LIECHTENSTEIN Law and Practice Contributed by: Thomas Plattner and Fabian Jenny, Ospelt & Partner Attorneys at Law Ltd.
subject to the endowment tax of 3.5% of the value of the contribution if the settlor is not subject to unlim - ited tax liability in Liechtenstein. Liechtenstein does not levy a withholding tax on distributions made by a Liechtenstein trust to beneficiaries abroad. Liechtenstein trusts may be established for an indefi - nite period. Therefore, trusts are not per se affected by succession. The law of the state whose nationality the settlor has may provide their heirs with a compulsory share of their estate. If a settlor submits the transfer of assets to a trust under the laws of Liechtenstein, the settlor’s heirs may claim payment from the trust fund to the extent that the deceased settlor’s estate does not suffice to cover their compulsory portion (Article 29, paragraph 5, IPRG, in conjunction with the provisions on the supplementation of the com - pulsory portion in Section 781 et seq, ABGB). Where Liechtenstein law was chosen to govern the transfer of assets, gifts to persons not entitled to a compulsory portion that were made more than two years before the settlor’s death are in principle disregarded, so that no shortfall payment can be claimed from the Liech - tenstein trust in respect of such transfers (Section 781 et seq, ABGB). Foundation Foundations are recognised in Liechtenstein and gov - erned by Article 552, paragraph 1 and the following PGR. Foundations have had a long tradition in Liechten - stein. The common type is the family foundation using the assets comprised therein for the benefit of mem - bers of one or more families, also often used as a holding of family business companies. Liechtenstein is a well-known jurisdiction for foundations with chari - table purposes. The foundation legal entity established by a founder. The founder specifies its purpose and endows it with assets. These assets become property of the foun - dation and are separated from the founder’s private assets. The corporate body of a foundation is the Foundation Council, which conducts the business, represents the foundation in its relations with third par - ties and is responsible for the fulfilment of the founda - tion’s purpose. The Foundation Council must consist
of at least two members. The founder can designate additional corporate bodies to manage the assets, and to advise and assist the Foundation Council. The minimum nominal capital is CHF30,000, EUR30,000 or USD30,000. The formation of the foundation can be in cash or in kind. The capital is at the Foundation Council’s free disposal. Foundations established in Liechtenstein are liable to at least the minimum corporate income tax of CHF1,800 per year. Foundations with their registered office or effective place of management in Liechten - stein are liable to corporate income tax at a rate of 12.5% on their total income. Charitable foundations can be tax-exempt. The endowment/transfer of assets located abroad to a Liechtenstein foundation by a natural person (founder) is not subject to the endowment tax of 3.5% of the value of the contribution if the founder is not subject to unlimited tax liability in Liechtenstein. Liechtenstein does not levy a withholding tax on distributions made by a Liechtenstein foundation to beneficiaries abroad. A foundation is a legally and economically independ - ent special-purpose fund that is formed as a legal entity through the unilateral declaration of will of the founder. In general, assets of the founder endowed by them to the foundation are not subject to their succes - sion. If the testator was entitled to derive benefits from the foundation only during their lifetime, their benefi - cial entitlement in the foundation ends with their death and does not form part of their estate. Similar Entities The Establishment is an original Liechtenstein type of legal entity. It can be used for different purposes due to its flexible character. There are two main types of establishment, ie, the establishment with founder’s rights and the establishment without founder’s rights (foundation-like). The establishment with founder’s rights is similar to the small limited liability company. The holder of the founder’s rights is the supreme cor - porate body. The founder’s rights can be transferred inter vivos by assignment. The establishment without founder’s rights is administered and represented by the board of directors as the supreme corporate body. The board of directors shall administer the establish -
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