The Principality of Liechtenstein is a constitutional hereditary monarchy based upon democratic-parliamentary principles, which is celebrating its 300th anniversary this year. The small state is located in the heart of Europe, between Austria and Switzerland. It has 37,000 inhabitants, the capital is Vaduz, the official language is German, and the business languages are German and English. Liechtenstein can be reached very easily from different international airports such as from Zurich (within 1 hour), and from Munich and Milan (within 2 ½ hours).
The Principality is independent and follows the customs treaty of 1923 with Switzerland, with which it has close administrative and economic ties, including a currency union. Liechtenstein is a member of the United Nations (UN) and of the European Economic Area (EEA), although 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.
Liechtenstein is best-known as a financial center, but in fact, it is one of the most highly industrialized countries in the world, with 40% of the gross domestic product (GDP) generated through the industrial sector, and only 18% through financial services. Through its customs treaty with Switzerland and its membership in the European Economic Area (EEA), Liechtenstein and established companies in the country are in a very comfortable economic position.
When talking about Liechtenstein, its very stable economic and political situation also has to be mentioned. All over the world, states have to deal with political and economic crises, while the Principality can refer to its ‘triple-A’ Standard & Poor’s rating, which was just reconfirmed in June 2018.
In addition to its stable social, legal, and economic order, and the high level of political stability and consistency, other features of Liechtenstein include its liberal company law, liberal economic policy, good infrastructure, stable Swiss franc as the official currency, minimal bureaucracy, and direct administrative channels. Yes, Liechtenstein is a small country, but it is also very pleasant, innovative, and successful.
Liechtenstein: A place for business activities, innovative new business models and traditional asset preservation
Liechtenstein has successfully achieved a split between being a place for business activities, as well as a safe haven for asset preservation over the 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 characterized 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), have also been enshrined in law since 1926. 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, preservation of family assets). The Liechtenstein trust, which is based on the English Common Law model, can fulfill similar purposes.
Modern Tax Law in Liechtenstein
Profit tax system
Liechtenstein has a profit tax law for legal entities, with a tax rate of 12.5% of net earnings which complies with the regulations of the EEA and OECD standards. A number of special factors are applicable when determining net earnings — as an example, an interest deduction of 4% on operationally necessary equity capital. There are further constellations where net earnings can be reduced, but this is dependent on the business model.
Liechtenstein has a wide network of over 20 double tax treaty agreements and over 25 tax information exchange agreements with countries in the world.
Private asset structure
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 professional third party), may choose to be taxed at the minimum income tax rate of CHF 1,800.00 per annum.
Trusts are subject exclusively and without further conditions to the minimum income tax rate amounting to CHF 1,800.00 per annum.
Why choose Interadvice Anstalt?
In the context of professional Liechtenstein Trustee Offices, Interadvice Anstalt is not the biggest player, but it is a very well-established and reliable company. It was started in 1922 by the great-grandfather of the author and is, therefore, one of the oldest Trustee Offices in Liechtenstein. Interadvice focuses on the core business of trustee services, which is developing tailored and long-term solutions in a specialized team for selected private and business clients, as well as the strategic partner for Family Offices. We see ourselves as a provider of family office services and solutions.
Thanks to our networks and cooperation with law firms and fiduciary offices, and 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 cooperation keeps us independent, and the solutions are always in the best interest of our clients.