This article was written by ATU (Allgemeines Treuunternehmen), an independent trust service provider based in Vaduz, Liechtenstein.
Professional and Legal
Liechtenstein is located between Switzerland and Austria, in the heart of the Alps. With a total area of 160 square kilometers and a population of 38,557, it is the fourth smallest country in Europe. Liechtenstein celebrated its 300th birthday in 2019.
Its political system is very complex, being a "constitutional hereditary monarchy based on democracy and parliament". Simply put, the principality is a semi-constitutional monarchy headed by a ruling prince.
Liechtenstein is a civil law country. Therefore, case law does not play as significant a role as in Anglo-Saxon jurisdictions, although it does exist. The court system is very efficient.
Liechtenstein is a mixture of Austrian and Swiss law, though it retains its own characteristics in terms of procedure. In addition, Liechtenstein is the first and only country on the European continent to adopt the concept of trusts.
Advantages of Liechtenstein Foundations and Trust Funds over Other Jurisdictions
- Liechtenstein offers both trust funds and foundations.
- Flexibility - The structure of the foundation and trust can be irrevocable, revocable, discretionary, non-discretionary, settlor or non-settlor.
- Privacy Protection - Registration of private foundations is mandatory, but does not disclose the identity of the founder or beneficiaries. Due to tax reasons, trusts require registration, but registration does not need to disclose the property assignee or beneficiary. No underlying foundation of trust documents shall be disclosed.
- Court cases in Liechtenstein are not public. In contrast, cases in Jersey, Guernsey, or other common law countries are subject to public inspection.
- Asset Protection - Foundations provide limitations on settlor legal claims, thus can be used for asset protection. Foundations offer a "safe haven" for investments in civil law countries; as a legal entity, they can be used like companies. Liechtenstein foundations may be suitable for preserving and long-term family plans, such as paintings and cash.
- Foundations can utilize double taxation treaties signed with countries such as Singapore, Hong Kong, the United Kingdom, and Switzerland, and serve as reliable planning tools for convening meetings.
- Foundations may be subject to the Common Reporting Standard (CRS), or listed as Financial Institutions (FI), Passive NFE, or Active NFE (holding). A foundation can easily be classified as an Active NFE because all its activities basically include holding, which is not subject to CRS reporting restrictions.
- Compared to trust funds in Hong Kong, New Zealand, British Virgin Islands, UK, Guernsey, or Jersey, Liechtenstein trust funds have greater beneficiary rights. For example, the settlor can decide whether any or all beneficiaries have the right to inspect the trust's financial accounts or letters. There is also no obligation to disclose beneficiaries to banks prior to distribution. Liechtenstein courts also tend to favor beneficiaries in the event of any dispute.
- Liechtenstein is a "white-list" country of the OECD/FATF/EU, not considered offshore, as it levies a 12.5% corporate tax on profits. However, it does not tax dividends or stock capital gains, and does not tax trusts (trusts pay a flat tax of approximately $1800). Foundations pay an annual flat tax of approximately $1800 only (or if limited purpose).
- Liechtenstein trust funds and foundations can provide stronger creditor protection; if structured reasonably, they can flexibly handle marriage and inheritance issues. The reason behind this is that this legal protection is not directly governed by trust law, but by donation law and claims expire after 2 years.
- Private Trust Companies can be used for Liechtenstein foundations or trust funds.
- Safer Client Protection Mechanisms - The trust environment protection in Liechtenstein is by the Financial Market Authority (www.fma-li.li), ensuring client protection through monitored licensing requirements and compliance with licensing conditions, as well as cooperation with various departments including courts, associations of professional trustees, Public Prosecutor's Office, and Financial Intelligence Unit. The Financial Market Authority can also file disciplinary charges with the Ethics Committee.
About ATU
Established in 1929, Allgemeines Treuunternehmen (ATU) is one of the first and most traditional trust companies in Liechtenstein, with subsidiaries and offices in major financial centers. Due to our extensive experience, we are familiar with many foreign jurisdictions and can adjust the solutions we offer to adapt to international legal and business situations.
