Liechtenstein is often described as a safe harbour. But what does that mean for someone who wants to safeguard their life’s work? The Liechtenstein foundation is regarded as a universal solution, but it reveals its true value when assets are transferred over the long term. This is about legal certainty without unpleasant surprises.
This guide provides clarity. We focus on the hard facts, from set-up and ongoing costs through to operational use, so you can assess whether this model fits your strategy.
The Principality of Liechtenstein is not an EU member, but it is part of the European Economic Area (EEA). This status enables access to European capital markets and financial services while maintaining its own tax legislation. This is not a footnote, but structurally decisive: Liechtenstein does not have to follow the EU’s tax harmonisation, yet benefits from its economic framework conditions.
In addition, the country offers political stability, a strong regulatory foundation and a financial regulator that is internationally recognised. Anyone who does not want to hide assets but to structure them with legal certainty is in the right place here.
Once established, the foundation itself becomes the legal owner of the contributed assets. Neither the founder nor the beneficiaries have direct ownership rights, although beneficiaries may, depending on the design of the foundation regulations, obtain enforceable entitlement rights.
Foundation deed and foundation regulations: The deed is the publicly accessible document that defines the foundation’s purpose. The regulations set out the details, in particular beneficiaries, distribution mechanics and governance. They are not public.
Foundation council: The foundation council must consist of at least two members. At least one member must be a trustee or solicitor admitted in Liechtenstein with a professional establishment in the Principality. In practice, this role is usually carried out by a local fiduciary services provider.
Minimum capital: Liechtenstein law requires minimum capital of CHF 30,000 (or the equivalent in EUR or USD). In practice, however, a foundation only becomes economically sensible for substantially larger assets, typically from around EUR 500,000.
Liechtenstein corporation tax is a flat 12.5% on operating income. This is one of the lowest rates in Europe and well below the typical tax rates in Germany, Austria or the Netherlands.
Dividends and capital gains from qualifying participations are, however, generally exempt from tax. Subject to certain conditions, foundations may also qualify as so-called Private Asset Structures and then be subject only to an annual minimum tax currently of CHF 1,800.
Private assets transferred into the foundation and held there do not trigger ongoing tax. As a holding vehicle, the foundation therefore avoids direct access to the founder’s assets and enables a substantially more favourable taxation of returns than most European alternatives.
A client based in London, the owner of a portfolio of commercial property in Europe and the USA, faced a significant tax challenge. His wealth had historically been bundled within a complex UK holding structure. While ongoing income was already heavily taxed, the real worst-case scenario was UK Inheritance Tax (IHT). At a tax rate of 40% on worldwide assets, an estate event threatened a liquidity crisis that would have forced the sale of key property assets.
Working closely with his tax advisers, we transferred the portfolio into a Liechtenstein family foundation. This step legally decoupled ownership from the founder’s personal estate. Ongoing income is now taxed at foundation level at a moderate 12.5%, which materially strengthens cashflow for reinvestment.
For the children as beneficiaries, this means: they receive scheduled distributions, while the core property assets remain protected and indivisible across generations. Depending on the specific structure and the timing of the transfer, such an arrangement can offer considerable advantages for succession planning. At the same time, the UK inheritance-tax rules and relevant anti-avoidance provisions must be carefully reviewed and implemented in coordination with UK tax advisers. Everything was disclosed to HMRC with full transparency. The structure does not rely on anonymity, but on its superior legal logic.
The protective effect of a Liechtenstein foundation is based on a central legal principle: the assets transferred into the foundation are legally separated from the founder as a person. A creditor pursuing the founder personally cannot access the foundation assets directly, provided the transfer did not occur as part of a voidable transaction.
Liechtenstein also provides for a clear time limit: asset transfers into a foundation may, under certain conditions, be challenged as part of creditor protection. The relevant limitation periods depend on the specific legal basis and can extend over several years, particularly where an intention to disadvantage creditors or to commit fraud is proven.
For family business owners, the foundation is also attractive from a succession perspective. Instead of transferring a business or property assets through inheritance, the foundation can act as a permanent holder. Beneficiaries receive distributions in accordance with the regulations, without any fragmentation of the asset base. The assets remain structurally intact.
In practice, Liechtenstein distinguishes between the classic private foundation and the family foundation. The key difference lies in the purpose:
The private foundation serves the founder themselves as the primary beneficiary or pursues a general purpose. It is often used to hold financial investments, property or corporate participations.
The family foundation is expressly aimed at providing for and supporting the founder’s family. It is particularly suitable for the orderly transfer of wealth across generations without jeopardising capital through inheritance disputes.
Both variants are subject to the same tax regime, but can be tailored individually in terms of governance and rules. The choice depends on the specific assets, the beneficiaries and the time horizon.
From a legal perspective, family foundations in Liechtenstein are generally classified as private-benefit foundations, as they serve specific beneficiaries and do not pursue a charitable purpose.
A Liechtenstein foundation is not a tool for tax evasion and not an anonymous hiding place for assets. Liechtenstein has fully implemented the international standard for automatic exchange of information (Common Reporting Standard, CRS). Tax authorities in the founder’s country of residence receive information on accounts and structures in which domestic taxpayers have an economic interest.
Anyone establishing a foundation must comply with relevant reporting obligations in their home country. In Germany, for example, the Foreign Tax Act may apply; in Austria, reporting obligations under the EU Mandatory Disclosure Rules legislation are relevant. Anyone who ignores these aspects risks not tax savings, but back taxes with interest and, where applicable, criminal consequences.
The foundation is effective only when implemented in a compliant and fully transparent manner. Anything else is no longer structuring, but simply tax evasion.
From advisory experience, three client types can be identified for whom the foundation regularly delivers genuine added value:
Entrepreneurs approaching an exit: Anyone intending to sell their stake in an operating company may, under certain conditions, be able to treat the disposal gain significantly more favourably for tax purposes if the participation was first transferred into the foundation. Timing and execution are crucial.
High-net-worth individuals with a large securities portfolio: The actual tax burden depends largely on the tax residence of the founder and the beneficiaries. Although Liechtenstein foundations are generally subject to corporation tax at 12.5%, attribution rules and the taxation of distributions in the participants’ country of residence must also be taken into account.
Family business owners planning succession: Those who do not want to sell their business but to preserve it for the family use the foundation as a cross-generational holding vehicle. The next generation receives distributions without being able to exercise direct influence over entrepreneurial decisions, provided the regulations specify this.
In our advisory work, we often see that the initial focus is almost exclusively on the quasi tax-free investment returns. Yet tax metrics are only half the truth in asset protection. Anyone who wants to secure wealth across generations primarily needs legal resilience and a structure that can withstand international pressure.
Liechtenstein is not an experimental playground for tax optimisers, but a jurisdiction for those seeking a lasting solution. While many “quick” jurisdictions must regularly amend their laws under pressure from the OECD or the EU, the Liechtenstein foundation offers a stability that is hard to find today.
It is not about avoiding the tax authorities in your home country, because in a world of automatic exchange of information that no longer works anyway. It is about organising ownership so that it is not ground down by political arbitrariness, private disputes or inheritances.
A well-meant piece of advice from our practice: do not invest in a structure that you constantly have to explain or justify to regulators. A foundation in Liechtenstein is a clear statement to the tax authorities that matters are being handled professionally and transparently. In addition, wealth is passed on to the next generations in a tax-efficient manner.
Asset protection requires foresight and discretion. We would be happy to discuss in a confidential meeting whether the Liechtenstein foundation fits your objectives. Book your appointment now.
No. The founder may keep their residence in any country. The foundation itself is resident in Liechtenstein and must have sufficient substance there, in particular through a local foundation council.
Annual costs for the foundation council, accounting, audit and registry obligations typically range between CHF 10,000 and CHF 20,000, depending on complexity and asset size. For smaller assets below EUR/CHF 500,000, the structure is generally not cost-effective.
Yes, Liechtenstein property income is subject to the standard corporation tax of 12%. For foreign property, however, the relevant double taxation agreement applies, which may lead to different outcomes depending on the country.
Rental income is generally taxed where it is generated. If a let property is located, for example, in France, the income is taxed there. Depending on the DTA, it is then not taxed again in Liechtenstein.
