Banking,
especially private banking, is Liechtenstein's
flagship financial service, although its
trust regime, modelled on common law precedents,
is unique among civil law jurisdictions,
and is widely used. The variety and great
flexibility of the corporate forms available
in Liechtenstein, coupled with excellent
tax-saving possibilities, has encouraged
an inflow of holding and investment management
companies. See Offshore
Legal and Tax Regimes for details.
Early figures suggested that the EU's Savings
Tax Directive, which forced Liechtenstein
to impose a withholding tax on returns from
savings paid to citizens of EU Member States,
has had little impact on the country's highly
successful private banking sector.
The
administration has recently been developing
legislation for captive insurance and collective
investment sectors.
By
the end of the third quarter 2007, a total
of 35 insurance undertakings were domiciled
in Liechtenstein. The direct insurance companies
operate almost exclusively pursuant to the
free movement of services in the EEA area
and Switzerland.
A
Law on Asset Management (Asset Management
Act, AMA) entered into force on 1 January
2006. This Act lays the foundation for asset
management companies as new, internationally
recognized financial intermediaries. The
Financial Markets Authority supervises implementation
of the Asset Management Act and related
ordinances as well as compliance with regulations.
At
the end of the third quarter 2007 there
were 63 fund management companies and 379
investment funds operating in Liechtenstein.
At the end of 2006 assets under management
in Liechtenstein stood at CHF 219.4 billion,
20% higher than a year earlier.
This
section of the 
site describes the most important types
of offshore business activity carried out
from the island.
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Liechtenstein International
Holding Companies
The structure of Liechtenstein company and
tax legislation makes it a very suitable
place in which to base various types of
holding company. See Offshore
Legal and Tax Regimes for a more
detailed description of tax aspects of holding
companies. They are exempt from most normal
taxes.
In
Liechtenstein, a holding company is recognised
as such, but does not have a special legal
form: it can take any of the forms permitted
under the Law on persons and Companies 1926
(PGR Code), including a company limited
by shares, a private limited company, a
foundation, a trust enterprise (not a trust)
or an establishment (see Types
of Company).
The
objects of holding companies are described
in the tax legislation as 'exclusively or
predominantly the management of assets,
participation in other enterprises, or the
permanent management of holdings in other
enterprises'. Holding companies are permitted
to own and manage movable and immovable
property whether inside or outside Liechtenstein,
including real estate and the various types
of intellectual property.
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Liechtenstein Trade Marketing
and Distribution
Situated in the centre of the EU, but not
being part of it, and with a well-developed
banking sector, not to mention the presence
of Switzerland alongside, Liechtenstein's
offshore taxation regime is very inviting
to companies with cross-border European
trading, marketing and distribution operations.
The
'domiciliary' entity is suited to external
trading operations. It is not a separate
corporate form as such, but is a status
that can be adopted by any of the corporate
forms permitted by the PGR Code, including
the company limited by shares, the private
limited company, the foundation, the trust
enterprise (not the trust) and the establishment
(see Forms of Company).
Domiciliary
companies are defined as 'juridical persons.
. . . . which have only their domicile in
Liechtenstein whether an office is kept
or not and carrying on no commercial or
trading activities in the country'. They
are largely exempt from local taxes. See
Offshore Legal and
Tax Regimes for further details of their
taxation.
In
practice, the tax authorities intepret the
legislation very flexibly, as long as a
domiciliary company doesn't use its tax
advantages to compete against local, more
highly taxed companies. Thus, the domiciliary
company can have an office from which it
manages import/export operations, purchase
services, employ free-lance agents who act
as local sales-people for foreign customers,
etc.
Along
with other offshore jurisdictions, Liechtenstein
is a suitable place in which to base e-commerce
services for retail or wholesale distribution
of material or non-material goods: see Offshore-e-com.com
for extended descriptions of how such businesses
can take advantage of the combination of
offshore and e-commerce.
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Liechtenstein
Banking
A substantial banking sector has developed
in Liechtenstein, particularly in private
banking, due to a combination of factors,
including a relatively relaxed but still
highly respected regulatory regime, the
very flexible company legislation, and strict
banking privacy.
The
Liechtenstein banking sector is regulated
under the Law on Banks and Finance Companies
1993; this law was substantially amended
following Liechtenstein's entry into the
EEA in 1995, through the Law on Banks and
Finance Companies 1998. The Act concerning
Banks and Savings Funds 1960 imposes heavy
penalties for breaches of professional secrecy.
Other recent legislation dealt with due
diligence on the part of bankers accepting
deposits or assets, installing 'know your
customer' rules.
The
"know your customer" system is
now legally compulsory (from 1 October,
2000) for all banks that belong to the Liechtenstein
Bankers' Association. This means that banks
in Liechtenstein, previously known as one
of Europe's most secretive tax havens, can
no longer guarantee anonymity for new and
existing account holders, although further
account details will remain under normal
banking secrecy agreements.
Liechtenstein private banks are able to
offer highly tax-efficient asset management
services to clients, using one or other
of the forms available under the PGR Code,
so that income received in Liechtenstein
from international assets can be forwarded
or reinvested with minimal or no local taxation.
There
are a total 16 banks in Liechtenstein, with
12 of them having been granted licences
in the last four years alone. Collectively
they have some SFr120bn (US$70.3bn) under
management (which equates to a staggering
SFr3.7m for every man, woman and child in
the principality). However, this total has
tended to stay static in recent years.
In
March, 2006, Prince
Alois, ruler of the Principality, said that
Liechtenstein is unlikely to dispense with
its coveted banking secrecy laws any time
soon because such a measure would probably
not be approved if put to a referendum.
Prince
Alois told Bloomberg News that banking secrecy
is "very firmly anchored" in Liechtenstein
and any proposed watering down of current
laws to satisfy the OECD and the FATF would
therefore be rejected when put to a referendum
- a necessary measure under the Principality's
constitution.
"I
don't think a draft law or international
accord proposing to scrap bank secrecy would
be successful in the foreseeable future.
The people would reject it in a referendum,"
Prince Alois stated.
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Liechtenstein Trust Management
As a civil law jurisdiction, Liechtenstein
did not have trust legislation, until it
was included in the PGR Code in 1926. This
far-sighted action has led to the development
of a thriving business in trust management;
although other local corporate forms offer
partial substitutes for the trust, it remains
a highly effective means of asset protection,
and non-anglo-saxon clients are often more
comfortable with Liechtenstein as a jurisdiction
than they might be with, for instance, an
ex-British colony. Unlike common law trusts,
Liechtenstein trusts can accumulate income,
and are subject to no rule against perpetuities.
The trust law generally is extremely flexible
as regards the powers of settlors (trustors).
As
long as the original trust documentation
is deposited with the Registrar of Trusts
within 12 months, there is no public information
about the trust, and later trust documention,
eg naming beneficiaries, does not have to
be deposited; the level of confidentiality
is therefore very good. Trust documents
can be in any language.
See
Law of Offshore
for details of the legal regime for trusts,
and see Offshore
Law and Taxation Regime for details
of their taxation.
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