Economy of Liechtenstein

Theeconomy ofLiechtensteinis based on industry, with a small but significant agricultural sector, and services (especially general services, including tourism and information technology). The country participates in a customs union withSwitzerlandand uses theSwiss francas its national currency. It imports more than 85% of its energy requirements. Liechtenstein has been a member of theEuropean Free Trade Association(EFTA) since 1991 (previously its interests had been represented by Switzerland). It also has been a member of theEuropean Economic Area(EEA) since May 1995 and participates in theSchengen Agreementfor passport-free intra-European travel.
Liechtenstein's historical customs union with Austria was dissolved in 1919. A customs treaty was signed in 1923 and since its entering into force in 1924, Liechtenstein and Switzerland have been in acustoms unionwith each other and as such the borders between the two countries are open. The German villageBüsingen am Hochrheinand the Italian villageCampione d'Italiaalso form part of this customs union (the latter albeit in ade factomanner), which is often referred to as theSwiss customs area.
Liechtenstein utilizes the Swiss franc as its national currency. Swiss border police and customs officers secure its frontier withAustria. Currently there are 21 Swiss border guards stationed in Liechtenstein and 20 Austrian border guards securing its border (as of 2011).
Liechtenstein is a member ofEFTA, and joined theEuropean Economic Area(EEA) in 1995 in order to benefit from theEUinternal market. The capitalist economy and tax system make Liechtenstein a safe, trustworthy and success-oriented place for private and business purposes, especially with its highly modern, internationally laid-out infrastructure and close connections to Switzerland.
In the last half century, Liechtenstein has developed from a mainly agricultural state to one of the most highly industrialized countries in the world.
Besides its efficient industry, there also is a strong services sector. Four out of ten employees work in the services sector, a relatively high proportion of whom are foreigners, including those who commute across the border from neighboring Switzerland, Austria and Germany. Industrial exports more than doubled in 20 years from $1.21 billion (SFr. 2.2 billion) in 1988 to $2.9 billion (SFr. 4.6 billion) in 2008. Some 15.7% of Liechtenstein goods are exported to Switzerland, 62.6% to the EU and 21.1% to the rest of the world.
TheUnited Stateshas been the most importantexportmarket for Liechtenstein in recent times, totaling $561 million (SFr. 876 million); Germany is second, with $479 million (SFr. 748 million) worth of imports, and Switzerland third, with $375 million (SFr. 587 million).
About 32% of the country's revenues are invested in research and development, one of the driving forces of the success of Liechtenstein's economy. Total R&D spending in 2000 rose by 20.7% to approximately $140 million (213 million francs).
The Principality of Liechtenstein also is known as an important financial centre, primarily because it specializes in financial services for foreign entities. The country's low tax rate, loose incorporation and corporate governance rules, and traditions of strictbank secrecyhave contributed significantly to the ability of financial intermediaries in Liechtenstein to attract funds from outside the country's borders. The same factors made the country attractive and vulnerable to money launderers, although late 2009 legislation has strengthened regulatory oversight of illicit funds transfers.
Liechtenstein has chartered 17 banks, three non-bank financial companies, and 71 public investment companies, as well as insurance and reinsurance companies. Its 270 licensed fiduciary companies and 81 lawyers serve as nominees for, or manage, more than 73,000 entities (primarily corporations, institutions, or trusts), partly for non-Liechtenstein residents. About one-third of these entities hold the controlling interest in other entities, chartered in countries other than Liechtenstein. The Principality's laws permit the corporations it charters to issue bearer shares. Until recently, the Principality's banking laws permitted banks to issue numbered accounts, but new regulations require strict know-your-customer practices for all new accounts.
Liechtenstein's standard rate ofVAT(Mehrwertsteuer) is identical to Switzerland's for it must mirror the latter's continually and is currently 7.7%. The reduced rate is 2.5%. A special rate of 3.7% is in use in the hotel industry.
In July 2015, Liechtenstein and Switzerland signed a new agreement ondouble taxation, which took effect in December 2016, superseding the previous one from 1995. Some differences on thewithholding taxarose, but Switzerland did not agree to introduce this practice to residents of Liechtenstein working in Switzerland.
In November 2016, the parliament of the principality decided with a large majority to introduce an agreement of automatic information exchange with 27 new treaty partners, including Switzerland. Data collection will start in 2018, and effectual exchange of account information is planned for 2019.
The principal industries are electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments, and tourism.
In 2022, the sector with the highest number of companies registered in Liechtenstein is Services with 7,666 companies followed by Finance, Insurance, and Real Estate and Unknown industry with 5,240 and 3,104 companies respectively.