B2 Current income taxation Standard taxation and tax exemption at foundation level

Income tax Regular taxation

Liechtenstein private-benefit foundations are subject to unlimited tax liability on all their income if their registered office or place of effective administration is in Liechtenstein. If the legal and actual power of disposal over the foundation’s assets remains with the founder, the founder is regarded as the beneficial owner of the foundation’s assets, with the result that the income is attributed to him and taxed at his level and not at the level of the foundation.

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The basis of assessment for the income tax is the taxable net income resulting from the annual financial statements.
The income tax rate is a uniform 12.5% of net income (flat rate). An effective tax rate reduction is achieved by the possibility of deducting the interest on equity capital, currently amounting to around 3.75%, as a justified expense.
Irrespective of the annual result, taxable foundations in Liechtenstein are subject to a minimum income tax of CHF 1800, which is fully creditable against the income tax.
Irrevocable foundations subject to income tax must file a tax return annually and are assessed.
Revocable foundations do not have to file a tax return for investment income and only have to pay a minimum income tax. Other income must be declared and is subject to income tax.

Exemptions from income tax

Liechtenstein tax law grants the following tax exemptions to legal entities and thus also to Liechtenstein foundations:

  1. Income from the cultivation of foreign agricultural and forestry land and from any other agricultural and forestry production abroad;
  2. Foreign permanent establishment results;
  3. Rental and leasing income from properties located abroad;
  4. Domestic real estate gains, insofar as they are subject to real estate gains tax in Germany, as well as capital gains from the sale of foreign real estate;
  5. Profit shares due to participations in legal entities;
  6. Distributions from foundations, institutions similar to foundations and special asset dedications with personality;
  7. Capital gains from the sale or liquidation and unrealized appreciation of investments in legal entities;
  8. Income from the assets under management of undertakings for collective
    investment undertakings in accordance with the IUA, alternative
    investment undertakings pursuant to the IUA, of alternative
    funds under the AIFMG or comparable undertakings for collective investment
    established in accordance with the law of another state; income from
  9. Income from the net assets of legal entities subject to the Pension Fund Act, provided that these assets are exclusively and irrevocably allocated to the company pension scheme;
  10. Capital gains from inheritance, bequest or gift.

Tax law in DE, AT
DE: corporate income tax; standard rate 15%, ; trade tax, if applicable; inheritance substitute tax
AT: corporate income tax; standard rate 25% with special features for private foundations, withholding tax rate 5% according to DTA DE-AT

Taxation of liquid bank assets in DE, AT
DE: taxation of capital gains on portfolio investments eff. 0.79%
taxation of dividends received eff. 0.79%; plus withholding tax of usually 15% in the source country reduced by applicable DTAs
taxation of interest received 15% corporate income tax
AT: Taxation of capital gains on portfolio investments 0% outside the speculation period of one year, otherwise 25%
Taxation of dividends received 0% plus withholding tax of generally 15% in the source state reduced by applicable DTAs
Taxation of interest received 25% intermediate tax

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