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Taking a closer look at Liechtenstein

Taking a closer look at Liechtenstein

When you are looking for a strategic country for economic activities in Europe and Worldwide, a place for asset protection and wealth planning or a new residency you should have a closer look at the Principality of Liechtenstein in the heart of Europe.

The Principality of Liechtenstein is a constitutional hereditary monarchy based upon democratic-parliamentary principles. The small state is located between Austria and Switzerland, with which it has a customs and currency union.

It has 37,000 inhabitants, the capital is Vaduz, the official language is German, and the business language is English. Travelling there is easy as the international Zurich airport is within a one-hour radius (115 KM).

The Principality is independent, and following the customs treaty with the neighbouring country of Switzerland in the year 1923, it has close administrative and economic ties with Switzerland. In addition, it also has a currency union with Switzerland. Liechtenstein is a member of the United Nations (UN) and of the European Economic Area (EEA), although, like Switzerland, it is not a member of the European Union (EU). In November 2013, an international convention to prevent tax evasion ("OECD/Council of Europe Convention") was signed.

International Liechtenstein is most known as an offshore place but in fact is one of the most highly industrialised countries in the world. Through its customs treaty with Switzerland and the membership in the European Economic Area (EEA), Liechtenstein and in the country established companies are in a very comfortable economic situation.

When talking about Liechtenstein also the very stable economic and political situation of Liechtenstein has to be mentioned. All over the world states have to deal with political and economic crises and banks all over the world have problems with bad loans. While the Principality can refer to its triple A rating of S&P, which was just confirmed in July 2016. Also there is no public dept and the banks can refer to its good ratings.

Other location factors beside the stable social, legal and economic order and the high level of political stability and continuity are the liberal company law, liberal economic policy, good infrastructure, stable Swiss franc as official currency, the little bureaucracy and direct administrative channels.

Liechtenstein, a place for business activities and asset protection

Liechtenstein succeeds in doing the split being a place for business activities as well as a safe haven for asset protection over generations. The Liechtenstein Persons and Companies Act (Personen- und Gesellschaftsrecht – "PGR") and the Trust Enterprise Act (Gesetz über das Treuunternehmen) establish a liberal, flexible statutory framework that is characterised by the spirit of entrepreneurial freedom and facilitates various company forms and asset holders; the trust (Treuhänderschaft) as well as the trust enterprise (Treuunternehmen/Geschäftstreuhand) are also enshrined in law. 

While the stock corporation is an ideal vehicle for commercial activities, foundations are established to pursue common-benefit objectives, holding foundations (succession arrangements for companies) or as family foundations (estate planning, protection of family assets). The Liechtenstein trust can pursue similar purposes. This is closely based on the English common law model.

Liechtenstein Holding Company for Swiss companies

The Principality of Liechtenstein has established double taxation conventions and treaties on the exchange of information for tax purposes with a number of states. For example there is a TIEA (Tax Information Exchange Agreement) with China and a double Taxation Agreement with Hong Kong.

Of interest is the Double Taxation Treaty with Switzerland that is set to come into force on 1 January 2017. This means Swiss withholding tax (35%) will be entirely waived on interest payments to natural persons or legal entities domiciled in Liechtenstein, and the tax rate on dividends will be reduced to 15% or will be entirely waived, depending upon the size of the shareholding. An effective option may consequently be a Liechtenstein holding company for Swiss companies or a corporate holding foundation for long-term corporate succession arrangements.

Modern Tax Law in Liechtenstein

The uniform tax rate for legal entities that are not covered by the special arrangement for private asset structures (Privatvermögensstrukturen - "PVS") is 12.5% of net earnings. A number of special aspects are applicable when determining net earnings. For example, earnings and profit shares (dividends) from participations are not subject to tax, and an interest deduction of 4% may be made on operationally necessary equity capital. Dividend distributions are tax-exempt.

Asset management foundations, establishments and fiduciary companies, in accordance with the rules governing private asset structures (Privatvermögensstrukturen – "PVS"), subject to certain preconditions (in particular: no economic activity as well as asset management by an independent third party), may choose to be taxed at the minimum income tax rate of CHF 1,200.00 per annum. Trusts are subject exclusively and without further conditions to the minimum income tax rate amounting to CHF 1,200.00 per annum. Although the Liechtenstein Parliament wants to increase the minimum tax to CHF 1’800.00 per annum it’s still very attractive.

Why Interadvice Anstalt?

On the landscape of professional Liechtenstein Trustee Offices, Interadvice Anstalt is not the biggest player but a very old reliable company, which started its activity in 1922 by the great-grandfather of the author. Interadvice focuses on the core business of trustee services which is developing tailored and long-term solutions in a specialised team for selected private and business clients. The client’s interest has always first priority. We see ourselves as a provider of family office services and solutions.

Thanks to our cooperation with law firms and fiduciary offices, asset managers and consultants in a wide variety of countries, we are able to clarify complex questions or to refer clients to precisely the right specialists. This cooperations keep us self independent and the solutions are always in the best interest of the clients.

If you are looking for a Trust Company in Liechtenstein which is interested in long term relationships and respectful and efficient cooperation we would like to offer you our services.

Philipp Kieber, Interadvice Anstalt, Landstrasse 25, 9490 Vaduz, www.interadvice.li