LIECHTENSTEIN Law and Practice Contributed by: Thomas Plattner and Fabian Jenny, Ospelt & Partner Attorneys at Law Ltd.
Taxation of a Beneficiary For beneficiaries, the tax consequence follows the character of the distribution received. A distribution is subject either to wealth tax or property tax, or to personal income tax; where the underlying asset (for example, a bond, fund or security) is not itself subject to wealth tax, the distribution is taxed as personal income instead. Revocable Versus Irrevocable Structures The taxpayer identity depends on the revocability of the structure. • Beneficiaries of an irrevocable foundation, trust or foundation-like establishment may, with the con - sent of the trustee or foundation council, elect to be taxed on the underlying wealth in their own right – where this election is made, the entity discharges the wealth or income tax liability on the benefi - ciary’s behalf. • Absent such an election – and in every case involv - ing a revocable foundation, trust or foundation-like establishment – the assets are attributed to, and taxed in the hands of, the founder or settlor. Tax Consequences at the Point of Transfer A further consequence attaches at the point of transfer: where assets are contributed to an entity that thereby ceases to be subject to wealth tax, and no benefit or share becomes individually subject to wealth tax, and no election under the preceding paragraph has been filed, the transferor incurs a one-off dedication tax of 3.5% of the wealth-tax value of the transfer. This liability sits alongside, and is independent of, the ongoing income or wealth tax consequences borne by the fiduciary or beneficiary described above.
establishments see 3.1 Types of Trusts, Foundations or Similar Entities ). In addition, life insurance (PPLI) is also a widely used tool. 4.2 Succession Planning Legal Structures The above-mentioned private foundations and trusts (see 3.1 Types of Trusts, Foundations or Similar Enti- ties ) are the most popular succession planning strate - gies and structures in Liechtenstein. Dispositions During Lifetime In addition to such structures, Liechtenstein recog - nises the transfer of real property and companies from one generation to the next generation. Property can also be transferred to the next generation with the registration of a right of use ( Nutzniessung ) for the parents. With regard to real estate, such right of use must be registered in the land register for effect on property. Contractual arrangements are also common, eg, free lease of the land. Shares in business companies can be transferred by gift or sale and purchase agreement. Successors can acquire a small share and get pre-emption rights on the remaining shares. Successors must consider the wealth tax on real property in Liechtenstein and participation rights. Estate Dispositions Liechtenstein inheritance law comprises statutory succession and testamentary succession. If no tes - tamentary dispositions are made, intestate succes - sion applies. Testamentary dispositions can be made in a Will or contract of inheritance, among other things (subject to forced heirship). If only one or more person is appoint - ed without restricting them to a part of the estate, they receive the entire estate. If the appointed heirs have only been granted a specific part of the estate in relation to the whole, the remaining parts go to the legal heirs. The Will of the testator must be specific and declared in full awareness, with deliberation and seriousness, free from coercion, fraud and material
4. Family Business Planning 4.1 Asset Protection
The Liechtenstein regime on private foundations, trusts or similar entities is the most popular method for asset protection planning. It has now almost 100 years of history and development. The Liechtenstein foundation is well known in Europe and around the world (for details on private foundations, trusts and
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