Foundations have a long tradition in Liechtenstein and can be structured very differently depending on the founder’s desired objective.
Compared to other countries, Liechtenstein law offers great flexibility in structuring of foundations. These can be set up for both private benefit and charitable purposes – mixed forms are also possible.
This blog post shall provide you with an initial overview of private-benefit and charitable foundations.
1. General
The law of foundations is set out in § 1 et. seq. of Art. 552 of the Liechtenstein Persons and Companies Act (PGR). A foundation is a legally and economically independent special-purpose asset that is established as a legal entity by the unilateral declaration of intent of the founder.
By defining the purpose of the foundation in the foundation deed, it is determined whether a foundation is charitable or private. The predominance is to be assessed according to the ratio of the private-benefit purposes to the charitable purposes. In case of doubt, the foundation is to be regarded as charitable.
2. Private-benefit foundations
A private-benefit foundation has set out a wholly or predominantly private or self-benefit purpose in the foundation deed. Motives for setting up a private-benefit foundation can include estate planning or asset protection.
The law provides for two forms of private-benefit foundation in particular: (i) pure family foundations and (ii) mixed family foundations. A pure family foundation’s assets serve exclusively to cover the costs of members of one or more families or similar family interests. Mixed family foundations have an additional purpose, such as supporting certain charitable institutions.
3. Charitable foundations
In the case of a charitable foundation, the foundation deed must stipulate that the foundation is intended to serve entirely or predominantly charitable purposes.
Charitable purposes are those purposes whose fulfillment promotes the general public. This is particularly the case if the activity benefits the common good in charitable, religious, humanitarian, scientific, cultural, moral, social, sporting or ecological terms. In other words, the charitable foundation serves philanthropic purposes.
4. Registration obligation
Only charitable foundations and foundations that operate a commercial business on the basis of special legislation are required to be entered in the commercial register.
All other private-benefit foundations are not required to be entered in the commercial register; however, they may voluntarily register in the commercial register.
5. Duty of supervision
Charitable foundations are subject to mandatory supervision by the Liechtenstein Foundation Supervisory Authority (STIFA), which ensures that the foundation’s assets are managed and utilized in accordance with the designated purpose.
Private-benefit foundations are generally not subject to STIFA’s supervision. However, they may voluntarily submit to STIFA’s supervision if a provision in the foundation deed so stipulates.
6. Conclusion
Liechtenstein is an attractive location for foundations, not only for tax-related reasons, but also due to the considerable flexibility it offers in structuring foundations. These advantages can provide founders worldwide with exciting new opportunities for wealth management, succession planning and asset protection.
We would be delighted to advise you on selecting the optimal structure and establish your foundation in Liechtenstein.
Start with us now and contact us at office@isp.law or use our fully automated booking tool to make an appointment directly for an initial consultation at https://www.isp.law/termin-buchen/. Lay the foundations for your foundation with us.
