🇱🇮Liechtenstein: Residence and Taxes

Concept

Liechtenstein is a tiny principality between Switzerland and Austria, just over 160 km² with around forty thousand inhabitants, home to one of the most stable financial sectors in Europe and a reputation as a place for very old and very quiet capital. The principality belongs to the EEA and Schengen, stays outside the European Union, uses the Swiss franc, and forms a customs and monetary union with Switzerland. Taxes here are moderate: rates are well below the European norm, but the treasury genuinely collects them. The hardest part is residence itself — obtaining a residence permit in Liechtenstein is harder than almost anywhere in Europe.

Residence by Quota and Lottery

The principality strictly caps the number of residents. For EEA nationals roughly 56 residence permits with the right to work open up each year: half are allocated by the government on application, and half are drawn twice a year in a lottery. A separate, even narrower quota — around fifteen places — is set aside for economically inactive newcomers living on their own capital. Swiss citizens go through their own channel for about 17 places a year. Nationals of countries outside the EEA need either an employment contract or real economic significance to the country. There is no direct purchase of residence through an investment, as in the Caribbean programmes or the Andorra scheme — the classic golden visa does not work here.

Income and Wealth Tax

Personal income tax combines a national rate of 1 to 8 percent with a communal surcharge of 150 to 180 percent of that figure; together the top effective rate comes to around 22 to 24 percent depending on the commune — well below neighbouring Austria and Germany. Wealth is taxed in an unusual way: net assets are multiplied by a notional yield of about 4 percent (Sollertrag), and that computed figure is added to taxable income, giving an effective tax on capital of roughly 0.06 to 0.9 percent a year. There is no capital gains tax on securities or crypto assets, and dividends are not taxed at the individual level either — which makes the principality convenient for holders of investment portfolios who have become tax residents of Liechtenstein.

Corporate Taxes, Foundations and the Privatvermögensstruktur

The corporate layer is a separate reason wealthy families value Liechtenstein. The profits of all companies, foundations and establishments (Anstalt) are taxed at a single flat rate of 12.5 percent — one of the lowest in Europe — with a minimum tax of 1,800 francs a year. Inheritance and gifts are not taxed at all: the relevant tax was abolished in 2011. The principality took VAT from Switzerland along with its administration — a standard rate of 8.1 percent from 2024, against double-digit figures almost everywhere in the EU.

The core of the local industry is the private foundation (Stiftung) and the holding structures attached to it. If a legal entity merely manages its own capital and carries on no commercial activity, it can obtain Privatvermögensstruktur (PVS) status: instead of 12.5 percent it then pays only the minimum of 1,800 francs and files no profit reporting. This relief was approved in its time by the EFTA Surveillance Authority as compatible with EU competition law; the minimum capital of a foundation is 30,000 francs, euros or dollars.

Lump-Sum Regime for the Wealthy

For the ultra-wealthy who do not work in the country and live on the return from their capital, there is expenditure-based taxation — the lump-sum. The tax is calculated on worldwide living expenses at a rate of about 25 percent, while the annual minimum is fixed at 300,000 francs and locked in for five-year periods. The regime is open to those moving to Liechtenstein for the first time, or after at least ten years away, who hold no local citizenship and fund their life from foreign sources. In practice the arithmetic makes sense at taxable capital of roughly 35 million francs and up; below that threshold ordinary taxation is more often cheaper.

International Status and Transparency

Modern Liechtenstein combines low rates with full reporting. The principality has been in the EEA since 1995 and in Schengen since the end of 2011, so a resident gains freedom of movement across Europe and access to the single market. Bank secrecy in the old sense no longer exists here: a law on automatic exchange has applied since 2016, Liechtenstein was among the early adopters of CRS and has reported account data for 2016 since 2017, while a separate exchange agreement with the EU has operated from the same time.

The turn came after 2008, when a data leak from LGT Bank triggered an international scandal, followed in 2009 by the so-called Liechtenstein Declaration on adopting OECD tax standards. Since then the principality has rebuilt its model: a bet on genuine substance, a network of double-tax treaties, and a reputation as a transparent financial centre. For anyone who genuinely becomes a tax resident and moves their centre of vital interests here, that is a benefit; for anyone who was looking for a quiet harbour for undisclosed capital, the window has closed.