 and qualified them as EEA-compliant

In short, Liechtenstein becomes more attractive as an alternative holding structure compared to traditional holding locations. Especially by combining resources already available in Swiss group companies, a robust (i.e. BEPS-compliant) and tax efficient holding company structure can be established in Liechtenstein. There is a so-called “principle purpose test” embedded in the new DTT CH-FL similar to the principal purpose test provision (i.e. general anti-abuse rule) recommended by the OECD. There is not yet any practice available in this respect but we expect the same substance requirements for Liechtenstein holding companies as required by the ESTV for other known holding jurisdictions.

Blog LI - DBA

In case of any questions please contact us:

Brunner_Roman_09544Roman Brunner
PwC | Partner
Office: +41 58 792 72 66
Mobile: +41 79 676 40 63
Email
PricewaterhouseCoopers AG
Vadianstrasse 25a | Neumarkt 5 | 9001 St. Gallen

 

Meyer_Martin_09723_01
Martin Meyer
PwC | Director
Office: +41 58 792 42 96
Mobile: +41 79 348 36 13
Email
PricewaterhouseCoopers GmbH
Austrasse 52 | Postfach | FL-9490 Vaduz

Private banking in Switzerland and Liechtenstein: are its days numbered?

CyberThreatLandscapeSwitzerlandAre the days of private banking in Switzerland and Liechtenstein numbered? If you’re to believe what many experts and the media have been claiming recently, they are: with the advent of the process to regularise untaxed client money from abroad, there have been various horror stories predicting heavy outflows of assets from Switzerland and Liechtenstein. But the reality is that most players in both financial centres adopted a clean money strategy some time ago already, and have managed to largely rid themselves of past burdens. So it’s gratifying to note that the process of regularisation has not led to significant outflows of client money from the banks. Total client assets under management in Switzerland and Liechtenstein are currently running at almost the same levels as in 2007, a record year. Even in the era of automatic exchange of information (AEOI), both countries have been able to defend their position as important offshore wealth management centres.

Download the full report here.