Liechtenstein Foundation Research Articles

Italian resident individuals with interests in Liechtenstein entities: notes on Italian income taxes—Part 1

Abstract It is not uncommon for Italian resident taxpayers to resort to Liechtenstein entities to take advantage of the benefits that they can offer, like asset protection, confidentiality and favorable taxation. This article tries to address some of the Italian income tax implications that Italian resident individuals with interests in Liechtenstein entities should consider. Part 1, after providing an overview on the recent agreement for the elimination of double taxation stipulated between Italy and Liechtenstein, focuses on Liechtenstein foundations and establishments, also covering the potential advantages that may derive from the combination of the Italian lump sum tax regime with the use of these legal entities. Part 2 (to be published soon in 2024), will deal with Liechtenstein limited companies and “the Italian Controlled Foreign Companies regime”.

Italian resident individuals with interests in Liechtenstein entities: notes on Italian income taxes—Part 2

Abstract It is not uncommon for Italian resident taxpayers to resort to Liechtenstein entities for taking advantage of the benefits that they can offer, like asset protection, confidentiality and favorable taxation. After having dealt, inter alia, with Liechtenstein foundations and establishments in Part 1, Part 2 focuses on the holding of participations in Liechtenstein limited companies by Italian resident individuals. In this regard, the tax treatment of dividends, capital gains and “the Italian Controlled Foreign Companies regime” are addressed. Finally, a few remarks are made on some income tax planning opportunities and criticalities in light of the Italian tax legislative framework described in Part 1 and Part 2.

The Liechtenstein Anstalt—the legal chameleon’s mystery unveiled

Abstract Just like the Liechtenstein foundation, the anstalt is a true legal chameleon among the Liechtenstein company forms, fulfilling purposes that range from those commonly pursued by corporate bodies to purposes pursued by private foundations. This year’s editorial explains and contrasts the basic concept of the Liechtenstein anstalt, which more often than not puzzles domestic and international practitioners alike, and points out why the correct classification of an anstalt is essential.

The German and the Liechtenstein family foundation after the German foundation law reform

Abstract The structure of private wealth in Germany is approaching that of many other countries, such as England, the USA and Switzerland: it is becoming intergenerational. As more and more and also substantial assets are inherited, the need for instruments to preserve and increase this wealth is growing. It is therefore not surprising that family foundations are enjoying growing demand in Germany. But the Liechtenstein foundation is also becoming increasingly popular—especially for German citizens. The article compares the two legal institutions.

A comparison of the Newly Reformed German and the Liechtenstein Foundation Law against the background of the competition between the legal systems

Abstract An European legal framework for foundation practice is still missing. Even the proposal for a regulation on the statute of the Fundatio Europaea has not yet been implemented. Meanwhile, the civil law regulations of the various foundation law systems are manifold. At the same time, competition between European legal systems not only affects civil, corporate and tax law, but has also reached foundation law. Moreover, the social and international environment of foundations is changing. In addition to a new generation of young founders, the demographic change in society and the mobility of legal forms in the European environment are also having an impact on foundations. Due to current reforms in the traditional foundation law systems of Germany and Switzerland, the question arises whether Liechtenstein should react to the competition between foundation law systems and whether the Liechtenstein legislator should become active once again. For this reason, this article deals in detail with the most important changes in German foundation law that are relevant for Liechtenstein foundation law. The article also looks at the regulations in Liechtenstein foundation law in a comparative law perspective, highlighting the competition between foundation law systems.

Belgian court of appeal rules on inheritance tax treatment of a distribution by a Liechtenstein foundation

Abstract In a judgment of 5 April 2022, the Court of Appeal of Ghent ruled on a case regarding the qualification of a distribution by Liechtenstein Stiftung under Belgian inheritance taxation. While the constitution of and the transfer of assets to a private foundation, or even a distribution by a private foundation after the death of the founder normally does not trigger Belgian inheritance taxation, the Court ultimately ruled that the distributions should be subject to inheritance taxation, based on the (perceived) existence of an ‘agreement’ between the wife of the founder, who was designated as the ‘first beneficiary’ and the second beneficiaries. This judgment raises a number of questions regarding the correct interpretation of the relevant Belgian tax provisions and the correct application of the applicable Liechtenstein legislation. This article provides an in-depth assessment of this judgment and serves as a cautionary tale for any private foundation which has a founder and/or beneficiaries resident in Belgium.

Reporting Requirements for a Liechtenstein Foundation

Reporting Requirements for a Liechtenstein Foundation

The liability of foundation councils: an uphill battle for beneficiaries?

Abstract The question of liability of a foundation council remains one of the most important issues in foundation law practice and is at the root of many conflicts in the Liechtenstein foundation landscape. This article seeks to contribute to a better understanding of the key principles of this topic by outlining some of the elements forming the very complex legal framework of Liechtenstein's laws of liability. A closer look at the more recent hot-button issues in light of the Supreme Court's case law reveals a multitude of legal issues ultimately rendering attempts by beneficiaries to hold the foundation council accountable an uphill battle.

Distribution of foundation assets to another foundation or trust—powers of the trustees and claims based on unjust enrichment

Abstract The article deals with fundamental questions regarding the distribution carried out by a Liechtenstein foundation to another foundation and/or trust instead of a direct distribution to the beneficiaries. In principle, this phenomenon partly falls under the concept that is labelled as ‘decanting’ within the private client law community. One of the key advantages of foundations as compared to other instruments is the high level of stability combined with very limited instruments to change the purpose as well as the beneficial interest. As with trusts, the ‘decanting’ in the field of the private foundation practice seems to be a method to adjust the set-up of the vehicle, leaving old provisions behind that might no longer be compatible with the changed circumstances of the founder’s/settlor’s family. The article deals with the different legal issues involved, such as the ultra-vires-doctrine as well as the relevant issues of unjust enrichment. Finally, the author gives guidelines for practitioners by discussing the recent developments in Liechtenstein case law.

Wealth preservation by using trusts or private foundations in a civil law environment

Abstract The article describes the use of trusts and private foundations as well as the cultural and legal differences between the two legal instruments. The problems and opportunities arising from any legislative measure that introduces the trust in a civil law jurisdiction will be addressed. The article will focus primarily on the Principality of Liechtenstein. While Liechtenstein is a typical civil law jurisdiction that has embedded partly the Austrian and partly the Swiss legal tradition, a unique trust regime was enacted as early as 1926. On the contrary, the Swiss legislature has never created its own legal instruments for private wealth structuring. Swiss practitioners have relied on foreign tools, such as the Liechtenstein foundation and the Liechtenstein trust. Currently an academic and political debate is underway in Switzerland regarding the introduction of genuinely Swiss vehicles for private wealth structuring. What lessons can be learned from the almost 100 years of Liechtenstein experience?

Implications of common reporting standard for Liechtenstein foundations and trusts—taking stock

Abstract Three years after the implementation of the common reporting standard (CRS), it is time to take stock and assess the impact that the CRS had on Liechtenstein’s financial centre, in particular on the approximately 15,000 foundations and trusts located in the Principality. Especially the particularities in transposition, eg the interpretation regarding the requirements of the managed by test, as well as the manner of information procurement, which is closely linked to the reporting obligations under the CRS, are of special interest in this regard.

Liechtenstein: a hub for wealth preservation

Over many generations, various institutions have created ‘the picture of the filthy rich’ and condemned wealth as something unethical. Important facts get overlooked thereby; namely, that private capital is put to work much more fruitfully and prudently than public capital. And that it is the driving force for the further development of any society. It is time to heighten the awareness that private wealth is a genuine value; that the activity of trustees represents a wealth-preserving necessity; and, that the Liechtenstein foundation in this respect is a time-tested legal instrument in the most professional manner.

Information rights in Liechtenstein foundations, reloaded: back to the future?

Why should the founders and beneficiaries of Liechtenstein foundations revisit the foundation documents and consider varying the provisions relating to the next generation’s rights to information? A recent, groundbreaking Liechtenstein Supreme Court decision extends such rights back into the past—unlike previous case law which was understood to limit such rights to the time from which the applicant became a beneficiary and denied requests for historic information. While many may welcome the court’s reaffirmed undertaking to ensure ‘foundation governance’, others will certainly wake up and ask themselves, looking into the future, whether their next generation should really be able to learn all about the past.

Liechtenstein: Beneficiaries' rights and foundation governance in Liechtenstein

The competition between the European legal systems which are familiar with the institution of the private-benefit foundation is played out not only in tax law but also in civil law. In this context, issues regarding foundation governance have increasingly come to the fore in the recent past. When comparing the new Liechtenstein foundation law to the corresponding laws in other jurisdictions, it is striking that there is such a huge range of mechanisms available to achieve an optimal governance structure. In this respect, the legislator has focused particularly on the active role of the beneficiaries as control bodies.

Liechtenstein: How to protect the assets of a Liechtenstein foundation from the onslaught of creditors and forced heirs

Liechtenstein: How to protect the assets of a Liechtenstein foundation from the onslaught of creditors and forced heirs

The Liechtenstein Foundation as a cross-border wealth planning instrument under the Liechtenstein Disclosure Facility and the Liechtenstein--UK Double Taxation Agreement

The Liechtenstein Disclosure Facility (LDF), in contrast to the Swiss–UK Agreement gives non-compliant UK taxpayers a unique chance to regularize their past tax obligations on their worldwide assets while being given immunity from prosecution for tax offenses. If the clients decide to keep their structures in Liechtenstein upon completion of the LDF, they profit from corporate tax incentives as, under specific conditions, Liechtenstein foundations (Stiftungen), establishments (Anstalten) as well as UCITS and AIFM funds will henceforth have access to the treaty benefits provided by the comprehensive Double Taxation Agreement which was signed by Liechtenstein and the UK on 11 June 2012.

The Liechtenstein Foundation in the context of family governance

Possessing wealth is something the general public frequently views as being desirable. But all too often, wealth and especially family wealth can be the source of conflicts. Thus, it should come as no surprise that anxieties and doubts arise amongst the parties involved when the deployment and conveyance of assets are up to discussion. However, there are methods and instruments by which the issues surrounding family and wealth management can be clarified and sorted at an early stage and thus unnecessary contentious situations be avoided. Family governance is one of those methods and the Liechtenstein family foundation a viable instrument. Purpose of a family foundation As a legal form with decades of tradition, the Liechtenstein foundation has its origins in the Persons and Companies Act of 1926 (PGR). The ‘family foundation’ in particular has been firmly established in Liechtenstein foundation law since time immemorial. But what is the purpose of such a legal entity? For one, it is a means of cementing for the long term those family principles that are of relevance to one’s wealth: for example, the issues associated with the rearing, schooling, continuing education, and support of family members. But of equal importance, it is an instrument for safeguarding the family fortune and preserving it for future generations. This article takes a closer look at the family foundation as it relates to prudent and circumspect family (wealth) management. This article takes a closer look at the family foundation as it relates to prudent and circumspect family (wealth) management

The Swiss court's approach to beneficial ownership

Following the conclusion of the agreement between Switzerland and the United States on the request for information from the Internal Revenue Service, the Swiss Federal Administrative Court (SFAC) has determined in a number of cases whether US persons were the beneficial owners of structures, in particular, Liechtenstein foundations, Liechtenstein Anstalts and irrevocable or revocable trusts. Based upon the principle of substance over the form, the concept of ‘beneficial owner’ refers to the economic reality as opposed to the legal from. As ruled by the SFAC, it is crucial to examine whether the founder or beneficiary of the structure ‘plays by the rules of the entity’.

Liechtenstein family foundations and financial privacy

At present, international and intergovernmental organizations are aiming to reduce basic individual rights to privacy. However, financial privacy continues to be the best protection against unjustified attachment and disclosure! Financial privacy is not an issue of rich people. And, financial privacy is not an issue of taxation. Financial privacy is also not an issue of criminal money. Financial privacy first and foremost is an issue of freedom! The Liechtenstein Foundation guarantees financial privacy for lawful means.

The provisions of the TIEA/MoU concluded between the Principality of Liechtenstein and the United Kingdom of Great Britain and Northern Ireland and their effect on Liechtenstein Foundations and Trusts

The provisions of the TIEA/MoU concluded between the Principality of Liechtenstein and the United Kingdom of Great Britain and Northern Ireland and their effect on Liechtenstein Foundations and Trusts