date | theme

23. February 2021 | Management of a foundation in Liechtenstein – using organs sensibly

18. February 2021 | Asset management of banking assets of a foundation in Liechtenstein

17. February 2021 | Foundation in Liechtenstein: 6 advantages over a German foundation

11. February 2021 | Foundation in Liechtenstein: Requirements & Expiration (this contribution)

20. January 2021 | Family Foundation in Liechtenstein: no income tax in Germany

The most important legal requirement for establishing a foundation in Liechtenstein is a minimum amount of the foundation’s assets. You can choose between three currencies. On the one hand, the minimum amount can be CHF 30,000. For example, both private individuals and corporations from abroad can establish a foundation in Liechtenstein. In addition, there is an alternative option to donate the same amount in EUR or USD. In addition, the process differs from that in Germany in that you can set up a foundation in Liechtenstein without being dependent on official recognition. Furthermore, there are formal conditions for construction. Depending on whether the founder sets up a charitable or family foundation, an application to the commercial register or a deposit of the foundation documents with the Office of Justice must take place. The latter must be done within 30 days.

Foundations in EU/EEA: The key to tax design according to § 15 para. AStG

Establishing a foundation in Liechtenstein: historical consideration

1.1. Since 1926 you can found a foundation in Liechtenstein

Since 1926 there is a law on foundations in the Principality of Liechtenstein. Embedded in personal and company law, it was considered for many decades as a guarantor of a successful model in which wealthy people from abroad in particular deprived their assets of access to the taxation of their respective countries. As long as the anonymity of the founders was guaranteed, they could be sure that they could achieve enormous financial benefits by establishing a foundation in Liechtenstein – and in particular family foundations.

1.2.2009: Reform of Liechtenstein foundation law

But at least since the spectacular Zumwinkel affair in 2008, which culminated in the conviction of the then CEO of Deutsche Post AG, there has been a rethink in the Principality. After all, the clean international image of the Principality of Liechtenstein was also criticized for one reason. In addition to wealthy people from abroad, many criminal or even terrorist organizations had discovered the advantages that can be realized with the establishment of a foundation in Liechtenstein: money laundering.

That is why a new edition with far-reaching changes came into force on 01.04.2009 with a comprehensive reform of Liechtenstein foundation law. Due to this reorganisation of foundation law in Liechtenstein and the accompanying international agreements to which Liechtenstein has since joined (for example, double taxation agreements and TIEA with Germany), Liechtenstein is considered a model for transparency. The reform came about under the stipulation that the previous foundation law will in principle continue to apply to the already established foundations. Thus, with a few exceptions, the new foundation law applies exclusively to foundations founded from 01.04.2009.

Since this article deals with the question of how to establish a family foundation in Liechtenstein, only the current Liechtenstein foundation law is relevant here.

2. In what form can a foundation be founded in Liechtenstein?

Basically, there are two types of foundations in Liechtenstein, whereby a third can be added as a mixed form practically.

2.1. Foundation established in Liechtenstein: charitable foundation

On the one hand, you can establish a pure procurement foundation. Such a foundation has only one purpose, namely a charitable one. When setting up the charitable foundation, the more precise purpose of the foundation expressed by the founder is of course particularly central. The purpose of the charitable foundation can be cultural, social, charitable or humanitarian, religious, scientific or ecological as well as sporting. Of course, it is important here that the grants predominantly benefit the general public. On the one hand, the charitable foundation is under a special control of the Liechtenstein foundation supervision. After all, it is also about such charitable foundations enjoying tax privileges. Therefore, the Liechtenstein authority has the task of representing the interests of the founder and ensuring that the tax benefits from which a charitable foundation in Liechtenstein benefits are not abused.

2.2. Foundation established in Liechtenstein: private-benefit foundation

On the other hand, you can set up a foundation in Liechtenstein in the form of a family foundation. The Destinatär are of course family members of the founder. Here, the influence of the foundation supervisory authority is limited insofar as it only checks the correctness of the information contained in the founding advertisements. Since such data can also be relevant for amending decisions, the Liechtenstein Foundation Supervisory Authority also examines the data in these cases. Otherwise, a family foundation can also use the services of Liechtenstein Foundation Supervision on a voluntary basis, provided that the statutes allow this.

2.3 Foundation in Liechtenstein: Family Foundation with charitable aspects

As already indicated, in addition to the pure forms presented here, there is also the possibility of establishing a mixed form between charitable and private-benefit foundations. For example, it is conceivable that a founder expresses the will to transfer the exceeding amount from a certain profit to a charitable purpose instead of the first-ranking family members.

First of all, it can be stated that it is possible for both natural and legal persons from home and abroad to establish a foundation in Liechtenstein.

3.2. Formal requirements for establishing a foundation in Liechtenstein

To establish a foundation, a foundation declaration of the founder is required. It must be written and the signature must be certified. The founder’s deputy shall also be mentioned by certified signature if one is provided for.

Furthermore, there are also formal requirements when filing the company registration. Thus, the founding advertisement has to list the name and seat as well as the purpose of the foundation. It must also indicate the date of establishment and, if foreseen, the duration of the Foundation. Information on the members of the foundation bodies is also relevant. Of course, one also expects information on the beneficiaries by the founder. Then a provision on the status of the foundation as a non-profit or non-profit institution must also be included. Finally, a confirmation that the foundation actually has the legally prescribed minimum capital rounds off the foundation advertisement.

3.3. Provisions on minimum capital for setting up a foundation in Liechtenstein

Although there is no legal norm in Germany that specifies exact requirements for the minimum amount of foundation capital. However, the principle applies that the capital of a foundation must be sufficient to fulfill the purpose of the foundation in a sustainable manner. Often this means a minimum capital of EUR 500,000, but also EUR 1,000,000 are in discussion.

On the other hand, a minimum capital is required by law to establish a foundation in Liechtenstein. This can be either EUR 30,000, USD 30,000 or CHF 30,000. In addition, it is irrelevant whether the founder transfers the foundation assets to the foundation in the form of cash or other assets.

Foundation in Liechtenstein: Establishment and construction

Establishing Foundation in Liechtenstein: Calculation of Minimum Foundation Funding

For a German founder who wants to establish a foundation in Liechtenstein only with the minimum capital, it is important that the foundation usually also pays the gift tax in Germany associated with the foundation business. With an endowment capital of EUR 30,000 and the deduction of an allowance of EUR 20,000, EUR 10,000 is taxable. The gift tax is 30% of this tax base, i.e. EUR 3,000. However, due to the fact that the foundation now pays this gift tax to the financial administration in Germany, it lacks exactly EUR 3,000 to meet the condition of Liechtenstein foundation law with regard to the minimum capital.

Therefore, as a German founder, a minimum capital of EUR 34,300 should be considered in this case. After deduction of the allowance of EUR 20,000, the gift tax is waived on the remaining taxable EUR 14,300, which leads to a gift tax of EUR 4,290 at a tax rate of 30% (who calculates it exactly, comes to a necessary excess of EUR 4,285.71).

Now this is a purely hypothetical scenario. In fact, a foundation in Liechtenstein only offers the prospect of fulfilling its purpose if the foundation assets amount to at least EUR 1,000,000.

5th phase of foundation in Liechtenstein

As already mentioned, the founder deposits a signed foundation declaration when establishing a foundation in Liechtenstein. In this way, the founder formally confirms his foundation business. It is therefore a declaratory act.

The next step in the process of establishing a foundation in Liechtenstein is either to announce or deposit the foundation deed. At this point, one must distinguish whether a foundation to be established is commercially active or merely operates the administration of the foundation assets. Because in the case of a commercial activity of the foundation, as it usually exists in a charitable foundation, but is also selectable on a voluntary basis by a family foundation, the registration of the foundation in the commercial register is also obligatory. On the other hand, the establishment of an ordinary foundation requires only the deposit of the deed of foundation with the Office of Justice in Liechtenstein. This legal obligation to submit a founding notice must be fulfilled within 30 days of the foundation being established. A lawyer, trustee or notary admitted in Liechtenstein must confirm the information contained in the founding notice.

Recognition by a foundation authority, as required by law in Germany, is completely unknown in Liechtenstein. Therefore, it is very easy to set up a foundation in Liechtenstein. However, with regard to the fulfilment of the purpose of the foundation and its long-term perspective, appropriate intensive advice should be provided in advance.

Finally, we would like to remind you that after a donation of foundation assets to a foundation in Liechtenstein, you are also obliged to file a corresponding tax declaration with the German Treasury.