Liechtenstein: Private Client

1.1. The Liechtenstein Tax code makes a basic distinction between resident and non-resident tax subjects. Individuals who maintain either a domicile or habitual residence in Liechtenstein are considered residents.

1.2. Income tax is assessed on the basis of the overall (world-wide) income for resident individuals and the domestic (Liechtenstein) income for non-resident individuals. Gains deriving from assets which are already subject to wealth tax are exempt from income tax. Non-residents are required to file ordinary tax returns if their annual gross income in Liechtenstein exceeds CHF 200’000.00.

1.3. Income from foreign businesses and profit shares and capital gains from holdings are generally tax exempt.

Married couples are subject to a joint tax assessment unless they declare an opting out and apply for individual separate tax assessments.

1.4. Nationality and citizenship are no relevant factors for the determination of a person’s tax status.

2.1. Income and capital gains of individuals are both covered by income tax, which is levied on an annual basis. Usually the tax year is identical to the calendar year (1 January to 31 December). Tax liability starts with establishment of a residence or habitual residence, the taking up of employment respectively and ends with departure or termination of employment.

2.2. Notably, capital gains, dividends and profit shares from holdings in domestic and foreign legal entities (e.g. companies) are usually exempt from income tax.

2.3. The overall income tax is composed of federal tax and municipal tax. The latter is set by each municipality and may range from 150% to 250% of federal tax. Liechtenstein uses progressive tax rates to calculate annual income tax and applies different schemes for singles, married couples and lone parents. Absolute maximum taxation (highest levels of income) in each scheme ranges from 20% to 24%.

2.4. The deadline for the submission of tax returns is set annually by the Liechtenstein Tax Authority. Tax subjects may apply for an individual extension of the deadline of up to five months. Following receipt of the returns, tax rate and amount are assessed and determined by the authority.

3.1. For residents, earnings from employment and remunerations for board members are subject to withholding tax. The domestic annual gross income is applied as taxable base.

3.2. For non-residents, further to the two above positions, payments from retirement, invalidity and corporate pension schemes and payments arising from the dissolution of such schemes will be subject to withholding tax.

3.3. The tax rate for withholding tax in respect to earnings from employment is determined by the Tax Authority and lies currently within a range of 4% to 19%, rising with increasing income level. Withholding tax applicable to the other sources of income is up to 12%. The interest rate for certified withholding tax currently amounts to 0%.

4.1. Liechtenstein takes a very active approach towards the avoidance of double taxation of individuals and corporations. With reference date 24 November 2022, Liechtenstein has concluded 24 double taxation agreements with a broad range of different countries from its neighbour states Austria and Switzerland to main economic centers like Germany, the Netherlands, the United Kingdom, Hong Kong and Singapore.

4.2. Although, each of these agreements is tailored to fit the specific needs of the respective inter-state relationship, most of them are based on the OECD model agreement.

4.3. Liechtenstein is a signatory to the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS. During the last years, Liechtenstein has taken substantial efforts to update its previously concluded double taxation agreements to meet the requirements of the framework. In the course of the conclusion of new agreements (e.g. with the Netherlands in June 2020), agreed standards of the BEPS framework were considered and implemented.

5.1. A modified form of wealth tax is levied as an integrated component of income tax. It comprises all movable and immovable property of the tax subject. Gains deriving from assets which are already subject to wealth tax are subsequently exempt from income tax. Wealth tax is calculated as fictitious interest yield of 4% of the net assets, i.e. the world-wide assets (for residents) or domestic assets (for non-residents) net of associated liabilities, which is subject to regular income tax. Reference date for the valuation of assets is the beginning of the tax (and calendar) year.

5.2. Notable exemptions from wealth tax include household and personal effects of up to CHF 25’000.00 (CHF 50’000.00 for couples’) and foreign properties and business premises.

5.3. Citizenship is not a factor in determining wealth tax. However, eventual effects of international aspects (e.g. foreign residence or assets) should be considered on an individual case-by-case basis.

6.1. No, Liechtenstein does not charge tax on inheritances, legacies or onetime gifts.

6.2. However, donor and donee as well as the recipients of inheritances and legacies are required to file a declaration of onetime gifts, inheritances or legacies of CHF 10’000.00 or more with their annual tax returns.

7.1. Onetime gifts are tax exempt. Consequently, there is no room for relief provisions.

7.2. Please kindly see our answer to Question 6 above.

8.1. According to the 2022 Global Philanthropy Environment Index-Rating (GPEI), Liechtenstein is considered the most attractive location for philanthropy.

8.2. Donations to qualified charities with their seat in Liechtenstein, Switzerland or another EEA member country may be deducted from an individual’s annual taxable income in an amount of up to 10%.

8.3. Although gifts, inheritances and legacies to charities are already exempt from tax, Liechtenstein tax law provides further provisions to encourage philanthropy and charitable giving in different ways.

8.4. Firstly, organisations which are exclusively dedicated to charitable purposes are entitled to receive comprehensive tax exemption. This exemption is only inapplicable insofar as directly held business operations of a charitable organisation generate an annual revenue exceeding CHF 300’000.00.

8.5. Secondly, collections of artistical, historical or similar import which the proprietor has made regularly accessible to the public without an own economic interest and which serve common education or tourism (e.g. a private art gallery, museum meeting those requirements) will not be included in the valuation of assets for the purposes of wealth tax.

9.1. Real estate in Liechtenstein will be relevant for the purposes of wealth tax calculation. In this context it will be included in the valuation of assets according to the principles outlined in Question 5 above. The common market value at the beginning of a tax year is applied as calculation base.

9.2. A non-resident (regardless of citizenship) will be taxed at a general rate of 4% on the tax value of the real estate.

10.1. Besides income, wealth and withholding tax, the Tax Code refers to a specific property gains tax which applies to individuals selling domestic property. The difference between initial cost and amount realised (minus associated losses) is taxed at the usual progressive income tax rate.

11.1. Non-citizens who do not work in Liechtenstein, can afford to live from foreign assets and relocate for the first time or return after a duration of ten years or more to Liechtenstein, may apply for a lump sum taxation instead of being subject to regular income and wealth tax. After acceptance of their application, they are taxed at a flat rate of 25% of their total annual living expenses.

11.2. With regard to an only partial connection, application of the above (see Question 1) regime on limited taxation for non-resident individuals should be considered

12.1. Before a residence is established, individuals should conduct a detailed in-depth analysis of their overall income streams and asset structure. Such analysis should also consider potential future acquisitions in Liechtenstein and the present and future location of sources of income.

12.2. Moreover, international aspects of tax and estate planning play an important role. In this context, it is necessary to consider the interplay of having a residence, asset or source of income in Liechtenstein with the other jurisdictions involved, e.g. double taxation agreements or tax information exchange agreements can become relevant in this category.

12.3. With regard to the establishment of a permanent or habitual residence, it should be noted that Liechtenstein takes a rather restrictive approach towards residence matters and that foreigners will be required to obtain a residence permit which is only granted under narrow conditions. The details of this issue should be discussed with professional advisers in good time before establishment of a residence is scheduled.

13.1. Liechtenstein law tries to strike a balance between the principles of testamentary freedom and the natural interests of closely affiliated individuals which are represented through intestacy and forced heirship rules of the jurisdiction.

13.2. The Civil Code provides for intestacy rules following the principle of family succession per stirpes which apply in cases where no will has been made.

13.3. Statutory heirs are the spouse and children of the decedent. The system of statutory heirship further provides that the relatives of the decedent are appointed to legal succession in order of their proximity to the decedent in lines. The first line is made up of the decedent’s descendants, the second line of the decedent’s parents and their descendants, the third line of the decedent’s grandparents and their children and the fourth line of the grand-grandparents of the decedent. A more distant line will only be appointed to inheritance if there are no individuals at all from a closer line.

13.4. The extent of the spouse’s legal right to inheritance depends on the relatives of the decedent with whom the spouse competes. A spouse will be entitled to one-half of the inheritance estate in relation to other intestate heirs of the first line, to two-thirds of the inheritance estate in relation to intestate heirs of the second line or grandparents and to the entire inheritance estate in relation to all other intestate heirs.

13.5. However, the testator is not free to dispose of the entirety of his assets. Forced heirship rules entitle decedent’s descendants and spouse (in the absence of descendants, the decedent’s ancestors) to a compulsory portion of the inheritance estate amounting to half their share under statutory heirship rules. Ancestors of the decedent are entitled to a portion amounting to one-third of their statutory share.

13.6. A spouse is entitled to double the compulsory portion if he or she has made significant contributions to the accumulation of the decedent’s assets and the increase in assets acquired during the marriage accounts for the majority of the inheritance.

13.7. A testator may reduce the compulsory portion of entitled persons other than his spouse by half, if he and the respective person have never established a close familiar relationship typical for their degree of kinship (in practice often e.g. a parent and an illegitimate child). This is not possible, where the lack of relationship is entirely caused by the testator’s behaviour (e.g. rejecting a relationship for no reason).

14.1. As a general rule, the standard matrimonial property scheme is a continued separation of property, i.e. both spouses maintain separate ownership of their respective property, they remain creditors of their own debtors and debtors of their own creditors, assets acquired by one spouse without the other remain sole property of this spouse.

14.2. Deviating from this principle, couples may decide to enter into a scheme of conjugal community of property by contract. By way of such agreement, the spouses can establish joint ownership of both spouses’ assets. Moreover, mixed forms of matrimonial property schemes are admissible (e.g. separation of property for previously acquired and joint ownership of future property).

14.3. Establishment of full conjugal community of property will make each spouse a co-owner of the other’s assets, thereby leaving only half of the property for each spouse’s inheritance with implications for the potential claims statutory heirs and even forced heirs. The second half will be subject to the regular order of succession. It is possible to maintain separation of property while both spouses are still alive and contractually agree for conjugal community of property in the event of decease of one of them.

14.4. The surviving spouse of a married decedent is entitled to the right to further reside in the matrimonial home and to keep all movable property belonging to the joint household (household effects), necessary to maintain the previous standard of living as a statutory legacy in advance. This legacy is not counted for purposes of the calculation of inheritance portions. However, the testator could order otherwise.

15.1. According to Liechtenstein international private law rules, the law applicable to legal succession upon death is determined by a decedent’s personal statute at the time of decease, i.e. the law of the state of the decedent’s citizenship. If an individual is the holder of more than one citizenship, including the Liechtenstein citizenship, Liechtenstein law will apply. In other cases, the citizenship to which the individual has the strongest connection will be relevant.

15.2. If probate proceedings are conducted by a Liechtenstein court, Liechtenstein law will be applicable, unless one of the following circumstances applies:

1. a foreign testator has submitted legal succession to the law of one of his foreign citizenships or his last habitual residence by will or contract of inheritance;
2. a domestic testator with foreign residence has submitted legal succession to the law of one of his foreign citizenships or his last habitual residence by will or contract of inheritance

15.3. Issues of the validity of an individual’s will or contract (or waiver) of inheritance, particularly testator’s capacity and other validity requirements are considered sufficiently fulfilled if they are deemed fulfilled either

1. under the law of one of the testator’s citizenships at the time of the relevant act or at the time of the testator’s decease; or
2. under the law of the country of the last habitual residence of the testator at the time of the relevant act or at the time of the testator’s decease; or
3. under Liechtenstein law, if probate proceedings are conducted by a Liechtenstein court.

15.4. Those rules apply equally to revocation and repeal of a will.

16.1. If foreign law, the application of which would be ordered by Liechtenstein law, refers back to Liechtenstein material law, this cross-reference (renvoi) is accepted and Liechtenstein succession law will be applicable.

16.2. Jurisdiction of the Princely Court of Justice in probate proceedings is generally given with regard to the following assets:

• immovable property (real property) in Liechtenstein;
• movable property in Liechtenstein if the decedent was (i) a citizen or (ii) habitual resident of Liechtenstein at the time of his decease, or (iii) if enforcement of a claim arising from inheritance law, forced heirship or a will is impossible abroad;
• movable property abroad owned by a Liechtenstein citizen upon application of a party attesting a right to inheritance under the condition that the decedent was (i) a habitual resident of Liechtenstein at the time of decease or; (ii) if enforcement of a claim arising from inheritance law, forced heirship or a will is impossible abroad;
• movable property abroad owned by a foreign citizen whose domicile at the time of decease was Liechtenstein upon application of a party attesting a right to inheritance if the decedent has made a choice of law in favour of Liechtenstein law in a will.

16.3. Please note that the Princely Court of Justice is competent for probate proceedings in relation to real property situated in Liechtenstein, but never with regard to real property abroad. The latter is excluded even in cases where the court is generally competent for the probate proceedings.

16.4. Liechtenstein generally takes a very reluctant stance towards recognition and enforcement of foreign judicial decisions. To date, bilateral treaties on this subject have only been concluded with Liechtenstein’s two neighbour countries Switzerland and Austria. However, the treaty with Austria explicitly excludes decisions in inheritance matters. Further to that, the Principality is a signatory to the New York Convention on the recognition and enforcement of arbitral awards.

16.5. There are no specific treaties on the application of inheritance and succession law to which Liechtenstein is a signatory.

17.1. If a person dies, not leaving behind a will, the statutory order of succession (see 13.3.) will apply to the inheritance estate.

17.2. As a general rule, making a will is advisable to everyone who intends to deviate from the statutory order of succession which will apply otherwise. It is particularly recommendable to everyone wishing to consider individual circumstances as a will offers the possibility to implement bespoke solutions instead of the statutorily scheduled scheme. This is regularly advisable for private clients.

17.3. The formal requirements necessary to ensure validity of will are split up into internal and external requirements.

17.4. With regard to internal formal requirements, the General Civil Code requires a specific and serious declaration of the testator’s intention and given testator’s capacity at the time of the signing of the will.

17.5. On the external side, exact formal requirements depend on the respective type of will the testator intends to make. The following types with corresponding formal requirements are recognized by law:

• Holographic Will: A handwritten document penned entirely by the testator and signed in his own handwriting. No witnesses are needed, text and signature may be applied at different times. Adding a location and date is recommended but not required. The simplest form of a will.
• Allographic Will: A document, the text of which may be written either by hand but by someone different from the testator or by the testator himself but by typewriter or computer (and printed). It must be signed in the testator’s own handwriting. Three witnesses are required who must sign the document as well indicating their function as witness with a short affix.
• Joint and Mutual Wills: Married couples may make up a joint will benefitting each other or a third person. Depending on the general choice of form, the above formal requirements apply as well.
• Emergency Will: May be issued in written form or even orally as ultima ratio in case of an immediate danger of the loss capacity or even death of the testator. No formal requirements apart from the presence of two witnesses. Loses its validity three months after the danger has ceased to exist.
• Public Will: May be declared in written form or orally. A written document must be signed in the testator’s own handwriting and delivered to the court in person. The will is sealed and deposited with the court. If declared orally, the will is recorded and signed at court. Two members of the court need to be present as witnesses, one of them must be a judge (or two non-judges instead).

18.1. Administration of inheritance estates follows the rules of the Act on Non-Contentious Proceedings. The Princely Court of Justice is primarily responsible for administration of the estate and may appoint a curator in case the presumptive heirs cannot agree on joint administration.

18.2. Municipalities are also involved and have different functions which are performed on behalf and as an agent of the court. This includes the registration of death, raising of an inventory, conducting of further enquiries and (if necessary) safeguarding of the estate.

19.1. Liechtenstein law provides for a variety of different vehicles to preserve, protect and increase private family wealth for future generations. Among the most popular and effective legal forms are the private foundation (Stiftung), the trust, the trust enterprise (Treuunternehmen) the establishment (Anstalt).

19.2. A foundation is a legal entity with own legal capacity and personality in which the founder has provided assets from his own estate to serve a specific purpose in perpetuity. The foundation is a separate entity which is managed by the foundation board for the benefit of beneficiaries, the determination of which is expressed in the foundation purpose. Liechtenstein foundations have a long and successful track record as estate planning, asset protection and wealth preservation vehicles.

19.3. As the first continental European jurisdiction, Liechtenstein has adopted the Anglo-Saxon legal form of the trust comprehensively into domestic statutory law as early as 1926. In a trust relationship, a settlor entrusts assets from his own estate to a trustee who manages those assets on behalf of the settlor as full legal owner for the benefit of designated beneficiaries. Trusts are another traditional option for the preservation of family wealth and provide for strong asset protection as well.

19.4. The trust enterprise is a special legal form that has been modelled after the Massachusetts Business Trust. It can also be used as an estate planning and wealth preservation vehicle.

19.5. Establishments are a legal form unique to Liechtenstein law. An establishment is a legal entity that has been described by legal writing to be a hybrid between a foundation and a corporation. The law provides for the possibility to design the individual features of the respective entity relatively flexibly and make it either more corporation-like or more foundation-like. This makes it a suitable vehicle for private clients seeking a bespoke wealth preservation solution.

20.1.1. A foundation may either be set up during the founder’s lifetime (inter vivos) or by effect of a will upon decease of the founder (mortis causa). Foundations are constituted by a unilateral declaration of the founder in which he expresses an intent to set up a foundation, the deed of establishment (or in a will). Such deed or will must be in writing with notarized signature(s) of the founder(s).

20.1.2. Foundations gain legal personality immediately upon issuance of the deed of establishment. Entry into the Commercial Register has only declaratory effect.

20.1.3. There is no general obligation to enter a foundation into the Commercial Register. This is only required by law if a private-benefit foundation conducts business along commercial lines on the basis of special law or in the case of charitable foundations. Such foundations acquire legal personality by entry into the Commercial Register, contrary to regular private-benefit foundations. All other foundations, e.g. a holding foundation, are only required to deposit a notification of their formation with the Register.

20.1.4. The supreme corporate body of a foundation is the foundation board (two or more natural persons or legal entities), which is responsible for administration and management of the foundation’s assets. It is also possible to provide for further corporate bodies like a supervisory or family council or a protector. This is often considered to ensure supervision of the foundation board.

20.2.1. A trust comes into existence by written agreement between a settlor and a trustee. Such agreement is referred to as a trust deed. It is also possible that a settlor makes a unilateral appointment of a trustee under the condition that such appointment is accepted in by the trustee in writing.

20.2.2. Trusts with a duration exceeding twelve months require entry into or deposit of their trust deed with the Commercial Register within twelve months of their formation. This has only declaratory effect.

20.2.3. Contrary to a foundation, a trust is not a legal entity and has no legal personality. It is rather a term to describe the contractual relationship between settlor and trustee based on which the settlor transfers assets from his estate to the trustee to be administered for the benefit of beneficiaries. The trustee acts as legal owner of those assets and is responsible for administration and management along the lines of the provisions stipulated in the trust deed. Establishment of a protector to ensure appropriate discharge of the trustee’s duties is possible and common.

20.2.4. Notably there is no equivalent to the rule in Saunders v Vautier in Liechtenstein trust (or foundation) law which would enable beneficiaries by unanimous decision to dismiss a trustee (or board member) and there is no rule against perpetuities.

20.3.1. An establishment requires the founder’s or founders’ signing of the articles of association. According to statutory law, establishments must be entered into the Commercial Register and it is not before such entry that an establishment acquires legal personality.

20.3.2. Establishments are governed by the holder of the founder’s rights as supreme corporate body. Day to day business is usually conducted by a board of directors. Further corporate bodies may be appointed as needed. The legal framework allows for a largely customizable corporate structure and bespoke solutions.

20.3.3. Liechtenstein corporate law also allows for a type of Establishment without founder’s rights (foundation-like Establishment) which is particularly suited for asset protection purposes.

21.1. The information which must be made available to the public will depend inter alia on the set-up of the structure and the choice of entry into the register or deposit of the notification of formation/trust deed which is eligible in the case of trusts and private-benefit foundations.

21.2. With regard to private-benefit foundations, it is usually decided to deposit solely the notification of formation with the Commercial Register, an entry is not required by law except for special cases. With reference to such notification, the following content will be publicly accessible:

• name, legal seat, purpose, date of formation and duration of the foundation;
• name, date of birth, citizenship, corporate seat or residence of the board members and the legal representative;
• an indication of whether the foundation is under supervision of the Supervisory Authority (Stiftungsaufsichtsbehörde);
• a confirmation that the founder has designated the beneficiaries of the foundation;
• a confirmation that the foundation does not wholly or primarily serve charitable purposes;
• a confirmation that the minimum capital is at the foundation’s free disposal.

Disclosure of the founder or beneficiaries of the foundation is not required vis-à-vis the Commercial Register.

21.3. In the case of a trust relationship, entry into the Register is not necessary either, in cases where the trust deed is deposited with the Commercial Register.

21.4. Deposited trusts are particularly well suited for asset protection purposes as the trust deed is not publicly accessible. Upon request of third parties, only the fact that a trust relationship has been established will be disclosed.

21.5. Establishments are required to be entered into the Commercial Register. While an extract from the Register, which is publicly accessible, will contain basic features of the Establishment (name, legal seat, purpose, date of formation, representative, board members), the holder of the founder’s rights and beneficiaries (if any) are not entered into the register. Thus, they may remain anonymous if they should wish to do so.

21.6. As an EEA member country, Liechtenstein participates in the broader efforts to prevent the abuse of the financial system for the purposes of money laundering and terrorist financing. Consequently, Liechtenstein has implemented the 5^th Anti-Money Laundering Directive (“5^th AMLD”) into national law by enacting a total revision of its Act on a Register of Beneficial Ownership (“BO-Register”).

21.7. The law requires all corporations (e.g. establishments, stock corporations), legal entities (e.g. foundations) and other dedications of property (e.g. trusts) to record their beneficial owners and enter their name, citizenship, country of residence and date of birth into a centralized register.

21.8. While settlors/founders, board members, trustees, persons with property-like rights, other controlling individuals and protectors as well as beneficiaries with a legal claim will be entered into the register as beneficial owners, trusts, foundations and foundation-like establishments will not be obliged to record and submit the names of individual discretionary beneficiaries. An abstract description of the class of beneficiaries will suffice. As a result, it will be possible to maintain the anonymity of discretionary beneficiaries while ensuring high and internationally accepted standards with regard to the prevention of money laundering and terrorist financing.

21.9. Moreover, access to the register is not generally available to the public. While authorities like the Public Prosecutor’s Office, Financial Market Authority and Financial Intelligence Unit enjoy unlimited access to the data, disclosure to third parties is severely limited.

21.10. Banks and financial institutions may access the register to fulfil their statutory duties arising from the Due Diligence Act only. Other third parties need to substantiate a legitimate interest which will only be assumed where the disclosure of information is necessary to combat money laundering, predicate offenses to money laundering or terrorist financing. Even if such an interest can be successfully substantiated, the request will be served upon the concerned legal entity for a statement and them decided by a special independent commission.

21.11. Further to the above, current developments on a European scale should be expected to exert considerable influence for the Liechtenstein BO-Register. In its recent landmark decision of 22 November 2022 in the case of Luxembourg Business Registers (C-37/20, C-601/20), the European Court of Justice held that the provision in the 5^th AMLD requiring all member states to ensure access of the general public to information on the beneficial owners of companies and legal entities is invalid and constitutes an infringement on individuals’ fundamental rights to private life and protection of personal data.

22.1. Foundations are considered own tax subjects which are generally taxed at the usual corporate tax rate of 12.5% at foundation level if their legal seat or place of effective management is in Liechtenstein. However, if the founder has retained a right to revocation, assets and income will be entirely assigned to him for tax purposes.

22.2. Entitled beneficiaries are charged wealth tax dependent on the valuation and share of the beneficial interest assigned to them. Discretionary beneficiaries are not subject to wealth tax unless they opt for surrogate wealth taxation.

22.3. Distributions from foundations are considered tax-free income under Liechtenstein law for both residents and non-residents.

22.4. The taxation of trusts in Liechtenstein is highly attractive, competitive, transparent and internationally recognised by the measure of OECD standards.

22.5. On a trust level, the Tax Code provides for an annual minimum flat rate tax of CHF 1’800.00 instead of the usual corporate income tax rate which would amount to 12.5%. Irrevocable trusts are subject to income tax at a regular rate of 12.5% only with their earnings from agricultural and silvicultural land use of domestic property, rental yield from domestic properties, earnings from domestic business premises and remunerations from board functions.

22.6. Tax treatment of settlors and beneficiaries depends on the type of trust.

22.7. Assets and income of a revocable trust are assigned entirely to the settlor for tax purposes. If the settlor is subject to unlimited taxation in Liechtenstein, assets and income will be taxable there. Beneficiaries are not affected as long as they do not receive distributions.

22.8. In an irrevocable fixed interest trust, the beneficial interest will be taxed (at market value) as an asset of the respective beneficiary if such beneficiary is subject to unlimited taxation in Liechtenstein. No tax obligations arise for the settlor.

22.9. The irrevocable discretionary trust is of particular practical importance. In such trust neither the settlor nor the beneficiary is subject to wealth tax. However, beneficiaries (with approval of the corporate body responsible for distributions) may opt for surrogate wealth taxation which makes them individually subject to wealth tax.

22.10. Charitable trusts will be exempted from wealth tax by the Tax Authority upon application.

22.11. Distributions to beneficiaries will also be treated differently depending on the type of trust. In revocable trusts, distributions qualify as gift tax exempt donations by the settlor to a beneficiary. As the beneficial interest is already considered as property of the beneficiary for wealth tax purposes. In an irrevocable fixed interest trust, a distribution from the funds of such trust to a beneficiary will not be subject to income tax. Distributions to beneficiaries of irrevocable discretionary trusts who are resident in Liechtenstein are subject to income tax, unless the trust has opted for surrogate wealth taxation. In the latter case, distributions are tax exempt.

22.12. Remuneration of trustees, directors and board members will be taxed as income at the abovementioned rate or in the case of corporate trustees, directors and board members at the corporate income tax rate of 12.5%.

23.1. Trusts and foundations from most foreign jurisdictions are recognized.

23.2. Notably, Liechtenstein is a signatory to the Hague Convention on the law applicable to Trusts and on their Recognition.

Liechtenstein tax law does not distinguish between foreign and domestic structures. The general rules regarding the scope of taxation apply.

25.1. Trusts and private foundations are well established instruments of asset protection which have been traditionally and successfully used to shelter assets from unwanted seizure.

25.2. As a general rule, after the transfer of assets from the founder’s or settlor’s own estate to either the foundation as own legal entity or the trustee, who shall hold the trust property as full legal owner, such assets are no longer part of the founder’s or settlor’s liability fund.

25.3. Creditors of the founder of a foundation or the settlor of a trust may challenge endowments just as a gift. To be admissible, the claim must be permitted under both, (i) the law of the residence or seat of the debtor (i.e. the founder) and (ii) the law relevant for the process of the endowment.

25.4. Depending on the circumstances, the statute of limitations for such challenge differs. While gratuitous dispositions in general are challengeable up to one year before enforcement has been granted by the court, gratuitous dispositions made with perceptible (i.e. perception of the third part receiving the disposition) intent to disadvantage certain creditors or prefer certain creditors to the disfavour of others will be challengeable up to five years from the date of the relevant disposition.

25.5. In exceptional cases, where the use of a legal structure or entity would amount to an intentional abuse of rights (e.g. where a trust has been deliberately used to avoid the satisfaction of creditors), the Liechtenstein Supreme Court has recognized the concept of “reverse piercing of the corporate veil” according to which the legal person or structure is to be held liable instead of its founder/settlor. We emphasize that this doctrine is only applicable in extraordinary cases where an abuse of the law is apparent. The legal personhood of a foundation or legal validity of a trust relationship is not regularly questioned in proceedings.

25.6. Founder’s or settlor’s rights may generally be the subject of attachment by creditors. The Supreme Court has considered them mediate property rights in the past. However, if the trust or foundation deed includes an enforcement privilege clause and if the exertion of such rights is made subject to the approval of an additional corporate body (e.g. a protector), the rights will not be attachable.

25.7. According to Liechtenstein case law, discretionary beneficiaries of trusts and foundations may generally not be deprived of their beneficial interest by their creditors.  Creditors may only seize funds or assets that have already been transferred by the trust or foundation to its beneficiaries on the basis of a respective beneficial interest.

25.8. With regard to entitled beneficiaries of private-benefit foundations and trusts, the Liechtenstein Foundation Code provides for the possibility to prevent creditors of beneficiaries from depriving the latter of their entitlement to a beneficial interest in enforcement or insolvency proceedings or by interim relief by including an accordant provision (enforcement privilege clause) in the foundation or trust deed.

25.9. Another important aspect of asset protection is the lack of jurisdiction with regard to foreign discretionary beneficiaries. In the past, the Supreme Court has held that a claimant may not file a lawsuit against a discretionary beneficiary of a Liechtenstein trust who resides abroad due to a lack of jurisdiction. The bare discretionary beneficial interest will not be sufficient to establish jurisdiction based on assets as it will regularly not considered a domestic asset itself.

25.10. Two further factors which render Liechtenstein a favourable location for asset protection are the reliable anonymity of the mentioned structures (see 21.) and the jurisdiction’s reluctance toward recognition and enforcement of foreign judicial decisions (see 16.4.)

26.1. The general age of majority in Liechtenstein is 18 years. However, legal capacity is acquired at birth already (or even before that by the nasciturus under the condition of live birth) and capacity to contract develops in different stages starting at birth.

26.2. Individuals reaching an age of 14 are considered emancipated minors. Usually they require consent of their legal guardians (regularly their parents) to contract unless they receive an economic benefit without any associated obligation.

26.3. The founder of a foundation or the settlor of a trust may appoint minors as beneficiaries. Scope, amount and timing may be determined on an individual basis. It is possible to provide that minors will only receive certain distributions upon reaching a particular age.

27.1. We definitely recommend individuals to establish a health care proxy to ensure that they can be properly legally represented according to their own wishes in the case of mental incapacity.

27.2. A health care proxy is a special power of attorney which becomes effective upon the principal’s losing mental capacity or the ability to express his will. In such case, the proxy designates another person (i.e. the agent) to assume certain affairs on behalf of the principal.

27.3. The affairs to which the proxy relates must be explicitly mentioned in the document.

27.4. With regard to formal requirements, notably the proxy must be authored entirely by the principal and signed in his own handwriting. If the text is not written entirely by hand of the principal, the law requires that the principal attest in the presence of three witnesses that the content of the document is his true will. All witnesses have to confirm this and sign the document indicating their function as witness with a short affix. In case, the document remains unsigned, it has to be certified by an attorney or the Court to be valid.

27.5. Dispositions covering consent to certain medical treatment, permanent change of residence or management of the principal’s assets with regard to extraordinary conduct of business must be expressly labelled as such. They require a special health care proxy which has to be established in the presence of an attorney or at Court. The principal must be informed about the consequences of such proxy and that a revocation is possible at any time. Finally, the attorney or responsible person at Court must sign the document to certify that the principal has been adequately informed.

27.6. No one who works as a dependent employee or director of a hospital or other care institution where the principal is receiving treatment must serve as an agent.

29.1. As a microstate, Liechtenstein is particularly dependent on international cooperation, this has even been explicitly recognized by the Constitutional Court in decisions regarding to the exchange of information with other countries.

29.2. Over the last years, 34 tax information exchange agreements (TIEA) have been concluded with partner countries. However, even though international cooperation plays an important role, the jurisdiction tries to strike a balance between this legitimate interest and the – sometimes conflicting – fundamental rights of privacy and data protection. The TIEA as well as the Tax Information Exchange Act provide for possibilities to anonymise names and data of individuals who are not directly affected by an information request by a foreign authority.

29.3. In addition to that, Liechtenstein has committed itself to adhere to the OECD standard with regard to the automatic exchange of information in tax matters. The respective national implementation law has entered into force on 1 January 2016.

29.1. As a microstate, Liechtenstein is particularly dependent on international cooperation, this has even been explicitly recognized by the Constitutional Court in decisions regarding to the exchange of information with other countries.  

29.2. Over the last years, 34 tax information exchange agreements (TIEA) have been concluded with partner countries. However, even though international cooperation plays an important role, the jurisdiction tries to strike a balance between this legitimate interest and the – sometimes conflicting – fundamental rights of privacy and data protection. The TIEA as well as the Tax Information Exchange Act provide for possibilities to anonymise names and data of individuals who are not directly affected by an information request by a foreign authority. 

29.3. In addition to that, Liechtenstein has committed itself to adhere to the OECD standard with regard to the automatic exchange of information in tax matters. The respective national implementation law has entered into force on 1 January 2016. 

We are currently not aware of any legislative changes which will affect our advice to private clients.