Liechtenstein Foundation: Legal definition and recognition

Liechtenstein law defines a foundation as a legally and economically independent special-purpose asset that is established as a legal entity through a unilateral declaration of intent by the founder. The founder dedicates the foundation assets and determines the purpose of the foundation as well as the beneficiaries.

As an EEA member state, all EU directives and regulations also apply in Liechtenstein. Liechtenstein has acceded to all international agreements on the exchange of information, thereby enabling the conclusion of a large number of double taxation agreements.

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Private-benefit foundation (family foundation, maintenance foundation, corporate foundation)

Under the new Liechtenstein foundation law there are two types of foundation, a private-benefit foundation and a charitable foundation.

Private-benefit foundations include family foundations, maintenance foundations and corporate foundations.

The private-benefit foundation can in turn be organised as a transparent controlled foundation or as a non-transparent discretionary foundation – depending on the structure of the foundation deed.

Private-benefit transparent control foundation

In the case of the transparent control foundation, the founder retains extensive intervention rights and organisational rights; the Board of Trustees is generally bound by the founder’s instructions via a mandate agreement.

Non-transparent private-benefit discretionary foundation

In the case of a discretionary foundation, the founder has neither control over a mandate agreement nor any other means of access or influence. The Board of Trustees acts at its own discretion and is only bound by the provisions of the foundation documents. There is a legal, economic and actual separation of the foundation’s assets from the founder’s assets.

Practical tip: For reasons of tax recognition of the Liechtenstein Foundation abroad, founders generally choose the non-transparent discretionary foundation as the form of foundation.

Charitable foundation

In Liechtenstein, the charitable foundation can be organised as a purely charitable foundation or as a mixed charitable foundation.

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Liechtenstein as an EEA member state

Liechtenstein completely reformed and modernised its foundation law and tax law in 2008/2010, leaving its tax evasion past behind and adapting to international standards.
Liechtenstein is not an EU member state, but is a member  of the European Economic Area EEA. The EC Treaty, the TFEU and the EEA Agreement guarantee its citizens the fundamental freedoms of free movement of capital, free movement of services, freedom of establishment and free movement of goods within Europe. The treatment of civil liberties and prohibitions of discrimination in the EEA is identical to those that apply within the EU. Most of the EU directives, EU regulations, decisions and recommendations issued by EU institutions are integrated unchanged into the annexes of the EEA Agreement and thereforealso become legally binding in the EEA member state Liechtenstein following national implementation.

Automatic exchange of information, double taxation agreement

In the so-called „Liechtenstein Declaration“ of 2009, Liechtenstein committed itself to the unrestricted implementation of the OECD Standards for intergovernmental exchange of information in tax matters and was subsequently able to conclude a large number of double taxation agreements with OECD-compliant information exchange clauses, including with Germany in 2011, as well as agreements on the automatic exchange of information with the EU and on the US FATCA regulations.

An overview of all double taxation agreements (DTAs) and tax agreements on the exchange of information can be found here => Tax Administration Principality of Liechtenstein

Conclusion: With the conclusion of the agreements on the automatic exchange of information with the EU and the US FATCA regulations, the foundation in Liechtenstein can no longer be used for the purpose of tax evasion. Since opening up, the Liechtenstein Foundation no longer encounters any reservations internationally, either in terms of civil law or tax law.

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