The Liechtenstein charitable foundation
In Liechtenstein, advancement of the general public is generally „charitable“ or „benevolent“ if the activity benefits the common good in charitable, religious, humanitarian, scientific, cultural, moral, social, sporting or ecological terms.
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Purely charitable foundation Liechtenstein
A purely charitable foundation is a foundation whose activities are exclusively intended to serve charitable purposes. Advancement of only a specific group of people is permissible.
Mixed charitable foundation Liechtenstein
A charitable foundation also exists if the foundation is only predominantly charitable. Private-benefit purposes can also be pursued.
Establishment of a charitable foundation in Liechtenstein
In principle, the general regulations for foundations in Liechtenstein apply to the establishment of a foundation.
Obligation to enter in the commercial register
In contrast to private-benefit family foundations, both purely charitable and mixed-benefit foundations must be entered in the Liechtenstein commercial register.
Supervision by the Liechtenstein Foundation Supervisory Authority (STIFA)
Charitable and mixed charitable foundations are subject to the Liechtenstein Foundation Supervisory Authority. This authority is officially responsible for checking that the foundation’s assets are managed and utilised in accordance with the foundation’s purpose. STIVA can inspect all of the foundation’s books and examines the annual audit report of the auditor.
Duty to set up an independent auditor, auditor as the foundation’s governing body
Both purely charitable and mixed charitable foundations must set up an independent auditor as the foundation’s governing body. The auditor must be appointed by the court and must check annually whether the foundation’s assets are being managed and utilised in accordance with the articles of association and prepare a report on this.
Founders‘ rights, risks of influence
The founder of a Liechtenstein foundation generally has extensive rights of influence over the foundation he has established:
He may be a member of the Board of Trustees or appoint himself as a beneficiary or appoint other bodies. He may reserve the right of revocation or amendment and appoint or dismiss members of the Board of Trustees and protectors.
Furthermore, a founder’s right may be subject to enforcement and seized by the founder’s creditors. The creditor could then declare revocation instead of the founder or designate the founder as the beneficiary within the scope of the power of amendment. There is as yet no Liechtenstein case law on these issues.
The reservation of founder’s rights can also have tax consequences for the recognition of the foundation abroad. Controlled foundations are often treated as fiscally transparent and the foundation assets continue to be attributed to the founder.
Charitable foundation taxation in Liechtenstein
Only charitable foundations that pursue exclusively charitable purposes can be exempted from personal tax liability upon application. The exclusive charitable nature of the purpose must be irrevocably established and the identity of the founder must be disclosed to the tax authorities.
Payments made by the Liechtenstein Foundation to charitable institutions in Liechtenstein or abroad or to foreign private individuals are not subject to Liechtenstein tax.
VAT exemption for the charitable foundation
Non-profit organisations, legal entities and trusts are exempt from VAT in Liechtenstein if their turnover in Liechtenstein is less than CHF 150,000 and they do not waive their exemption from tax liability. Turnover is calculated on the basis of the agreed remuneration excluding tax.
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