The first Double Taxation Convention between the UK and Liechtenstein entered into force on 19 December 2012, which was signed in London on 11 June 2012.
The Convention continues the cooperation between the UK and Liechtenstein on tax matters which also included a treaty on the exchange of tax information, signed in 2009, and a memorandum of understanding providing for the introduction by Liechtenstein of a five-year taxpayer assistance and compliance program and the introduction by the UK of a special disclosure facility.
The Double Taxation Convention generally follows the provision of the OECD Model. For the purposes of the Convention a pension scheme established in a contracting state is considered to be a resident of that state. Under the Convention interest and royalties are taxable only in the state of residence of the beneficial owner.
Withholding tax on dividends is generally zero, but where the dividends are paid out of income derived from immovable property by an investment vehicle that distributes most of its income annually, and where the income is not subject to tax, the maximum withholding tax rate is 15%. This does not however apply where the beneficial owner of the dividends is a pension scheme.
The provisions of the Convention take effect in the UK:
- in respect of taxes withheld at source, for amounts paid or credited on or after the first day of the second month next following the date of entry into force;
- in respect of income tax not described in sub-paragraph (i) above and capital gains tax, for any year of assessment beginning on or after 6 April next following the date of entry into force;
- in respect of corporation tax, for any financial year beginning on or after 1 April next following the date of entry into force; and
The provisions take effect in Liechtenstein:
- in respect of taxes withheld at source, for amounts paid or credited on or after the first day of the second month next following the date of entry into force; and
- in respect of other taxes on income and taxes on capital, to taxes chargeable for any taxable year beginning on or after 1 January next following the date of entry into force.
