"The limits of wage setting"

In Liechtenstein, company owners can set their own wages, often in favor of low salaries and high dividends. However, the tax administration monitors the appropriateness of these salaries. The issue gained public attention through court cases involving doctors who set their incomes low, which was deemed inappropriate under tax law. A low salary increases company profits, which results in higher income taxes and company valuations. However, this can lead to a tax saving as dividends are taxed at a lower rate than income. The tax administration plays an important role in determining appropriate wages, often in favor of social security. The practice is based on individual case decisions and court rulings, such as those of the Administrative Court, which developed calculation schemes for appropriate wages. The determination of fixed wages and the consideration of dividends and profit sharing remain key challenges.

Topics in the publication

• Wage determination by company owners
• Monitoring by the tax administration
• Tax implications
• Court cases and case law
• Social security aspects
• Practical challenges
• Role of the tax administration