Liechtenstein Sets New Voluntary Compliance Laws

August 12, 2009 Offshore BankingTaxation in EUTaxation in LiechtensteinTaxation in UK  No comments

As part of the new Liechtenstein-UK Tax Information Exchange Agreement, UK residents who hold offshore accounts in Liechtenstein will be asked to volunteer across their taxation information, or face eventual penalties.

The Tax Information Exchange Agreement (TIEA) between the United Kingdom and Liechtenstein, which was signed on the 11th of August, has an inherently new TIEA feature which sets down provisions for voluntary tax information disclosure, and a corresponding leniency program on the part of the British HM Revenue & Customs (HMRC).

The TIEA allows British account holders five years, starting in 2010, to volunteer up evidence proving that they are in communication with the HMRC, and that appropriate action has been taken in regards to their tax status. If within those five years the account holder provides no such evidence, the account holding bank may forcibly close the account or instruct the holder to move its contents to a different principalities’ banks. Penalties could also be issued by the bank, although there is no legislation within Liechtenstein law which details the exact amounts. Further, it has been made adamantly clear that Liechtenstein will not at any point be forced to divulge the the account holder’s name to the UK government.

On the British side, those found to be evading their taxation liability with a Liechtenstein offshore account, and volunteering that information up through the leniency program will face a penalty of only 10% for their total taxation owed. According to the HMRC, there could be as many as 5,000 British account holders in Liechtenstein, their combined unpaid tax value is estimated to be near £3 billion.

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