Insurance Center Liechtenstein – Improved Tax Environment
Missing network of DBAs
The insurance business is generally capital-intensive. This is particularly true for life insurance companies whose main activity consists of accepting funds in form of premiums from policyholders, before repaying them, usually many years or decades later, in case of an insured event or at the end of the insurance period. Regarding the management of assets held by insurance companies, it is detrimental to the latter that Liechtenstein so far concluded only a few double taxation treaties ensuring that foreign withholding taxes on interest and dividends are completely or at least partially avoided.
In relation to Switzerland, the previous lack of a comprehensive double taxation treaty was also damaging, as Liechtenstein insurance companies are very closely linked to the Swiss financial center. The Swiss withholding tax of 35%, which is levied on interest and dividends from Swiss sources, was a final burden on Liechtenstein insurance companies.
DTA Liechtenstein - Switzerland provides relief
A new double taxation treaty between Liechtenstein and Switzerland entered into force on 1 January 2017. As the former double taxation treaty was mainly limited to the issue of taxation of cross-border commuters, the Liechtenstein authorities rightfully insisted on the conclusion of a comprehensive treaty, and so the new double taxation treaty also covers the taxation of interest and dividends. Under the new treaty, Liechtenstein insurance companies now have the full right of recovery of the Swiss withholding tax levied in respect of interest. For dividend income from Swiss sources, the 35% Swiss withholding tax is reduced to 15% (the 0% rate applies to holdings of 10% or more). The new double taxation treaty between Liechtenstein and Switzerland has provided the Liechtenstein insurance center with a welcome benefit, so to speak through the back door.