LIECHTENSTEIN: COUNTRY AND FOREIGN INVESTMENT REGIME

Liechtenstein Geography

Liechtenstein Population Language and Culture

The population of Liechtenstein is 34,500 (July 2008 est), most of them living in the capital, Vaduz. The official language is German and there is also an Alemannic dialect. English and French are quite widely spoken. Ethnically, Liechtenstein is 90% Alemannic, with small groups of Italian, Turkish and other races. There is a large expatriate population.

Liechtenstein has been settled since Neolithic times. The Romans occupied the Principality from 15th to the 5th centuries BC, being succeeded by the Aleamanni. In the Middle Ages Liechtenstein passed through various different hands, finally being acquired by the present ruling family in 1712. Liechtenstein became a Principality in 1719, and a sovereign state in 1806.

Culturally, Liechtenstein is quite similar to the Germanic cantons of Switzerland that lie alongside it. Indeed, Switzerland is responsible for the defence of Liechtenstein, which also shares its currency, a customs union, diplomatic representation, and many aspects of social and business infrastructure. The monetary union of Liechtenstein and Switzerland took place in 1980. The Roman Catholic religion is dominant.

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Liechtenstein Government

Liechtenstein is a hereditary constitutional monarchy, with a democratically elected Parliament (the Diet). A first Constitution was signed in 1862 by Prince Johannes II; in 1921 a Constitution which remained essentially valid until 2003 was promulgated by Johannes II. In 1938 Prince Franz Joseph II became the first Prince to reside in the castle of Vaduz.

Prince Hans Adam II is currently the monarch and Head of State. The cabinet is elected by the Diet and confirmed by the Prince. The Prince usually appoints the leader of the majority party in the Diet as the head of government and the deputy head of government is usually the leader of the largest minority party in the Diet.

In March, 2003, the principality took a step towards becoming an absolute monarchy after a referendum gave the ruling Prince Hans-Adam II sweeping new powers. The vote showed a substantial majority for the Prince, with 64% supporting the move, and 36% against it.

The new constitution gives the Prince the right to veto parliamentary bills, sack the entire government and introduce emergency powers. However the constitution also provides for a further referendum to abolish the monarchy.

In 2004, Prince Hans-Adam II formally transferred the day-to-day running of the principality to his eldest son, Prince Alois. "A large responsibility has come to me today," Crown Prince Alois, 36, told reporters after the handover. "But I have the luxury that my father has included me in many important decisions and so I am well prepared."

The unicameral Diet or Landtag has 25 seats. Members serve a four year term and are elected by universal suffrage using proportional representation.

Liechtenstein law is a mixture of Austrian and Swiss law with some local peculiarities. There is a High Court (Landgericht), a Court of Appeal (Obergericht), and finally a Supreme Court (Oberste Gerichtshof). There is a Constitutional Court with powers in the area of public law.

Liechtenstein has been a member of the EEA since 1995, and a member of EFTA, but does not wish to join the EU. It belongs to the UN, and a wide range of other international organisations.

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Liechtenstein Economy and Currency

Since uniting in a customs and economic union with Switzerland in 1924, and in spite of limited natural resources, Liechtenstein has developed from an agrarian society into a highly industrialised, free-enterprise economy. Industries includes electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments and tourism.

The standard of living equals or exceeds that of the urban areas of neighbouring Europe. GDP per head is about $118,000 (2007); inflation and unemployment are both below 2%; there are trading and budget surpluses and the country has zero external debt.

The financial services sector has been extremely successful: key activities include private banking, trust services and investment management.

Liechtenstein's national currency is the Swiss Franc; there is no exchange control.

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Liechtenstein Entry and Residence

A valid passport is required by all except the nationals of EU member states, who can enter with an identity card.

Tourist visas are given for three months; employment or permanent residence require permits. There are restrictions on the purchase of real estate by foreigners.

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Liechtenstein Business Environment

Liechtenstein offers an extremely stable and efficient business environment with modern infrastructure and excellent telecommunications. There is a wide variety of corporate forms available for most purposes (see Forms of Companies) and the legislative structure is flexible and liberal. Although Liechtenstein is a 'civil code' jurisdiction, legislation has created a trust regime which is widely used.

There are stringent banking and tax secrecy laws. Liechtenstein signed a mutual assistance treaty with the US in July, 2002, but it excluded civil tax matters. In December 2008, however, it was announced that the United States and Liechtenstein had signed an agreement to allow for the exchange of information on tax matters between the two countries.

A double tax treaty with Austria contains provision for exchange of information regarding Austrian commuters working in Liechtenstein (there are some thousands of these). Liechtenstein is a signatory to some international conventions allowing exchange of information in criminal cases.

The dramatic growth of the Liechtenstein economy in the last 50 years has led to the development of very extensive professional and financial services. English is widely spoken in business life, but this is after all a German-speaking country, and that is a factor to be taken into account.

Along with Switzerland, in 2004 Liechtenstein accepted the EU's Savings Tax Directive, and imposed a 15% initial withholding tax on interest and other savings returns paid to citizens of the member states of the EU from 1st July 2005. (The 15% rate was to rise to 20% for three years from 2008, and will remain at 35% thereafter.)

Liechtenstein is a relatively expensive jurisdiction. However taxation is low, even for domestic and resident individuals and companies; and it is lower still for those who are offshore or non-resident.

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Liechtenstein Investments by Foreigners

The Liechtenstein administration welcomes foreign investment. There are no restrictions on investment, except for some controls on the purchase of real estate and the ownership of banks by foreigners.

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