The foundation is a special-purpose vehicle used for the collection and distributing of assets as per the instructions and wishes of the beneficiary. There are several types of these entities, which have a legal personality separate from that of their founder and may be used for targeted purposes.
In Liechtenstein, foundations enjoy a rather special regime because of the fact that their asses, as well as their non-commercial income, are not subject to tax. The founder is able to retain special rights, such as to also be the beneficiary or to become the protector of the foundation as well as to revoke it as the need may be. The assets of the foundation survive across generations and they can be invested or distributed indefinitely.
Investors who wish to set up a foundation in Liechtenstein can talk to one of our lawyers in Liechtenstein who can give you information on the legal structure of a foundation and the principles for incorporating such a legal entity.
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The main law providing for the creation of foundations in Liechtenstein
The Company Law is the main act governing the establishment of a foundation in Liechtenstein, as the country is one of the few European states to recognize this legal entity. It is deemed as a vehicle without shareholders who are replaced by founders.
Apart from the law, a foundation also relies on its bylaws and internal regulations in order to determine the way it operates.
In Liechtenstein, a foundation can be created through a declaration, an inheritance act, or through a will. Also, considering the law that governs it, this entity is often seen as combination of a trust with a company, which is why it is considered a very advantageous legal form.
If you need support in drafting the paperwork related to setting up a foundation, you can rely on our lawyers in Liechtenstein. If you wish to create such an entity in order to protect your assets by leaving a will, our specialists can provide you with tailored support on inheritance matters.
The uses of a foundation in Liechtenstein
A foundation in Liechtenstein can be set up for one of the following purposes:
- private benefit: used to administer and hold personal assets as per the instructions of the founder, for the beneficiary.
- charity: a common type, these are those foundations set up for various charity purposes, such as for education or for helping individuals in need; they benefit the community.
- family: for the management and conservation of family assets; can be used for child support and education.
- church: foundations established for religious purposes; they can comply with the specific purposes of a certain church.
- investment: this can be used as a collective investment vehicle by some entrepreneurs in Liechtenstein.
Charity and family foundations generally do not carry out commercial activities. Investors who want to set up a foundation in Liechtenstein and also engage in some commercial activities can use a foundation for private purposes. These activities may be related to investment and asset management.
As mentioned before, one of the main advantages of setting up a foundation in Liechtenstein is that its assets, as well as non-commercial income, are not subject to taxation. The beneficiary does not need to pay an inheritance tax nor a gift tax on the assets or goods received from the foundation it is not a usual resident in Liechtenstein. However, the obligation to declare this income remains in their country of origin. One of our attorneys in Liechtenstein can provide investors with additional information on some of the other requirements that can apply as per the chosen type of foundation.
The beneficiaries of a Liechtenstein foundation may remain anonymous in some cases as there are no provisions for external supervision or registration and information disclosure with the Commercial Register (only for some types of foundations).
Our lawyers in Liechtenstein can give you complete details on the rights if the foundation founder, asset distribution and other issues related to the perpetuity of the foundation.
The video below illustrates the characteristics of the foundation:
The structure of a foundation in Liechtenstein
An important issue to take into consideration when opening a foundation is its structuring. Below, our team of attorneys in Liechtenstein describes the main parties or the agents:
- The founder: the one who provides the capital or the assets and decides in the purpose of the foundation.
- The council: this is the executive body of the foundation, the equivalent of the executive board for a company in Liechtenstein.
- The representative: the permanent resident agents who will maintain the communication with the authorities; it is the equivalent of the registered agent for an offshore company.
- The beneficiary: the one for which the foundation is incorporated, the individual/s or legal entity receiving the benefits.
- The oversight committee: required for those foundations that carry our commercial activities; the committee has special attributions, including ones for auditing, as needed.
- The protector: oversees the council and can be appointed in an optional manner by the founder.
The structure of a foundation is only briefly described in the list above. Investors can reach out to the experts at our law firm in Liechtenstein for complete details about how the committee or the representative agent is to be appointed as well as the duties and liabilities of the founder and of the other mentioned agents.
The formation of a foundation in Liechtenstein
The foundation is incorporated based on a deed, drafted in accordance with the scope of the foundation as well as any particular wishes of the founder. The document is confidential and our attorneys in Liechtenstein can assist founders who wish to draft this private deed.
Only foundations that engage in commercial activities must be registered with the Commercial Register. Information recorded here will have a public character. Private benefit foundations that are used for non-commercial activities are not subject to mandatory registration. Our lawyers in Liechtenstein can give you detailed information about the registration requirements for each type of foundation. A minimum capital is needed to open a foundation in Liechtenstein and its value is generally around 30,000 EUR. For private foundations, they are considered incorporated when the deed of establishment is signed and they do not need to submit an application with the Commercial Register.
In some cases, the founders may choose a special category of beneficiaries. We present some of these below:
- Prospective: when the beneficial interests can pass from one beneficiary to the others; this can prevent any claims from individuals who are not entitled to obtaining benefits.
- Discretionary: when the rights of the beneficiaries are at the discretion of the foundation council.
- Ultimate: the ultimate beneficiaries can receive the assets remaining after the liquidation of the foundation.
Below, our team highlights a factsheet with the most important taxes or fees for opening a foundation:
- 30,000 Swiss francs: as mentioned before, a foundation can be formed with this minimum amount (it can also be in euros or US dollars).
- 700 CHF: the amount required to enter a foundation in the commercial register.
- 1,2000 CHF: the 1% annual capital tax was abolished; this minimum tax is payable only by some foundations.
- 0.2% government fee: this is a percentage of the total asset contribution payable upon formation.
Please note that the government and registration fees can be subject to changes.
The foundation can be successfully used both for personal as well as business interests and the fact that the founder and the beneficiary can engage in the specific activities discretely make it a useful tool for the protection of assets and family planning.
Types of beneficiaries in a foundation
Considering there are several ways through which one can create foundation in Liechtenstein, there are also various types of beneficiaries. These are:
- discretionary beneficiaries who are appointed by the founder who will leave them different shares of the assets;
- entitled beneficiaries who are often met in the case of foundation created by testament and who can partially claim the assets left by will
- prospective beneficiaries who can be added to the foundation’s deed at a later date than its creation (this usually happens with grandchildren who are not born yet);
- ultimate beneficiaries who can be entitled to a share of the assets remain unclaimed at the termination of the foundation.
Our law firm in Liechtenstein can help foreign citizens who have moved here and who want to create foundation with the purpose of ensuring their last wishes will be respected.
Activities that can be completed by a Liechtenstein foundation
In Liechtenstein, foundations can engage in both commercial and non-commercial activities. However, the primary purpose of creating such an entity is the non-trading one, as it is an excellent tool for estate planning and asset management.
Another use of the foundation can be the mixed one, where the private foundation is used for offering investment advice and asset management services.
The foundation is a very versatile legal vehicle, which is why we invite you to discover more about it with the help of our local lawyers.
If you are interested in moving to Liechtenstein, you can rely on our law firm for immigration services.
Management of foundations in Liechtenstein
The main governing body in a Liechtenstein foundation is the supreme body alongside the council. Their members are established from the beginning through the Articles of Association. They are appointed by the founder.
The foundation deed must also provide for the way resolutions are made and passed by the councils, as well as the powers of the members.
Accounting and tax aspects to consider
When determining the accounting and tax regulations applied to a foundation in Liechtenstein, there is one important aspect to consider: whether it was created for private or commercial purposes.
Its creation is subject to a fee of 0.2% of the total value of the assets of the foundation which must be paid with the Liechtenstein Government.
A change in the tax legislation, abolished the 1% annual capital levy, private foundations becoming liable for a fixed amount of 1,200 CHF per year.
Also, in the case of family foundations, there is no corporate, inheritance, or gift tax. In the case of foundations created for commercial purposes, the corporate tax levied at a rate of 12.5% must be paid.
Another aspect to consider from an accounting point of view is for foreign citizens who must consider the tax regulations in their home countries where they may be subject to various levies.
For details on the avoidance of double taxation in Liechtenstein, we invite you to discuss with our local lawyers.
The advantages of a Liechtenstein foundation
Setting up a foundation in Liechtenstein has several advantages, among which one of the less known refers to the fact that as long as the council of member is independent (the founder is not part of it), the foundation will be protected in national and EU courts.
The settlor has special rights when it comes to the management and distribution of the assets. Moreover, the founder can appoint him/herself as the beneficiary of the entity.
The beneficiaries of a private foundation can remain anonymous, as their details must not be entered with any authority.
Contact our law firm in Liechtenstein for more information on how to set up a foundation and how one of our attorneys can assist you with legal services.