Liechtenstein

Liechtenstein Foundation

Synopsis

The Principality of Liechtenstein was established within the Holy Roman Empire in 1719. Occupied by both French and Russian troops during the Napoleonic wars, it became a sovereign state in 1806 and joined the Germanic Confederation in 1815. Liechtenstein became fully independent in 1866 when the Confederation dissolved. Until the end of World War I, it was closely tied to Austria, but the economic devastation caused by that conflict forced Liechtenstein to enter into a customs and monetary union with Switzerland. Since World War II (in which Liechtenstein remained neutral), the country's low taxes have spurred outstanding economic growth and it is one of the world's best regulated jurisdictions for private interest foundations (stiftungs in German) offering both registered and non-registered (deposited) PIFs with excellent albeit relatively expensive licensed lawyers acting directly or indirectly as Foundation Council members (Historical source CIA Factbook)

About Liechtenstein

Private Interest Foundations

In general, it should be noted a PIF is a civil law construct equivalent in principle to a common law 'trust' in that they are a self-owning entities set-up by a 'founder' (settlor) or 'originating party' by way of an endowment/donation in favour of the stated objects of the foundation (trust): these objects normally being to provide for a class of beneficiaries known or related to the founder. The objectives of the PIF are recorded on its registered/deposited Foundation Charter but the 'key' to a successful PIF are the non-registered Foundation Regulations, which need to be properly drafted to ensure that the Foundation Council (see below) is/are independent of the founder during its lifetime. Most well drafted Regulations will have anti-duress clauses to prevent vexatious 3rd party legal actions. However, it is important to note that PIF endowments will only be valid if donated when there are, at the time of the endowment, not just no 3rd party creditors but no reasonable likelihood that such action will be commenced.

Liechtenstein private interest foundations (PIF's) or stiftungs must be set up for a non-commercial purpose but can invest and/or own commercial companies in or outside of Liechtenstein. PIFs can be registered or deposited with the relevant Liechtenstein authorities with the latter giving a higher degree of confidentiality. The governing body is called the foundation council and generally consists of either a licensed trust company and/or local lawyers with suitable indemnity insurance (a key difference when compared with other PIF jurisdictions). Management and administration fees tend to be charged at a professional rate equivalent to the rates charged in London or Switzerland however as PIFs are non-commercial in nature such fees are no more and mostly less expensive than a comparable trust. Liechtenstein PIFs are required to pay an annual tax of at least CHF 1,200.00 but otherwise are tax free with a very high degree of confidentiality in respect to both the original founders and/or 'originating parties' depending on structure. Liechtenstein PIFs are specialist self-owning legal entities and highly recommended for those with significant assets, wanting a safe and regulated environment for donated assets be they in liquid or fixed/real property.

How PIFs are likely to be considered by UK courts

Some of the potential benefits of using a PIF rather than a trust, at least for our UK based clients, are that anti-avoidance provisions in the UK and Ireland are based upon the use of trusts as self-owning entities and not PIFs. Further, the British House of Lords case of Carl Zeiss Stiftung (Stiftung is simply the German word for a PIF) v. Rayner & Keeler (1967) App. Cas. 853 has supported the contention that a PIF, unlike a common law trust, is to be treated as a self-owning separate legal entity i.e. in other words, akin to a limited company which provides potentially both the benefits of a trust (but with extra protection against local anti-avoidance provisions) and of a limited liability company! It should be noted that whilst all PIFs should be treated in the same way as highlighted in the above case, the case revolved around a Liechtenstein PIF, which is another reason why these are the 'Rolls Royce' of PIF structures.

The SCF Group and PIFs

There is no doubt that the SCF Group is the most experienced tax planning and company formation agent in the UK and can ensure that a Liechtenstein PIF has been drafted in a manner that is most likely to withstand creditor 'attack'. In particular, the SCF Group has successfully drafted PIF Regulations with its Liechtenstein colleagues for a significant number of clients over the years.

Basic Structure & Facts

  • Liechtenstein PIFs can be set-up directly or, which is more usual, by a local trustee company acting as the 'founder'
  • Endowments are separate from the personal estate of the founder
  • The Foundation Council normally consists of 2 or 3 local licensed lawyers together with any required 'protectors'
  • 'Protectors' and supervisory bodies can be appointed with it even being possible for a 'protector' to also be the founder
  • The Founder can reserve the right determine (end) the PIFs existence at any time
  • Foundation Regulations are not kept on public record
  • The Founder can protect and play a major role in influencing the Foundation Council (The governing body) activities and ensure that they adhere to the PIF Charter and Regulations. Something not possible under a traditional trust
  • There is a high degree of confidentiality with only limited information being available on the public registry
  • The minimum initial endowment is CHF 30,000.00 with no limitations on further endowments

Star Ratings

PIF & Corporate registration efficiency

5

Cost

5

Confidentiality

5

Local Banking facilities

5

Legal system

5

Political stability

5

Reputation

5

liechtenstein

Location

Liechtenstein is located between Switzerland and Austria.

Administration & Accountancy Services

It is a requirement that a PIF maintains full and proper accounts, an asset ledger and that periodical asset valuations are carried out. Where a PIF owns an underlying separate legal entity to carryout its investments then such legal entity must also have its accounts maintained by SCF accountants.

Bank Accounts

A PIF will require its own bank account to receive initial endowments or where an endowment constitutes shares or assets in another company or any other proprietary or intellectual rights then it is necessary that a suitable 'transfer of assets and liability' agreement is put in place clearly showing that ownership of the aforementioned has passed over to the PIF or its underlying investment vehicle. For more information please consult with your SCF consultant