Liechtenstein: Overview

RENTAL YIELDS

Gross yields are low at 3% in Liechtenstein

Yields on residential property in Liechtenstein, on average, are low at 3%, according to the Global Property Guide’s research. Yields on properties in the capital of Vaduz are similar to those in the suburbs, ranging from 2.2% to 3.4%.

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TAXES AND COSTS

Liechtenstein's complicated tax system

Rental Income: The rate of income tax depends in a complex way on the level of taxable income, and on the particular commune in which the tax-payer is resident, but rises to a maximum marginal rate of about 18% on taxable income of approximately CHF 180,000 (US$145,890).

Capital Gains: Capital gains are taxed in Liechtenstein at rates ranging from 3% to 35%, depending on the length of time the property was held.

Inheritance: There are two different forms of inheritance tax; the estate tax and the inheritor’s tax. Estate tax rates range from 1% to 5%. Inheritor’s tax is charged at a progressive rate, ranging from 0.5% to 27%, with direct heirs charged the lower rates.

Residents: As noted above, income tax is complex, but not onerous, depending on the level of taxable income and the particular commune in which the taxpayer resides.

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BUYING GUIDE

Transaction costs are very low in Liechtenstein

Total transaction costs amount to 4% of the selling price. The buyer pays 0.9% notary fees. The agent’s fee of 3% is paid by the seller.

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LANDLORD AND TENANT

Liechtenstein's laws are pro-landlord

Rents: The contracting parties are free to negotiate the initial rent.

Tenant Security: There are three types of rental contract: indefinite contract, six months’ contract, and freely negotiated contract (always for a fixed period).

Six months’ notice is required on either side to terminate an indefinite contract. It is customary to give 2-3 month’s notice to terminate a fixed period contract.

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ECONOMIC GROWTH

Low taxes propel growth

Low taxes in Liechtenstein have spurred outstanding economic growth since World War I. Contrary to popular belief, Liechtenstein has a broadly diversified economic structure with a significant emphasis on industrial production. It is home to very rich people and unemployment is below 2%.

Despite the small size of the country (160 sq. km.), the national economy covers 15 out of 16 economic segments in the international classification. The focus of production is on the development of high quality high-tech products.

A distinctive feature of Liechtenstein's economy is that it derives to a considerable extent from the work done by working personnel domiciled abroad. In 2001, 45% (12,908 persons) of people at work were cross-border commuters from abroad. Foreigners make up about one-third of the total population.

With the adoption of the Swiss Franc (CHF) as national currency in 1923, inflation is low in Liechtenstein. It fell from a modest 5.4% in 1990 to a low 1.6% in 2000. In 2001, the inflation rate was only 1%, and since then inflation was below this level – 0.8% in 2004.

The country came under the spotlight in 2000 when it was criticized for lax financial controls. Stung by the criticism, Liechtenstein reformed its banking laws, and implemented new anti-money laundering measures.

Liechtenstein has been a member of the European Economic Area since May 1995.

In March 2003, a constitutional referendum gave Prince Hans-Adam sweeping new political powers, such as the power to hire and fire the government, making Liechtenstein Europe’s only absolute monarchy.

The country operates as a business incorporation centre, particularly favoured by fund management companies because of low business taxes (maximum rate of 20%). About 75,000 so-called 'letter box' companies have nominal offices in Liechtenstein, exceeding the official population of 35,000. These companies provide about 30% of Liechtenstein's state revenue.