Income tax in Liechtenstein
March 18, 2015
Residents are taxed on their income from Liechtenstein sources. Liechtenstein asset and income tax law is governed by the principle of family taxation, which means that married couples are assessed and taxed jointly. The income of minor children who live in a joint household with their parents is also included in the family’s income.
Taxable income includes: (1) employment income, (2) business income, professional income, and income derived from self-employment, (3) benefits from social security and insurance, and (4) income from other sources such as alimony and maintenance payments, income from agriculture and forestry, capital gains (other than gains on real estate, which are subject to real estate gains tax).
Taxes are assessed on the basis of taxable assets and taxable income. The tax rate is determined annually by Parliament in fractions or multiples of the legal tax unit (0.1% for taxable assets, 2% for taxable earnings); it is currently 54% of the legal tax unit.
Tax progression surcharges of 5% to 425% are added to the simple national tax, i.e., the amount of asset and income tax calculated on the basis of the tax rates mentioned above, depending on the amount of the tax. Municipalities add additional surcharges of at most 200% to the overall national tax liability.
Assuming a municipal tax surcharge of 200%, the minimum and maximum tax rates are as follows: at least 0.162% and at most 0.8505% for asset tax; at least 3.24% and at most 17.01% for income tax.
Residents are entitled to deduct the following personal allowances and expenses:
- premiums for life, sickness and accident insurance up to CHF7,000 (€6,667) for a married couple
- premiums for life, sickness and accident insurance up to CHF3,500 (€3,333) for a single taxpayer
- premiums for life, sickness and accident insurance up to CHF2,100 (€2,000) for each child
- cost for higher education for children up to CHF12,000 (€11,429) per child
- medical expenses and dentistry expenses up to CHF6,000 (€5,715) per person
- voluntary donations to non-profit organizations up to 10% of taxable income
REAL ESTATE PROFITS TAX
Gains or profits realized from the sale of Liechtenstein property are subject to a special tax called real estate profits tax. Taxable gains or profits are computed by deducting the investment costs (acquisition costs and improvement costs) from the sales proceeds.
Gains or profits are taxed at progressive rates, from 0% on property values up to CHF15,000 (€14,286) to 0.70% on property values in excess of CHF170,000 (€161,905).
Community surcharge is charged at 200% of the property tax.
NET WORTH TAX
The net worth tax is levied on the net worth of the taxpayer’s assets. Net wealth is multiplied by 4% to calculate notional income from wealth, which is then subject to income tax at progressive rates.