Liechtenstein is one of the top financial centers in Europe and the small Principality has developed its financial sector over the years, welcoming some of the top world banks as well as creating a favorable regime for the fund management sector. More recently, the country is supporting the blockchain technology and the development of cryptocurrencies and their associated services.
Opening a business in Liechtenstein is a simple process and most investors will choose to open a limited liability company. Our team of lawyers in Liechtenstein can help investors open a business in the Principality and for this purpose we offer tailored services, suited to the needs of investors who are either interested in opening a company, foundation or fund. Below, we answer some of the most commonly asked questions about company formation and management in Liechtenstein and we highlight the main reasons why the Principality remains a top location for opening a business in Europe.
Liechtenstein, even though is a small state, is considered a very advantageous commercial location (right between Austria and Switzerland) and considered to be one of the most politically stable countries in the world. It has a rather liberal legislation related to business and tax policy issues. The service sector is mostly represented by banking and insurance. Its status as a member of the European Economic Area (EEA) is granting higher credibility among the investors.
Major advantages are granted to the foreign investors opening a Liechtenstein Stiftung (foundation) which is not subject to capital gains, income tax, transfer tax or estate tax in Liechtenstein. In the case of foundations, 100% foreign ownership is allowed. These vehicles are mostly opened for charity reasons and no profits for the interests of the investors can be raised.
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Ease of doing business and hiring employees in Liechtenstein
In order to meet all the necessary conditions for company registration in Liechtenstein, it’s advisable to contact a law firm specialized in such transactions. The process is not very complicated as the authorities are supporting foreign investments and try to attract them by various measures including a short time necessary in order to incorporate a new business.
The Liechtenstein workforce is formed mostly by employees, which are experts, well-trained and bilingual (English and German speakers). The country is a hub for financial specialists but also to developers and other types of employees and a large percentage of the workforce is comprised of commuters who travel to the Principality. In order to find suitable candidates, it is advisable to hire an employment agency. In certain cases, it is much cheaper to publish announcement adverts in specialized newspapers, but this process takes time and resources.
Types of companies in Liechtenstein
Investors can choose to open a limited liability company (GmnH), a corporation (AG), an establishment (Anstalt), a foundation, trust or the branch of a foreign company.
The private limited company and the public limited company are common among investors who wish to open a business in Liechtenstein. The GmbH tends to be the most popular business form because of the fact that is has a lower share capital and because it is suited to small and medium-sized businesses, as opposed to the AG which is incorporated by investors who wish to start a large business (and have a more substantial share capital available for incorporation).
Both of these types of corporations offer limited liability to their founders, meaning that they are only liable to the extent of the capital they have invested. One of our lawyers in Liechtenstein can describe the main traits of these business forms in detail.
The main advantages granted to the owners of Anstalt companies (holding companies or establishments) are that they benefit from international tax-exempt profits. Also, the companies mostly performing exports can receive VAT refunds on goods and services bought. Normally the VAT is levied at 7.7%.
Tax advantages can exist on the taxation method for the profits of the companies with residence in a country which has signed a double tax treaty with Liechtenstein. These companies have their profits not taxed at all or if they are taxed, a credit is guaranteed in the country of origin. Other advantages granted to the investors are that there are no withholding taxes on dividends, interests, and royalties paid to non-residents.
What are the requirements for opening a company in Liechtenstein?
The requirements for opening a business in Liechtenstein will depend on the chosen type of company. For example, the minimum share capital is lower for the limited liability company (30,000 CHF) compared to the corporation or public limited company (50,000 CHF). Likewise, the accounting, reporting and auditing requirements will differ from one type of business entity to the other.
Companies must have a unique name that can be checked with the help of our attorneys in Liechtenstein. It is advisable to provide more than one name, in case the proposed one is not available. Another requirement for companies is to have their proper Articles of Association drawn up, a phase during which one of our lawyers can also help you. The company directors may need to offer special statements and the founders will be required to provide copied if their identification documents; proof of payment for the share capital is also commonly requested.
What are the taxes for companies in Liechtenstein?
The corporate income tax in Liechtenstein has a rate of 12.5 percent. In some cases, a minimum tax of 1,800 CHF can apply (however, except for small businesses). Other taxes include the payroll tax, social security, stamp duty (considered part of Switzerland for stamp duty purposes). There is no withholding tax on dividends, interest and royalties and no capital duty or real property tax. Liechtenstein is also considered part of Switzerland for VAT purposes and the standard VAT rate is 7.7% with certain goods and services being subject to a reduced rate of 2.5%. A special 3.7% VAT rate applies to businesses in the accommodation industry. Moreover, Liechtenstein maintains its financial center status through the fact that most banking services are exempt from the value-added tax.
Companies incorporated in Liechtenstein, or resident companies, are taxed on their worldwide income. Income derived from their foreign branches and foreign immovable property is exempt from taxation. Non-resident companies in Liechtenstein are taxed on their branch income as well as on their income from immovable property located in the Principality. One of our tax lawyers in Liechtenstein can help answer more specific questions about taxation according to legal entity type.
We also remind investors of the need to obtain special permits and licenses and, in case of trade activities, follow the requirements for EORI registration.
Why is Liechtenstein considered a fund center in Europe?
Liechtenstein is an important financial center in Europe, with a highly favorable regulatory regime for investment funds. The high level of investor protection is an important advantage to all foreign entrepreneurs who choose to set up a fund in Liechtenstein. Moreover, there are several legal forms that can be structured for the purpose of creating an Alternative Investment Fund (AIF) or Undertakings for Collective Investments in Transferable Securities (UCITS). The licensing procedure for investment funds in Liechtenstein is a fast one, with generally no more than ten working days for the UCITS, in those cases where the complete documentation was submitted. Investors can rely on the assistance provided by our lawyers in Liechtenstein for the proper preparation of fund documents.
The Financial Market Authority (FMA) is the one that has both supervisory and protective functions and it manages to guarantee the stability of the market as well as observe the current market needs. The FMA is integrated with other European supervisory authorities.
Liechtenstein is a financial center that provides a suitable environment for traditional and modern business models. It manages to target investors from both the EU and from Switzerland and this is an important criterion that attracts investors from both locations. The region is small but compact and with strong international links. The fact that the country has high stability and secure policies for the financial sector only adds to the list of advantages for businesses here.
If you need to find out more about how to open a company, you may contact our attorneys in Liechtenstein who will offer you a wide range of legal services.