The Liechtenstein Persons and Companies Act, 1926 (PGR) is one of the cornerstones of the rapid economic development of the country. Supplemented by the Law Concerning Enterprises it led to the establishment of numerous domiciliary and holding companies, incidentally making Liechtenstein a pioneer as an offshore center. The aim of the legislation was to create income for Liechtenstein by introducing all forms of undertakings known and proven in foreign legislation. Even though Liechtenstein was neutral during the First World War, the economic consequences of it nevertheless proved to be disastrous; with the collapse of the Habsburg empire the Austrian crown, the currency used in Liechtenstein lost its value. The Company legislation was an ideal way of attracting new and stable money to Liechtenstein. Due to the absolute political stability of coalition Government for more than 50 years and the solid economic growth in all sectors supported by the enormous growth of the offshore services sector, Liechtenstein rivals Switzerland for stability and enjoys a more secure and discreet banking and fiduciary industry.

Type of Company Available

THE COMPANY LIMITED BY SHARES (AKTIENGESELLSCHAFT)

Which requires a minimum paid up capital of CHF50,000. It must submit annual audited accounts, pay a 4% coupon tax on dividends and is used in the manner of a traditional IBC. Bearer or registered shares may be issued.

THE ESTABLISHMENT (ANSTALT)

Has either commercial or non-commercial objects. It generally only suitable for one beneficial owner and has a minimum paid up capital of CHF 30,000. Audited accounts need only be submitted when having commercial objects, otherwise a statement by the directors annually that a complete statement of assets and liabilities is to hand suffices. The establishment can appoint beneficiaries by means of a by-article, which is not registered with the authorities - assuring absolute discretion as to the beneficial owner. The ownership respectively the control is evidenced by the person holding the founder’s rights, normally in the form of a blank deed of assignment. An establishment is not classified as having commercial objects provided it only administers its own assets e.g. an establishment that purchases properties as an investment to produce income is non-commercial, whereas an establishment that buys and sells properties as a business to achieve a profit would be classified as having commercial objects.

THE LIECHTENSTEIN FOUNDATION (STIFTUNG)

Is either registered, in the manner of companies when having the standard charitable purpose of a foundation, or deposited when a pure family foundation is where the beneficiaries are, specifically designated or definable. All foundations have a minimum capital fund of CHF 30,000 and submit no accounts to authorities. The Foundation Council is required to declare that an annual statement of assets and liabilities is available. The deposited family foundation guarantees a further degree of secrecy.

THE LIECHTENSTEIN TRUST OR SETTLEMENT (TRUST OF TREUHANDSCHAFT)

Is either operated in the manner of a common law trust and governed by the laws of trusteeship, or formed as a trust enterprise in the manner of a Massachusetts Trust. The trust differs from the fiduciary trust relationship, inasmuch that the latter is based on the law of mandate and the trust enterprise as a juridical person has legal personality. 
However, unlike the Anglo-Saxon trust, Liechtenstein law does not contain any prohibition of accumulation of income or any rule against perpetuities, therefore allowing the creation of a trust with an unlimited duration.

In the objects of the trust enterprise it must be clear whether commercial activities are to be undertaken or not. This will determine whether auditors are required pursuant to the law in the same manner as with the establishment.
 

Taxation

The taxation of domiciliary entities is restricted to a capital tax at a preferred rate of normally 0.1% on capital paid in or invested assets and reserves, however, a minimum tax of CHF 1,000 per annum per entity. A stamp duty is levied during formation of the capital of a limited company, an establishment and trust enterprise, normally in an amount of 3%, for family foundations only 0.2% or a minimum of CHF 200. A trust pays no duty. A reduction of duty may be applied for under certain circumstances should the registered capital be higher than CHF5 mio (1.5%) or more than CHF 10 mio (1%).

Liechtenstein has only one double taxation agreement with Austria.

Local representation is required on the boards of all juridical persons and trusts and all must have a local representative.
 

Summary

Liechtenstein is the most sophisticated of all offshore centers, situated in the heart of Europe, merely under two hours from Zurich Airport, with excellent telecommunications and supported by internationally renowned, highly efficient Liechtenstein banks and service industries, with English widely spoken in addition to the native German dialect. Therefore, it attracts substantial clients requiring a liberal and flexible company law allowing the formation of holding, domiciliary companies, foundations and trust in a highly developed jurisdiction.