The Principality of Liechtenstein is a leading traditional and modern international financial centre as well as a strong manufacturing industrial sector. In 2010 China and Liechtenstein celebrated the 60th anniversary of the beginning of their diplomatic and economic relationship. At the Expo in Shanghai Liechtenstein was represented with a Pavilion and in autumn 2014 China will be the guest country at the local fair in Liechtenstein.
Liechtenstein’s commitment to tax transparency is demonstrated firstly by the fact that in January 27, 2014 the People’s Republic of China and Liechtenstein signed an Agreement for the Exchange of Information relating to Taxes (TIEA) which came into force on August 3, 2014. Secondly, both the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes welcome and support Liechtenstein’s contribution to an efficient and standardised tax policy. Phase II of the review process for Liechtenstein will take place in the fourth quarter of 2014.
Asset protection and Asset succession planning has been an important factor for the wealth of local and internationally active Liechtenstein entrepreneurs and family businesses, as well as for the country itself. There are many examples, here are two of the better known:
• The Princely family of Liechtenstein holds its wealth in various Liechtenstein foundations.These foundations in turn hold their wealth in banks, corporations, agricultural properties and projects, patents, works of art, etc. The Princely family itself has its own family law for family internal procedures.
• Hilti AG provides leading-edge technology to the global construction industry. Founded in 1941, the worldwide Hilti Group evolved from a small family company to a global player with 21,000 employees in more than 120 countries around the world. The Martin Hilti Family Trust holds all shares and all participation certificates of Hilti Corporation. This safeguards the further development of the company founder Martin Hilti’s life’s work in the long term. Foundations for various charitable purposes are additionally formed by the family.
These experiences and expertise together with traditional, liberal and modern laws have attractedother entrepreneurs and family businesses worldwide, and continue to do so.
Often we see the requirements of a wealthy family to “keep it in the Family” but still the needto distance themselves from their wealth for Asset protection or Asset succession planning purposes. A Family office in Liechtenstein is a possible solution, to combine the knowledge of excellent trusted national and international advisors from Asia and Liechtenstein in a stable and low-tax jurisdiction in Europe.
Why should an individual or a family use a Liechtenstein vehicle and what are the legal entities Liechtenstein has to offer?
An investment or management of a structure or will, generally involves an individual (settlor/founder) holding, directly or indirectly, the majority of the shares of a company, properties, patents, works of art, etc. But people are unpredictable as are the circumstances in which they may find themselves and the financial consequences of such vagaries can be severe. There can beuncertainty around certain family members and their impact on family wealth, the management of a company, employees and so on. The use of a foundation, trust, fund, segregated legal entity or insurance for continuance may be advantageous in guarding against such potential difficulties. It is important to be aware of the time frame for planning and consideration of the best solution.This process is time consuming but it is a worthwhile investment!
Below is a selection of legal entities or instruments available in Liechtenstein for Asset protection and/or Asset succession planning:
There are various types of foundation available under Liechtenstein law. A foundation is a legal entity without shareholders or partners (earmarked assets) to which the founder transfers assets, e.g., shares in a company, property, patents, works of art, etc. These assets are then managed and used by the Board of Foundation in line with the wishes of the founder for the benefit of the beneficiaries. The private interest foundation (family maintenance foundation) is the most popular. As a non-commercial entity it is usually used to hold various types of private assets for the founder or his family for the benefit of named beneficiaries or a given class of beneficiaries. The private interest foundation can also act as a holding company for family businesses. With the implementation of the amended new foundation law in 2009, charitable foundations became more attractive in Liechtenstein. Predominantly charitable foundations are subject to supervision by the Liechtenstein Foundation Supervision Authority and require an auditor. Foundations with a combination of private interest and charitable purposes are also possible.
Liechtenstein has a codified Trust Law and is the only jurisdiction in civil law Europe which has introduced the AngloSaxon private trust into its law. However, the Liechtenstein Trust Settlement has attracted considerable interest and is still widely used by clients who prefer to have a Trust rather than a Foundation. The Liechtenstein purpose trust is also used in merger and acquisition transactions.
Beside Foundations and Trusts, Liechtenstein recognises and regulates:
o Corporations which can also be used as holding companies
o Establishments which can be used commercially or similarly to a foundation
o Alternative investments funds (AIF) which can support succession planning
o Private placement of life insurance contracts
In addition Liechtenstein has a favourable taxation system in place with:
o No inheritance tax
o No tax on dividends, capital gainsor liquidation gains
o No limitations on the transfer of profits, dividends orcapital
o Companies and trusts that qualify as Private Asset Structures (PAS) are subject only to the minimum payment of corporate income tax of CHF 1,200 yearly
o 12.5% tax on corporate or other profits
o Interest deduction on equity capital of 4%
o Income from intellectual property rights is subject to an effective corporate income tax rate of 2.5% (IP Box)
o Double tax treaties with Hong Kong, Singapore, UK, Germany, Austria, Luxembourg, Uruguay, Malta, Guernsey, Switzerland and others
Liechtenstein stands for stability, reliability, safety, security and transparency, international private banking, market access to the EU and Switzerland, family office facilities and possibilities, high quality of services and a low tax system.
