Liechtenstein in a nutshell

1. Extended in 160km2 and its 38,000 inhabitants Liechtenstein is tucked away between Switzerland and Austria with mountain slopes rising above the Rhine Valley.

2. Over 34% of the population is not from Liechtenstein, in fact the biggest group of foreigners living in this country stem from neighbouring countries, in particular from Switzerland (31%), Austria (17%) and Germany (10%).

3. Liechtenstein does not have an airport, but does have a heliport in the southern town of Balzers. A large number of motorways and train stations connect the country to the rest of Europe, while an excellent public transport network makes travelling within Liechtenstein simple and hassle-free.

4. The official language of Leichtenstein is German, and the currency is the Swiss Frank (CHF).

5. Liechtenstein has one of the world’s lowest crime rates, with its last murder occurring in approximately 1997 and its prison holding very few inmates.

6. In 2011, Liechtenstein joined the Schengen area, which allows passport-free travel across 26 European countries.

Economic Overview

Liechtenstein is a modern, globally connected industrial and service economy. The basis of its economic success in recent decades has been a favorable economic framework relying on liberal economic law.

Liechtenstein is also home to a highly productive, globally-oriented industrial sector, which contributes over 40% of the entire added value(gross domestic product) of the country. In addition, Liechtenstein also has well-developed services, especially in the financial sector, such as legal services, professional trustees, and banks.

The country enjoys a worldwide reputation as a modern financial center. Liechtenstein is one of the most industrialized countries in the world. This broad diversification has been and continues to be the key to the continuing and crisis-resistant growth of the Liechtenstein economy.
Despite its small size and lack of natural resources, Liechtenstein has developed into a prosperous, highly industrialized, free-enterprise economy with a vital financial service sector and the third highest per capita income in the world, after Qatar and Luxembourg.

Four out of 10 employees work in the services sector, a relatively high proportion of whom are foreigners. Industrial exports more than doubled in 20 years from $1.21 billion in 1988 to $2.9 billion in 2008.

Some 15.7% of Liechtenstein goods are exported to Switzerland, 62.6% to the EU, and 21.1% to the rest of the world. Liechtenstein imports more than 85% of its energy requirements from the Swiss, while it produces only 15% of its energy requirements. About 32% of the country’s revenues are invested in research and development, one of the driving forces of the success of Liechtenstein’s economy.

The Principality of Liechtenstein also is known as an important financial centre, primarily because it specializes in financial services for foreign entities. The country’s low tax rate, loose incorporation and corporate governance rules, and traditions of strict bank secrecy have contributed significantly to the ability of financial intermediaries in Liechtenstein to attract funds from outside the country’s borders.

Key sectors in Liechtenstein

Industries and manufacutring
Liechtenstein’s industry is heavily export-oriented and focuses on high-quality goods and services. Manufacturing, machine and plant construction, precision tools, dental instruments, optical instruments and the food industry are the main areas of activity.

Around 40% of Liechtenstein’s workforce is employed in the industrial sector, which together with the manufacturing sector generates no less than 40% of the country’s annual gross value added. Many industrial companies are highly specialised and work in niche markets.
Through intensive research and development, a significant number of them have become global leaders.

Tourism
Liechtenstein boasts a number of attractions that are of interest to visitors such as: Balzers, home to a beautiful church and a spectacular Gothic castle; Vaduz, which is capital and main shopping area in the country; Shloss Vaduz with its historic castle, home to the royal family.

Liechtenstein is also renown for great hiking, road biking, and mountain biking terrain: an opportunity to discover untouched nature in the heart of the Alps. Skiing and snowboarding are also offered at a reasonable price at the country’s small resort.

Service Industry
Being a stable financial centre with international connections, its services sector is second only in size to the industrial one. Liechtenstein’s first bank was founded in 1861. Since then the financial sector has grown to become an important part of the national economy and today employs around 16% of the country’s workforce. Nevertheless Liechtenstein is also attractive to and popular among many other kinds of companies such as insurers, asset managers, funds and trusts.

Taxes in Liechtenstein
At the beginning of 2011 a totally revised Tax Act entered into force in Liechtenstein. Now they are levied based on residency, meaning only companies with registered addresses and individuals with a domicile in the Principality will be taxed on the income they earn during a calendar year. In order to be able to pay their taxes, both companies and individuals must file annual tax returns with the local authorities.

Company Tax
Companies registered in Liechtenstein will be taxed on their worldwide income at a flat rate of 12,5%. Liechtenstein also signed several double tax treaties in order to avoid the double imposition of taxes with respect to branches of local companies operating abroad.

It is important to know that Liechtenstein offers many tax benefits to companies, among which no dividend, interest or royalties levies and no capital duty.The taxable period for a company is the calendar year i.e. from 01/01 to 31/12.

Vat in Liechtenstein
• VAT standard rate of VAT is 8%.
• The reduced rates of VAT are 3.8% (hotel and lodging industry) and 2.5% (deliveries of food, drugs, magazines, newspapers and books) and 0%.
• Health, social insurance, education, banking and insurance are exempt from VAT in Liechtenstein.

Tax returns
Every company needs to submit an annual tax return by 1 July of the following tax year.
Group tax returns are not allowed in Liechtenstein.

Investing in Liechtenstein

Even being one of the smallest European states, Liechtenstein is one of the most attractive countries for foreign investors. Credit agencies have offered Liechtenstein good ratings for several years in a row now which has led to the Principality to have very good economic prospects: with its stable and open economy more jobs openings were created than the country’s domestic population in the past decades.

What differentiates Liechtenstein from its European neighbors is that the country is mostly open to small businesses which are also encouraged by the central authorities.
The new Liechtenstein IUG became effective on 1 October 2016. It provides four specific categories of investment vehicles, supervised by the Financial Market Authority, which offer, to particular investors, excellent possibilities for structuring corporate and private assets.

The fast time-to-market via the so-called certification procedure is in addition to the low costs a special advantage of these vehicles.

The four categories of the new IUG are:
• Investment undertakings for single investors
• Investment undertakings for families
• Investment undertakings for interest groups
• Investment undertakings for affiliated groups

With its appealing fiscal programme, simple incorporation laws and increasingly strict regulations in terms of banking matters Liechtenstein is undeniably a strong site for national and international businesses.