Automatic exchange of information (AEOI)
Liechtenstein was among the so-called Early Adopter Countries that signed the multilateral agreement on the automatic exchange of information, the so-called Multilateral Competent Authority Agreement (MCAA), on 29 October 2014. To date, 102 countries and financial centres have signed up to the AEOI. On 22 August 2016, Liechtenstein took another important step towards the implementation of its financial centre and tax strategy. The Government deposited its instrument of ratification for the Council of Europe and OECD Convention on Mutual Administrative Assistance in Tax Matters (MAC) at the OECD in Paris.
Exchange of data in 2017/2018
The first exchange of bank data with EU countries (excluding Austria) occurred in 2017 for the 2016 fiscal year. The MAC, which is a comprehensive multilateral instrument for tax matters, has been in force since 1 December 2016. On the basis of this agreement, the Automatic Exchange of Information has been implemented with 32 other states since 2017. Another 27 states will be added from 2018.
AEOI in Switzerland
In 2017, Swiss banks collected tax data which from 2018 will be exchanged with the EU member states and nine other states. From 2018, Switzerland will implement the Automatic Exchange of Information in tax matters with 41 other partner countries – including Liechtenstein.
Double taxation agreements and tax information exchange agreements
Bilateral, long-term cooperation agreements form the basis of Liechtenstein’s financial centre policy. By the end of 2017, tax information exchange agreements (TIEAs) were concluded with 36 countries and double taxation agreements (DTAs) with 17 countries.
The new double taxation agreement between Liechtenstein and Switzerland has been applied since 2017. The two countries signed the DTA on 10 July 2015 and it came into force on 22 December 2016. It is a comprehensive agreement which is based upon OECD recommendations and avoids the double taxation of income and capital. It replaces the agreement of 22 June 1995 between Switzerland and Liechtenstein on various tax issues, which only governed the taxation of certain income.
The new DTA also includes the taxation of AHV pensions. These can be taxed solely in the state of residence. The respective country of domicile will continue to retain the right of taxation in the case of cross-border commuters. Benefits from occupational pensions are subject to taxation in the recipient’s country of domicile. The taxation of dividends, interest and royalty payments is now also governed by this new agreement.
In 2017, Austria exchanged tax information on new clients for the first time on the basis of the AEOI agreement. Data collection started in October 2016 and an extended exchange to include existing clients will take place in September 2018.
To avoid duplication with the AEOI agreement, Liechtenstein and Austria signed on 17 October 2016 a Protocol of Amendment to the withholding tax agreement applicable since 2014. Both countries thereby agreed upon the partial continuation of the withholding tax agreement which includes provisions on non-transparent asset structures and existing transparent asset structures as at 31 December 2016. All other accounts and custody accounts fall under the AEOI agreement with the EU in future.
The Liechtenstein FATCA Law ensures that Liechtenstein’s financial institutions can operate in the US capital market. On 16 May 2014, Liechtenstein and the USA hence concluded an agreement (Intergovernmental Agreement according to model 1) on the implementation of the Foreign Account Tax Compliance Act (FATCA). This US Act obliges financial institutions worldwide to identify their US clients and to disclose their assets and revenues to the Internal Revenue Service (IRS) of the United States. The information goes beyond the applicable provisions of the Qualified Intermediary (QI) regime.