Wednesday, December 12, 2012
Negotiations between Liechtenstein and Austria on a tax deal aimed at resolving the issue of Austrian citizens' undeclared bank accounts in the Principality are said to be in full swing.
Despite a slow start, agreement on a treaty is expected by the end of January 2013.
Reports indicate that the bilateral tax accord between Austria and Liechtenstein will be based on a deal similar to that concluded between Austria and Switzerland earlier in the year.
Signed in April and due to enter into force from January 1, 2013, the Swiss-Austrian tax deal provides for a withholding tax to be levied on undisclosed assets held by Austrian residents in Swiss banks to regularize the accounts. The agreement also contains plans to impose an annual withholding tax on future investment income.
Unlike the treaty brokered with Switzerland, the accord being negotiated with Liechtenstein is expected to encompass undeclared assets held in both foundations and trusts in Liechtenstein. There are believed to be as many as 6,000 Austrians with assets in foundations in the Principality, and in many cases this money is untaxed.
Time is of the essence for both parties. Upcoming elections are due to take place in Liechtenstein in February next year and there are growing concerns in Austria that Austrian citizens with undeclared and untaxed wealth in Switzerland will simply relocate their wealth to Liechtenstein ahead of the entry into force date of the Swiss tax treaty.
Back in April, Director of Liechtensteinís Office of International Financial Affairs Katje Gey made known that the aim of any future talks would be to totally revise the existing double taxation agreement between the two countries, as well as to resolve the issue of how to legalize untaxed assets retrospectively and to tax the future income of Austrian residents with wealth deposited in the Principality.
Gey said at the time that one solution to legalize wealth managed in foundations could be to impose a withholding tax on income earned, at the same rate as Austriaís capital gains tax.