Austria Signs Accord With Liechtenstein to Collect Trust Taxes

Austria and Liechtenstein signed an agreement to tax Austrian deposits and trusts in the principality while preserving their anonymity, as it taps wealthy citizens who bypassed levies in the past.

Austrian Finance Minister Maria Fekter and Liechtenstein Prime Minister Klaus Tschuetscher signed the accord in the principality’s capital of Vaduz today, Fekter said in a statement. Austrian funds face a one-time levy of between 15 percent and 38 percent, with a 25 percent capital-gains tax in the future, according to the statement. Those are the same rates Austria agreed in a pact with Switzerland last year.

“This agreement significantly reduces the incentives for seeking to escape taxation,” Fekter said in the statement. The nation expects several hundred million euros in one-time revenue when the pact enters into force next year, she said. “It’s a great move for Austrian taxpayers because it creates more tax justice, and on top we get more money for our budget.”

Liechtenstein, the 160 square kilometer (62 square mile) principality with a population of 35,000, sandwiched in the Alps between Austria and Switzerland, has long been a destination for wealthy Austrians seeking to lower taxes and obscure their net worth. Austria estimates there are between 1,000 and 3,000 trusts with Austrian beneficiaries that will be subject to tax.

Austrians investing more funds in Liechtenstein trusts from next year will have to pay a one-time tax of 5 percent to 10 percent, with a higher rate to be paid for trusts that make it harder to identify their founder or their beneficiaries, according to the statement.

Trust holders will also pay a 25 percent withholding tax on capital gains. That element of the deal that goes beyond the April 2012 accord reached with Switzerland, which doesn’t cover trusts.

All taxes will be levied by Liechtenstein and transferred to Austria without identifying the individuals. Austrians can also voluntarily disclose their funds to Austrian authorities, pay the same one-time rate and include them in their future tax statements.

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