Property in Liechtenstein can cost around €300,000 for a 50 sq. m. apartment, or €1.5 million for a 300 sq. m. apartment or house, depending on the size of the property.
The purchase of real estate by foreigners is very restricted. Property can only be bought after three years residency. The EU allows Liechtenstein these restrictions due to its small size.
Currently Liechtenstein allows in 28 EU nationals every year without working permits, excluding multinational employees who can take up residence as long as they have a work permit.
Assuming a municipal tax surcharge of 200%, the minimum and maximum tax rates are as follows: at least 0.162% and at most 0.8505% for asset tax; at least 3.24% and at most 17.01% for income tax.
Capital Gains: Capital gains are taxed in Liechtenstein progressive rates. Different sets of progressive rates apply, depending on the seller’s ownership period before he sold the property.
Inheritance: There are two different forms of tax on inheritance: the estate tax (levied on the estate) and the inheritance tax (levied on the beneficiary’s inheritance). Both taxes are levied at progressive rates and different sets of progressive rates apply, depending on the family relationship between the benefactor and the beneficiary as well as the value of the estate and inheritance.
Residents: Income tax is complex, but not onerous, depending on the level of taxable income and the particular commune in which the taxpayer resides.
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.
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. Despite the small size of the country (160 sq. km.) and a population of less than 40,000, the economy produces many high quality high-tech products.
It is also home a lot of very rich people, and unemployment is below 2%.
Although Liechtenstein is not yet part of the EU, it is a member of the EEA (since May 1995) which allows free trade of goods in the EU.
Financial services are a major portion of Liechtenstein’s economy. The 1923 Customs Treaty with Switzerland and the introduction of the Swiss franc as official currency became the foundation for the evolution of the financial centre. In fact, the financial sector comprises about 33% of its GDP and generates about 40% of the State revenue. In 2000, Liechtenstein was criticized for lax financial controls. Stung by the criticism, it implemented anti-money laundering laws.
Liechtenstein is a centre for incorporating fund management companies, because of low business taxes (maximum rate of 20%). About 75,000 so-called ‘letter box’ companies have nominal offices in Lichtenstein, exceeding its official population figures. These companies provide about 30% of Lichtenstein’s revenue.
After the adoption of the Swiss Franc (CHF) as the country’s national currency, inflation has been kept low and stable, and was 1.6% in 2000. In 2009, average inflation rate was -1.1%.
A distinctive feature of Liechtenstein’s economy is that in 2009, about 51% of people working in the country were cross-border commuters from abroad, according to the Office Statistics – Principality of Liechtenstein.
It was in March 2003 when 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.
In August 2004, Hereditary Prince Alois assumed the office vacated by Prince Hans-Adam II who, although could remain head of state, decided to withdrew from active political duties.