Liechtenstein To Strike Tax Deal With Germany
Friday, October 14, 2011

Liechtenstein’s Prime Minister Klaus Tschütscher has revealed that the principality is currently in talks with the German finance ministry to resolve outstanding issues concerning the taxation of German investors’ investment income in Liechtenstein.

Eager to strike a bilateral tax deal based on the Swiss model, Liechtenstein’s Tschütscher aims to ensure that the future treaty enters in to force at the same time as the agreement between Switzerland and Germany.

Underscoring the importance that no regulatory differences between Liechtenstein and Switzerland arise, Tschütscher stressed that the principality in no way aims to benefit from Swiss-German regulations and in no way wishes to see money transferred between the two countries.

Aiming to reach an agreement with Germany soon, Tschütscher pointed out that the negotiations between the German finance ministry and the Liechtenstein government have been ongoing since 2009. From the outset Liechtenstein has proposed a solution based on a withholding tax model, the Prime Minister declared.

Due to enter into force on January 1, 2013, the Swiss German bilateral tax deal provides for the future taxation of income earned by German taxpayers with accounts held in Switzerland by means of a withholding tax, with the proceeds derived from the levy subsequently transferred to the German authorities.

The agreement also provides for the lump sum taxation of ‘old money’ held by German residents in undeclared Swiss accounts, while at the same time maintaining traditional banking secrecy.

The agreement has yet to be ratified by either country’s parliament. Germany’s Social Democratic Party (SPD) has already announced its intention to block the deal in the Bundesrat or upper house of parliament.