What’s Liechtenstein got to do, got to do with it?

Tuesday, September 15, 2009 | Posted by: Dave Jennings
Categories: Protecting your wealth | Tags: tax, offshore, Dave Jennings, tax havens, disclosure, Protect Your Wealth, penalties, Liechtenstein Disclosure Facility, tax amnesty, Liechtenstein, NDO, New Disclosure Opportunity, LDF

What’s Liechtenstein but a sweet old-fashioned notion? What’s Liechtenstein got to do, got to do with it? Who needs a haven when a haven can be broken? With recent pressures on UK investors to disclose offshore funds, Liechtenstein’s status as a tax haven for UK investors is in question. But the new Liechtenstein Disclosure Facility (LDF) seems to offer the most lenient amnesty…

Thank you, Tina Turner, for some inspiration on a cold, grey, wet and windy September day. Although it’s not exactly sunny for British Liechtenstein investors – and this may be only the start of Britain’s attack on the ‘tax havens’. Where’s next? Singapore, Dubai or Monaco?

10 things we know about Liechtenstein

1. It’s good for winter sports
2. Switzerland and Austria share its borders
3. The basic rate of income tax is 1.2%
4. It’s Europe’s fourth smallest country after the Vatican City, Monaco and San Marino, although its per capita GDP is the highest in Europe
5. German is the native language
6. The capital is Vaduz
7. The population is approximately 35,000
8 It does not have an airport
9 There is no army
10 Alistair Darling thinks he will get £1bn in tax from investments made by British investors there

The new Liechtenstein Disclosure Facility (LDF), differs from the current alternative, the offshore NDO ‘tax amnesty’, in that:

• Investors only have to pay tax going back to April 1999
• The LDF is available until March 2015
• Penalties should be limited to 10% in most cases on disclosures of underpaid liabilities (which may be waived if it can be shown that an ‘innocent error’ was made)
• You can choose to pay a flat composite tax rate of 40% to cover all possible undisclosed arrears
• There is an immunity from prosecution if a full and accurate disclosure is made

The Liechtenstein banks also have to be notified that a disclosure is being made, or prove that UK tax is not due or prove that UK tax affairs are in order. If this is done, the funds can remain there. Failure to do this within the time limits will result in being forced to move the investments out of Liechtenstein or face sanctions if the investments remain.

There is also the possibility of a quirk within the LDF that could allow some investors with offshore accounts to switch their funds to Liechtenstein to benefit from a more lenient disclosure than the 20-year – and possible 20% penalty – under the NDO. Anyone contemplating such a decision should seek professional advice.

© Image: Vauvau, 2009

Catch up on all previous posts on the New Disclosure Opportunity and related issues.

For some people, the NDO may not be the best way to properly disclose any unpaid tax to HMRC and they should seek specialist advice.