Liechtenstein as a Gateway to the European Market

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1. What unique market access does a Liechtenstein presence provide? Liechtenstein offers a 'dual-entry' advantage: full access to the European Economic Area (EEA) for goods and services via its EEA membership, and privileged access to the Swiss market through its customs and monetary union with Switzerland.

2. Can financial services firms 'passport' from Liechtenstein? Yes. Locally regulated firms may promote and provide financial services across all 30 EEA jurisdictions under unified European passporting rules.

3. How does Liechtenstein’s relationship with Switzerland benefit the investor? The Principality uses the Swiss Franc (CHF) and shares a customs union with Switzerland. Its proximity to Zürich (approximately one hour) allows an investor direct access to world-class expertise from Switzerland, Germany, and Austria.

4. Is office space and local substance achievable for foreign firms? Yes. For the purposes of meeting 'economic substance' requirements, office space in the Principality remains affordable and accessible compared to other major European financial hubs.

5. How does Liechtenstein's membership of EFTA benefit an entrepreneur? As a member of the European Free Trade Association (EFTA), Liechtenstein benefits from one of the largest networks of free trade agreements in the world, facilitating global commerce beyond the EEA.

 

Security, Stability and Governance

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1. What is the sovereign credit rating of Liechtenstein? Liechtenstein maintains a sovereign AAA credit rating, reflecting its robust financial infrastructure and political stability.

2. How stable is the political and legal environment? The Principality benefits from a highly stable constitutional framework. Its innovative legislative approach ensures a versatile and modern political infrastructure for both legal and financial services.

3. How does the scale of the government impact regulatory procedures? Due to the small scale of civic institutions, regulatory procedures are notably efficient, pragmatic, and responsive, avoiding the bureaucracy often found in larger jurisdictions.

4. What is the local attitude toward free-market economics? The jurisdiction has a libertarian approach to government. Public support for the free market is strong and is reinforced through a system of direct democracy and referenda.

5. How does the Principality manage national debt? Liechtenstein is notable for having no national debt, which provides an exceptionally stable environment for long-term capital preservation.

 

Taxation and Fiscal Advantages

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1. What is the standard corporate tax rate in Liechtenstein? The corporate income tax rate is 12.5%, which is among the lowest in the European Economic Area.

2. Are there withholding taxes on dividends or interest? No. Unlike many other European jurisdictions, Liechtenstein does not impose withholding charges on dividends or interest payments.

3. Does Liechtenstein levy a capital gains tax? No, there is no form of capital gains tax in the Principality.

4. Is Liechtenstein considered an 'onshore' or 'offshore' jurisdiction? In spite of its competitive tax regime, both the EU and the OECD classify Liechtenstein as an 'onshore' financial centre and a white-listed jurisdiction, rather than a tax haven.

5. Is there a minimum income tax for legal entities? Yes, a minimum income tax of CHF 1,800 is generally imposed, though private wealth structures may be exempt from standard income tax provided they meet specific criteria.

6. How are dividends received from foreign subsidiaries treated? Dividends received by a Liechtenstein company are generally tax-free, unless they originate from a low-taxed foreign subsidiary generating predominantly passive income.

 

Asset Protection and Litigation

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1. How does Liechtenstein protect assets against frivolous litigation? Liechtenstein is not a signatory to the Lugano Convention on the mutual recognition of foreign judgements. Consequently, a plaintiff cannot rely on relief granted by foreign courts (excluding Austria and Switzerland).

2. What must a foreign plaintiff do to pursue a claim in Liechtenstein? A plaintiff must initiate litigation entirely anew within the Liechtenstein court system. This requirement serves as a significant deterrent against meritless or 'fishing' legal actions.

3. Does Liechtenstein offer arbitration services for fiduciary disputes? Yes. The jurisdiction is a leading centre for trust and fiduciary arbitration, allowing for the private and expert resolution of complex cross-border dynastic disputes.

4. Can a protector mitigate the need for litigation? Yes. By overseeing the good governance of a fiduciary arrangement, a protector may intervene to replace trustees for incompetence or bad faith, often resolving issues without recourse to the courts.

 

Trusts, Foundations and Fiduciary Governance

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1. What is the primary role of a Trust Protector? A protector oversees the good governance of a fiduciary arrangement on behalf of the beneficiaries. This individual ensures that the interests of the beneficiaries are not overlooked and avoids professional conflicts.

 

Residency and Relocation

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1. What residency programmes are available in Switzerland and Liechtenstein? There are longstanding 'lump sum' (expenditure-based) residency programmes available for high-net-worth individuals, particularly around the Zürich area and within the Principality.

2. How does 'remittance-based' taxation affect asset management? In countries with any form of remittance-based taxation of income, such as Italy, Malta, Greece or Ireland, it is advisable for assets to be managed outside the jurisdiction. Liechtenstein is ideally suited for this due to its proximity to Swiss financial centres.

3. Does a relocation project require the relinquishment of old tax residency? Yes. It is imperative that a methodical approach be taken to ensure the effective relinquishment of an existing tax residence to avoid dual taxation or scrutiny.

 

Corporate and Family Office Services

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1. What is a Family Office 'Private Trust Company' (PTC)? A PTC can act as the trustee of a family trust, allowing family members greater involvement in the governance of their assets whilst maintaining a professional fiduciary structure.

2. Are family offices regulated in Liechtenstein? Family offices are not strictly regulated by law, which allows for great flexibility in how a family office may be structured (e.g., via a foundation, a trust, or a PCC).

3. Can a Protected Cell Company (PCC) be used for a Family Office? Yes. A PCC allows for the legal segregation of different asset classes or family branches within a single corporate entity.

4. What 'concierge' services can be typically provided to UHNW clients? Services often include property searches, recruitment of domestic staff, identification of suitable schools, organising personal appointments, and dealing with local authorities.

5. How is client confidentiality protected in the digital age? Confidentiality is underpinned by rigorous data protection protocols, the use of best-in-class secure tools, and a long-standing institutional culture of discretion.

6. Does Liechtenstein comply with international transparency standards? Yes. Liechtenstein is a white-listed jurisdiction that complies with the OECD's AEOI (Automatic Exchange of Information) and FATCA standards.

 

US-Specific Tax Structuring (IRS Compliance)

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1. Can a Liechtenstein entity be 'tax transparent' for US purposes? Yes. A single-owned GmbH (limited liability company) may be classified as a Disregarded Entity (DRE) for US tax purposes, allowing the consolidated fiscal burden to be limited to the local 12.5% rate.

2. Why is a GmbH often preferred over an AG for the US investor? The Aktiengesellschaft (AG) is on the IRS 'per se' corporation list and cannot be disregarded. The GmbH, however, can qualify as a DRE or a partnership through a 'check-the-box' election.

3. How can the US investor avoid complex CFC and GILTI reporting? By structuring a GmbH as a Disregarded Entity (DRE), a single owner can often file the relatively straightforward Form 8858 and avoid the more onerous Form 5471 associated with Controlled Foreign Corporations (CFCs).

4. What is the US tax treatment for a Liechtenstein Protected Cell Company (PCC)? A PCC can maintain DRE status if the structure ensures that passive investors hold contractual debt claims (such as profit-participating loans) against individual cells rather than equity interests.

5. How should asset-backed tokens be structured for US tax efficiency? To avoid the GmbH being treated as a partnership (requiring Form 8865), tokens should generally be structured as contractual debt claims (loans) rather than equity interests.

6. Can a Liechtenstein fiduciary arrangement be treated as a trust for US tax? Yes. It is possible for a Liechtenstein fiduciary arrangement to be construed as a revocable foreign grantor trust to ensure tax transparency at the top level of ownership.

7. Can a US settlor retain control over a foreign trust? If a settlor retained too much control (such as the power to direct distributions or replace trustees with related parties), that individual would risk being treated as the tax owner of the assets under US grantor trust rules.

8. What is the benefit of appointing an 'independent unrelated' trustee? Appointing an independent trustee unrelated to the protector helps ensure that the settlor were not treated as the owner of the property for US tax and estate purposes.

 

US Reporting and Compliance

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1. What are the US reporting requirements for a new foreign trust? A US settlor must report the creation of a foreign trust on IRS Form 3520. He should attach a report of the initial transfer to his annual tax return.

2. When is IRS Form 3520-A required? This annual filing is required if a non-US trust were characterised as a 'grantor trust', where the US settlor would be treated as the tax owner.

3. What is the impact of the FATCA agreement in Liechtenstein? Liechtenstein operates under a Model 1 FATCA agreement, meaning local financial institutions report US account information to the local tax administration, which then forwards it to the IRS.

4. Can a discretionary trust be a grantor trust? Yes. If the beneficiaries were not specifically named, the trust could be a grantor trust unless the deed explicitly stated that a US person could not benefit from the trust.