Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Liechtenstein

Liechtenstein has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) that can be met in the absence of exchange of information being permitted and no recommendations are made.

Liechtenstein can legally issue five types of rulings within the scope of the transparency framework.

In practice, Liechtenstein has issued 18 past rulings;1 and for the year in review, Liechtenstein issued six future rulings within the scope of the transparency framework.

Liechtenstein did not have the necessary domestic legal basis for spontaneous exchange of information on rulings for the year of review. As such, no exchanges on rulings were permitted to occur.2 As no exchanges on rulings could be undertaken under Liechtenstein’s domestic legal framework, no peer input was received in respect of the exchanges of information on rulings received from Liechtenstein.

1. Including four that fell into more than one category under the BEPS Action 5 report.

2. The Action 5 Report notes that jurisdictions which do not currently have the necessary legal framework in place for spontaneous exchange of information on rulings will need to put in place such a framework in order to comply with the obligations under Action 5, but that in such cases the timelines are subject to a country’s legal framework.

Introduction

754.  This peer review covers Liechtenstein’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

755.  Liechtenstein can legally issue five types of rulings within the scope of the transparency framework: (i) rulings related to preferential regimes; (ii) cross-border unilateral advance pricing arrangements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) unilateral downward adjustment, (iv) permanent establishment rulings, and (v) related party conduit rulings. In Liechtenstein, rulings are issued by the Head of the Fiscal Authority (FA) in collaboration with the Legal Department of the FA and the Head of the respective technical department.

756.  For the year in review, Liechtenstein has commenced the information gathering process in advance of the legal basis for spontaneously exchanging information on rulings being finalised.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

757.  For Liechtenstein, past rulings are any tax rulings within scope that are issued on or after 1 January 2012 until 1 April 2017, provided they were still in effect as at 1 January 2017 (see paragraph 12).

758.  The process for identifying past rulings was conducted as follows: Since 2012 the Legal Department of the FA has maintained a central list in form of an XLS Schema of all rulings and was responsible for updating this list every time a ruling was issued. The Head of the FA, the Legal Department and the Head of the respective technical department, who are also responsible for the issuance of the rulings, searched the database manually to identify rulings issued in the period defined as past rulings. Each ruling was read to filter rulings in scope.

759.  In order to identify potential exchange jurisdictions with respect to the past rulings, the taxpayers’ files were manually reviewed. The files usually contained all information necessary to identify the potential exchange jurisdictions. In two cases the taxpayer was consulted directly to identify the potential exchange jurisdictions. As such, all potential exchange jurisdictions were identified for all past rulings.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

760.  For Liechtenstein, future rulings are any tax rulings within scope that are issued on or after 1 April 2017.

761.  Future rulings in scope are being identified by the Head of FA, the Legal Department and the Head of the respective technical department at the point at which the rulings are issued. The Legal Department compiles all rulings in the centralised database and marks the relevant rulings as being in scope of Action 5. The Legal Department reviews the database regularly and informs the EOI-unit, which is also located within the FA of new rulings issued.

762.  With effect as of 1 January 2017 Liechtenstein introduced a new mandatory request form for future rulings in scope, which gathers information on the relevant parties and jurisdictions. Since the introduction of the new application form for rulings, all information on potential exchange jurisdictions are contained in the ruling itself.

Review and supervision mechanism (ToR I.4.3)

763.  As rulings are issued by the Head of the FA in collaboration with the Legal Department of the FA and the Head of the respective technical department, this means that each ruling is reviewed at least by two officials checking whether the ruling is in scope. In addition all staff involved in the issuing process has received professional training through internal workshops and the participation in international working groups.

Conclusion on section A

764.  Liechtenstein has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

765.  Liechtenstein did previously not have the necessary domestic legal basis to exchange information spontaneously for rulings. This has been introduced and entered into force on 10 November 2017 (Law on International Administrative Assistance in Tax Matters, LIAATM). The LIAATM came into effect as of 1 January 2018 and allows Liechtenstein to exchange information on rulings issued as of 1 January 2012, provided they were still in effect on 1 January 2017. Liechtenstein explained that the limitation of the possibility to exchange information on past rulings was necessary as Liechtenstein’s constitution does not foresee the possibility of introducing legislation with retrospective effect. Due to this limitation, information on two past rulings could not be exchanged as they were not in effect as of 1 January 2017, and the exchanges can only take place as from 1 January 2018.1

766.  Liechtenstein notes that apart from the restriction to exchange information on certain past rulings there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

767.  Liechtenstein is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”) and (ii) double tax agreements in force with 5 jurisdictions, all of which allow for spontaneous exchange of information.2

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

768.  Although there was no domestic legal basis to permit exchange of information to occur in the year in review, Liechtenstein had put in place the process for the completion and exchange of templates, as follows: In order to exchange information with other jurisdictions, Liechtenstein would use the template in Annex C of the 2015 Action 5 Report (OECD, 2015) in the form of a Word document. For past rulings, the Head of the Division for Corporates of the Fiscal Authority would fill in the templates and the Head of the FA and the Head of the Legal Department would review them. The templates would then be forwarded to the EOI-unit for exchange as soon as the approval of the taxpayer was received.

769.  For future rulings, before a ruling in scope is issued, the taxpayer is requested to fill out the template based on the OECD guidelines. Liechtenstein confirms that they would complete the summary section in the Annex C as prescribed in the instruction to the section in the Action 5 Report (OECD, 2015). The Legal Department updates the centralised databank with the information on each ruling and would forward the templates on a monthly basis to the EOI-unit. The ruling itself would only be sent to the EOI-unit if the exchange jurisdiction has further requests. The EOI-unit would manually review the templates, to ensure that the template is complete.

770.  For the year in review, as the domestic legal basis was not yet in effect, no exchange of information could take place.

Conclusion on section B

771.  Liechtenstein has introduced the necessary legal basis for spontaneous exchange of information on rulings, which took effect from 1 January 2018. It is noted that Liechtenstein has already started putting in place the administrative practices for the completion and exchange of templates on rulings, and in practice Liechtenstein reports that all exchanges took place by the end of March 2018. Liechtenstein has met all of the ToR for the exchange of information process, and no recommendations are made.

C. Statistics (ToR IV)

772.  As there were no rulings exchanged by Liechtenstein for the year in review, no statistics can be reported.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

773.  Liechtenstein offered an intellectual property regime (“IP regime”) which was abolished with effect as of 1 January 2017, providing grandfathering for existing taxpayers and existing IP assets until 31 December 2020. Since transparency requirements for new Inclusive Framework members regarding grandfathered entrants only apply to those taxpayers that entered the regime after 16 October 2017, this does not apply to Liechtenstein. Therefore, Liechtenstein is not subject to transparency requirements under the Action 5 report (OECD, 2015).

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  The Action 5 Report (OECD, 2015) notes that jurisdictions which do not currently have the necessary legal framework in place for spontaneous exchange of information on rulings will need to put in place such a framework in order to comply with the obligations under the transparency framework, but that in such cases the timelines are subject to a country's legal framework.

← 2.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Liechtenstein also has bilateral agreements with Czech Republic, Germany, Hungary, San Marino and United Kingdom.