International Cooperation in Tax Matters

Liechtenstein’s International Tax Policy

Cooperation, coordination and exchange of information at a national and international levels are important features of the Liechtenstein financial center. Liechtenstein is an internationally focused financial center with a clear strategy of transparency and tax cooperation based on international and European standards.

As reaffirmed in the Financial Center Strategy 2019, compliance with such standards is an important pillar of Liechtenstein’s longstanding strategic focus. These standards include in particular the requirements of the OECD, the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum), the European Union and other global standard setters such as the FATF, IOSCO, and the IAIS. A consistently high level of compliance with these standards increases legal certainty for clients and financial market stakeholders and strengthens the financial center.

Liechtenstein has taken numerous measures in the field of exchange of information in tax matters and concluded various bi- and multilateral agreements with partner countries, including the United States, in order to facilitate exchange of information in tax matters.

Since joining the Convention on Mutual Administrative Assistance in Tax Matters (MAC), Liechtenstein has a global comprehensive network for the exchange of information on request, spontaneous and on an automatic basis as the MAC now has more than 140 signatory countries.

The Government attaches highest priority to Liechtenstein’s credibility in complying with international and European standards. It is committed to strong and consistent international engagement in relevant European and international bodies. As the results of various Peer Reviews show, the efforts taken by all national authorities and market participants are effective. Liechtenstein is consistently receiving positive results.

In the second round of the EOIR Peer Review conducted by the Global Forum Liechtenstein was rated overall “Largely Compliant” just like the United States among others.

In the 2021 Global Forum AEOI Peer Review the overall determination on the legal framework is “In Place” and no recommendations were made. The Global Forum is also carrying out Peer Reviews to ensure that the exchanges are effective in practice. These reviews are ongoing, with the results expected to be published in 2022. As of 1 January 2022 the list of Liechtenstein’s AEOI partner states includes 121 jurisdictions. Furthermore, information has been exchanged automatically with the US since 2015 on the basis of the FATCA Model 1 agreement.

As one of the first non-OECD countries, Liechtenstein joined the Inclusive Framework of the OECD in 2016 and is fully complying with the international standards that are developed in the area of cross-border company taxation (Base Erosion and Profit Shifting; BEPS) through its national law and treaty policy. By joining the Inclusive Framework, Liechtenstein became an Associate in the BEPS Project. In that role Liechtenstein participates in the work done on the BEPS Project by the Committee on Fiscal Affairs (CFA) and its subsidiary bodies.

In addition, Liechtenstein was among the first signatory states to the OECD Multilateral Convention (MLI) to Implement Tax Treaty Related Measures to Prevent BEPS.

The four BEPS minimum standards (Action 5, Action 6, Action 13, Action 14) are subject to peer reviews in order to ensure timely and accurate implementation and thus safeguard the level playing field. This level playing field is of essential importance for Liechtenstein. The Peer Reviews confirm Liechtenstein’s adequate implementation of the minimum standards.

Liechtenstein pursues a proactive and comprehensive policy approach and has a longstanding track record in taking swift action to the benefit of the attractiveness of the business center. Digitalization and globalization have had a profound impact on economies and the lives of people around the world, and this impact has further accelerated in the 21st century. These changes have created challenges to the rules for taxing international business income. The OECD therefore started the BEPS Project “Addressing the tax challenges of the digitalization of the economy”.  

From the beginning of this process Liechtenstein supported a long-term, consensus-based global solution. Liechtenstein is convinced that only a global agreement with practical and balanced rules for Pillar 1 and Pillar 2 combined with an end to unilateral measures will be an adequate and sustainable basis for addressing global tax challenges. Consequently, Liechtenstein joined the Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy in October 2021.

Liechtenstein and the European Union

Liechtenstein is part of two highly competitive economic areas: of Switzerland through Customs and Currency treaties and of the European Single Market through its membership in the European Economic Area (EEA).

Through the EEA, the 27 Member States of the European Union and the three EEA EFTA States (Liechtenstein, Iceland and Norway) are integrated in the Internal Market. Citizens of all 30 EEA Member States enjoy the four freedoms, i.e. the free movement of goods, persons, services and capital. The EEA Agreement prohibits any discrimination based on nationality.

As a general rule, Liechtenstein's EEA membership entails that the same legal requirements apply to financial market participants in Liechtenstein as in the EU countries. By implementing EU directives in a timely and market-oriented matter, Liechtenstein promotes the competitiveness and attractiveness of its financial center.

Liechtenstein has high standards and an effective system for combating money laundering and terrorist financing. The AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) framework is currently based on the 5th EU Anti Money Laundering Directive which fully takes into account the 2012 Recommendations of the Financial Action Task Force (FATF).

Liechtenstein entertains a close bilateral cooperation with the European Union on tax matters. According to the European Council it is “compliant with all its commitments on tax cooperation”. Liechtenstein’s tax system is based on the applicable European standards, including the EU’s rules on State Aid in the field of taxation which prohibit selective corporate tax regimes that specifically favor offshore business. Compliance with State Aid rules in the field of taxation is enforced by a supranational body, the EFTA (European Free Trade Association) Surveillance Authority (ESA) and the EFTA Court. ESA is the competent authority under the Agreement on the EEA to monitor and enforce the proper application of EU law by the three EFTA States. ESA works in tandem with the European Commission that assumes the same supervisory functions in respect of EU Member States.