Liechtenstein Lawmakers Give Go-Ahead To Austrian Tax Accords

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During a recent sitting, the Liechtenstein parliament gave the green light to the withholding tax agreement with Austria, together with the protocol revising the existing double taxation agreement (DTA) between the two countries in the area of taxes on income and on wealth.

The withholding tax law provides for the specific withholding tax rates to be applied to legalize the untaxed wealth of Austrians with assets held in the Principality, and provides a comprehensive framework for tax cooperation.

Under the terms of the withholding tax treaty, future capital gains realized by Austrian citizens with assets deposited in Liechtenstein will be taxed at a rate of 25 %. Previously untaxed assets will be subject to a one-off withholding tax payment to draw a line under the past, with rates generally varying between 15 % and 30 % of the asset value, although rising to 38 % in the case of particularly large wealth.

In contrast to Austria's tax agreement with Switzerland, foundations in Liechtenstein will also be subject to taxation under the terms of the deal, not just the capital assets of Austrians located in Liechtenstein banks.

Welcoming the decision by Liechtenstein lawmakers to adopt the agreement package, Austrian Finance Minister Maria Fekter stressed that this "is another major step in the direction of greater tax equity."

Fekter said: "Tax flight is becoming increasingly unattractive, as this agreement significantly reduces incentives. Implementation of the agreement, which was signed at the end of January in Vaduz, finally makes the days when Austrian money could be funnelled past the Austrian tax authorities and parked in Liechtenstein a thing of the past."

Highlighting the fact that one-off payments from Liechtenstein are expected to arrive in Austria in the second half of 2014, Finance Minister Fekter pointed out that Austria has already received two tranches totaling EUR671.4m (USD890.9m) so far this year from the tax deal concluded with Switzerland.

Concluding, the Austrian Finance Minister stressed that the withholding tax agreement with Liechtenstein is "a good solution for the past and future," making clear that the treaty is a major achievement for the Government. Furthermore, the accord will generate additional revenue for the state budget, thereby strengthening Austria and enabling the Government to continue along its fiscal consolidation path towards a zero deficit, Fekter ended.

The agreement package is due to enter into force at the beginning of 2014.