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Liechtenstein's Flat Tax Yields CHF5m In 2012

by Ulrika Lomas, Tax-News.com, Brussels

25 October 2013


During a recent sitting, the Liechtenstein Government announced that the lump sum taxation (Pauschalbesteuerung) of wealthy foreigners in the Principality served to yield around CHF5m (USD5.6m) for the state in 2012.

Under Liechtenstein law, as in neighboring Switzerland, wealthy foreigners are entitled to benefit from the country's flat tax regime, which is based on the cost of living rather than on an individual's wealth or income.

Responding to an interpellation submitted by the center-left Free List party, the Government explained that last year 41 individuals or married couples were subject to the lump sum tax, generating additional income of CHF5m. The Government explained that the prerequisite for benefiting from the tax perk is that foreign nationals have obtained a residence permit and are not in receipt of income from activity.

Concluding, the Government insisted that this type of taxation is in accordance with the international commitments that Liechtenstein pledged to adhere to recently in the area of taxation.

Defending its interpellation, the Free List party emphasized that the levy is now questionable, given the latest international developments in tax matters. Highlighting the fact that the tax is fiercely opposed abroad, the Free List party noted that five cantons in Switzerland have already elected to abolish the regime, which is due to be put to a national vote next year.

Summing up, the party argued that the flat tax regime only benefits foreign nationals, and therefore discriminates against Liechtenstein nationals. Furthermore, the tax lowers the financial burden on these persons, thereby further increasing their wealth.

TAGS: individuals | tax | law | Liechtenstein | Switzerland | tax breaks | individual income tax

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