Liechtenstein - IP tax at 2.5%

Liechtenstein introduced a tax reform at the beginning of this year (attempting to rehabilitate its international reputation) which included changes to their taxation of intellectual property, giving a local effective tax rate of 2.5%. Those changes have now been ratified by EFTA’s Surveillance Authority.

The new IP tax rules in Liechtenstein allow a business to deduct 80% of IP profits when calculating corporation tax so that, in effect, only 20% of the profits from IP are subject to tax in Liechtenstein. This gives an effective tax rate of 2.5% on IP profits, as Liechtenstein’s corporate tax rate is 12.5%.

Perhaps unsurprisingly, Liechtenstein has a relaxed definition of IP and and income from IP: it covers both created and acquired IP, and IP income includes that earned from group companies as well as third-party licensing. It does not, unlike the proposed UK patent box, cover embedded income within the income from the sale of products that include IP.

IP profits means IP income less all expenses connected with the IP (including amortization and similar deductions), regardless of when the expenses were incurred.