Private foundation in Liechtenstein
Due to the increasing tendency to deoffshorization, disappearance of bank secrecy and the global exchange of tax (and not only) information, such tools as trusts and private foundations are gaining popularity.
Talking about private foundations, one of the leaders in this industry is the private foundations of Liechtenstein. Liechtenstein is known as a “small Switzerland”, its stable legal and political system, as well as a high level of confidence in this jurisdiction often make it an excellent choice for creating a private foundation. The two main advantages of private foundations in Liechtenstein are their high confidentiality and the ability to open accounts in reliable and reputable banks in Europe.
The use of private foundations in Liechtenstein
Unlike classical investment foundations that are meant to attract and manage third-party investments, Liechtenstein’s private investment foundations perform somewhat different tasks — preserving asset ownership confidentiality, protecting them, reducing the tax burden, resolving inheritance issues, the role of a holding company or “family office “. In general, it is a good substitute for classic trusts, often used for similar purposes, but with a number of additional benefits. For example, a private foundation in Liechtenstein can be the direct owner of all assets, and also gives more management tools than trusts.
Confidentiality with a private foundation in Liechtenstein
Preserving confidentiality, when doing business or owning assets, becomes an extremely difficult task in the modern world. One of the most effective tools to cope with it is the private foundation in Liechtenstein.
Being a sort of hybrid of classic trusts and ordinary companies, if properly structured, a private foundation in Liechtenstein is able to ensure the highest confidentiality. In particular, the names of the final beneficiaries of the private foundation are not indicated in the commercial register of Liechtenstein, and for the purposes of the banking exchange of tax information, the beneficiaries indicate the managers of the foundation and its protector, if needed.
Minimal authorized capital of private foundations in Liechtenstein
The minimal foundation capital must be specified not less than 30 000 CHF/EUR/USD (Swiss francs). At the same time, it is allowed to directly deposit the foundation’s capital in equivalent in other currencies. The authorized capital of a private foundation in Liechtenstein must be contributed.
Assets of private foundations in Liechtenstein
One of the key questions in creating a private foundation in Liechtenstein is what can be transferred to such a foundation? The answer is very simple: there are no restrictions on the type of assets that the foundation can own. Among other things, a private foundation in Liechtenstein may own the following types of assets:
• Money. On the bank accounts of the foundation you can keep any currency.
• Cryptocurrency. Liechtenstein legislation does not restrict the right to own cryptocurrencies.
• Shares in companies. A private foundation in Liechtenstein is often used as a holding company and can directly own shares and interests in other companies.
• Securities. The foundation may own any type of securities, including stocks, bonds, etc.
• Real estate. A private foundation in Liechtenstein can directly own real estate in any country in the world where it is allowed by law.
• Any tangible assets (property). Transport, artwork, precious metals, antiques, etc. – no restrictions here.
• Intellectual property rights. Not only material values, but also intangible ones, such as patents or trademarks, can be transferred to the foundation.
Important: Unlike trusts, private foundations in Liechtenstein open bank accounts and own assets in their own name, which is a more practical solution.
Taxation of private foundations in Liechtenstein
Liechtenstein has gained a reputation of a reliable jurisdiction for tax planning. This country is ready to offer attractive tax rates, while maintaining an extremely high reputation and avoiding falling into the “black” offshore lists.
Taxation of private foundations in Liechtenstein has the following features:
1. Profit tax. As a general rule, the foundations in Liechtenstein pay income tax as well as other Liechtenstein companies. The tax rate is 12.5%, but no less than CHF 1,800 (Swiss francs) per year.
It is allowed to reduce the taxable base (net profit from which the tax percentage is calculated) by a conditional deduction of 4% of the foundation’s equity capital, which makes the effective tax rate even less than 12.5%.
2. Special tax status for private asset ownership structures (Privatvermögensstrukturen – “PVS”). Under certain conditions, a private foundation in Liechtenstein can receive a special PVS status at the tax agency, which exempts it from paying income tax — only the minimal tax of CHF 1,800 (Swiss francs) per year remains.
3. Exemption from tax on profits in the form of dividends and capital gains.
4. No tax on repatriation/distribution of profits. When paying profits to the beneficiaries of a private foundation in Liechtenstein, the tax on such payments (withholding tax) is not withheld.
5. Tax on the share capital when creating a foundation (Gründungsabgabe). In the process of establishing a private foundation in Liechtenstein, its share capital is taxed at 0.2%, but no less than CHF 200
Important: Registering a private foundation in Liechtenstein will help to reduce the tax burden only under the supervision of qualified tax advisors.
What is needed to register a private foundation in Liechtenstein?
To register a private foundation in Liechtenstein, you need to choose the name of the foundation, collect the necessary documents, have authorized capital and clearly understand the purposes for which the private foundation will be created in Liechtenstein.
The SBSB team will be happy to assist you in creating a private foundation in Liechtenstein, as well as advise you on all related legal and tax matters during its registration.
It is not a problem for the SBSB team to choose the best option of the country, the type and structure of the private foundation, taking into account your goals and wishes. For over five years we have been advising our clients in corporate law, international tax planning, asset protection, international licensing, and we provide comprehensive business support in more than 40 countries.
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