Establish and Open a Private Equity or Holding Company in Liechtenstein: Private Wealth Investment Structures (PVS) and Portfolio or Asset Management Vehicles ("Establishments", "Foundations", Trusts)

Private Wealth Planning Solutions

How does a Liechtenstein investment company work?

For global tax residents, a white-listed Controlled Foreign Company ("CFC") is a foreign business structure with these features:

• The foreign jurisdiction has no privileged tax regime
• The foreign jurisdiction provides for an adequate exchange of tax information

What Are the Advantages of a Holding Company in Liechtenstein for Global Investors?

• Exemption from standard Liechtenstein corporate income tax (12.5%) due to private investment structure regime ("PVS") leading to minimal local tax (CHF 1,800 per year)
• Liechtenstein has no withholding tax on dividend distributions
• Less scrutiny from bank compliance and tax authorities, as Liechtenstein is a member of the European Economic Area (EEA)
• Important asset protection and succession planning advantages due to flexible structures only available in Liechtenstein ("Anstalt", "Stiftung", "Treuhänderschaft")

What Is the Liechtenstein PVS Regime?

In our view, a Liechtenstein establishment ("Anstalt") set up in the form of a private investment structure ("Privatvermögensstruktur"), a regime in effect since 2010, is one of the most effective ways for global investors of exercising passive ownership over foreign assets (bank accounts, owner-occupied real estate, passive participations) provided (i) no economic activity is performed (ii) no control is exercised over the participations and (iii) no loans are granted to its participations.

In fact, the Liechtenstein PVS regime (here) replaces normal corporate taxation with a yearly minimum tax of CHF 1,800.

The PVS exemption regime is available to all types of legal entities in Liechtenstein provided the following conditions (here) are met:

• The Liechtenstein PVS holding structure is not allowed to perform any economic activity
• The holding company is not allowed (in the form of its directors, shareholders, or beneficiaries) to exercise direct or indirect control over the management decisions of its commercially active daughter companies. Put differently, these individuals cannot occupy a position in the governing body of the holding company's commercially active daughter companies. In contrast, the PVS holding structure is allowed to exercise control over passive (sub-holding) daughter companies. It is equally allowed to exercise its usual shareholder rights (such as voting rights, the right to transfer ownership, entitlement to dividends, information rights, the right to sue, etc.)
• The company benefitting from the PVS regime is not allowed to derive rental income from its real estate holdings (if any)
• The investment company in Liechtenstein is not allowed to grant interest-bearing commercial loans

When granting (or renewing) PVS status to an existing or new Liechtenstein legal entity, the Liechtenstein tax authorities routinely review the following company documents:

• The Liechtenstein holding company's articles of association (in particular its statutory purpose)
• The Liechtenstein portfolio management company's financials (in particular which type of assets the Liechtenstein PVS company holds and which type of income it generates)

In cases of doubt about whether the PVS status of a Liechtenstein company is justified, the Liechtenstein tax authorities may further review:

• Minutes the the Liechtenstein holding company's board meetings
• Public register excerpts of the holding company's subsidiaries (screening for any dual roles of the holding company's directors, shareholders, or beneficiaries)
• Further information about the detailed professional activity of the holding company's shareholders or beneficiaries
• Any other documents required to guarantee compliance with Liechtenstein laws

Which Are the Most Popular Private Wealth Holding Vehicles in Liechtenstein?

• Stiftung (charitable / family foundation)
• Anstalt (establishment)
• Treuhänderschaft (trust, trust with legal personality)

Such structures are typically managed by a board of directors (or equivalent) in accordance with the will of the founder or settlor laid down in a mandate agreement.