A foundation may be set up by private individuals, legal persons or other legal entities, public bodies and any other corporate body regardless of nationality, domicile or seat. A foundation may also be constituted by licensed fiduciary agents, if the founder himself wishes to remain anonymous. The use of a nominee founder guarantees the absolute confidentiality of the economical founder. A foundation can be set up so as to comply with the criteria required for a "complex trust". Many existing foundations can be modified to comply with these criteria.

The formation of a foundation requires the donation of assets for a specific purpose, this donation of assets can be accomplished in the following ways:

  • in the form of a foundation deed to which the legalised signature of the founder is attached (unilateral legal act inter vivos);
  • by last will;
  • by contract (deed) of inheritance.

A minimum capital of CHF 30'000.00 or the equivalent value in any desired legal currency is required to set up a foundation. The capital must be fully paid up to that amount and shall be transferred at the time of the formation of the foundation.

The formation duty normally amounts to CHF 200.00. The registration amounts to CHF 500.00 to 800.00. Additional charges of around CHF 32.00 are to be paid, also the minimum annual capital tax of CHF 1'000.00 in advance.

Where a foundation owns net assets of CHF 2 million or more, a reduced capital tax rate is levied (0.075 per cent on the amount exceeding 2 million to 0.05 per cent on the amount exceeding 10 million or more).

There are no additional taxes as long as the settlor or the beneficiaries do not live in Liechtenstein (that helps avoiding double taxation). Therefore, any settlor or beneficiary living outside of Liechtenstein has to consider the tax situation in his country of residence.

The Liechtenstein trustee who sets up the foundation and who will be responsible as foundation board and might open a bank account in Liechtenstein, has to identify the first beneficiary of the foundation. Apart from the first beneficiary, there may also be the need to identify the settlor and the protector of such a foundation which largely depends on the role of such persons and the source of funds. Also the Liechtenstein bank will have to identify these persons. The identification documents are under professional and bank secrecy and do not have to be sent to any authority. The Liechtenstein trustee and the Liechtenstein bank will have to set up an internal transaction report on any financial movements.

Structure Of Foundation Board

The executive bodies of the foundation as well as the administration of the foundation are laid down in the foundation deed or in the articles. In most cases a foundation has only one executive organ, namely the foundation council (board). When a foundation carries out a commercial activity for the achievement of its non-commercial purpose, it must have an audit authority, which verifies the financial statements.

The foundation board, therefore, is as a rule the supreme authority of the foundation. Its duty is the conduct of the business of the foundation in accordance with the articles, by-laws and regulations. As such the foundation board enjoys administration, representation and disposition rights. At least one board member must be natural member with domicile in Liechtenstein and have professional qualifications.

The founder relinquishes his rights once the formation of the foundation is established. However, the founder may exercise his rights as member of the board, as protector or as a member of any other supervisory board, or he may be granted special rights by means of the foundation deed, the articles or by-laws. It is also possible that nominee founders or beneficiaries are members of the board.

Usual Purpose Of A Foundation

A foundation may be formed as a pure family foundation for the support of the members of a family, or of a class of beneficiaries, and for the defrayment of expenses, maintenance and education purposes, and/or as a non-profit making foundation for the support and promotion of charitable, artistic, scientific or social objects.

Foundations And Trusts

A foundation enjoys legal personality and exists as an independent legal person with rights and obligations of its own. It is not the trustee, but the foundation which is the owner of the foundation's assets. The change of the foundation board therefore does not affect the ownership of the assets. Furthermore, bank accounts are held in the name of the foundation and not in the name of the trustee.


Foundations are as a rule subject to the supervision of the Liechtenstein Government. If the foundation is administered or the assets are applied contrary to the purpose of the foundation, anybody who can prove a legal interest, may make a complaint to the supervisory authority.

Ecclesiastical foundations, pure and mixed family foundations, as well as foundations whose beneficiaries are specified or otherwise defined, as well as foundations which solely manage assets and distribute proceeds or which hold capital participations, are not subject to any supervision by the Liechtenstein Government. In such cases, the supervisory authority shall ensure that the assets of the foundation are managed and applied in accordance with the objects and purposes of the foundation.

Liechtenstein offers some of the strictest confidentiality laws in the world. Apart from banking secrecy, trust companies are bound by statutory provisions combined with criminal sanctions to keep information on the client confidential.

Forced Heirship Claims

Endowments (inter vivos capital donations) to a Foundation have hereditary relevance if the founder (testator = person who funds the Foundation) is treated as the Foundation's first beneficiary. If the first beneficiary passes away, the Foundation's assets will be added to the estate of the testator in order to decide if forced heirship rules have been violated. Family members protected by forced heirship rules can take legal steps against the Foundation which will be forced to satisfy the claims by handing out funds until the provisions of the law are met.

According to Art. 560 al. 1 PGR code the heirs or creditors can dispute the validity of a Foundation in the same way as a donation. (Normally the Liechtenstein Foundation will be incorporated with a capital of CHF 30'000.00, and will be endowed afterwards with additional funds. Therefore it is not the Foundation the validity of which will be disputed but the separate endowments.)

Forced heirship rules do not apply for

  1. donations for public utility;
  2. endowment (at least partially) of current proceeds (thus without reducing the basic capital (fortune);
  3. donations to persons (endowments to Foundation for beneficiaries respectively) not entitled to a compulsory portion of the estate made by the testator two years before death of the testator (the Foundation per se is principally no forced heir)
  4. if there were no persons entitled to a compulsory portion of the estate at the time of the donation/endowment;
  5. generally after three years of the founder's/first beneficiary's death (claims statute-barred).

Foundations are usually used in the international field, i.e. the Foundation is domiciled in Liechtenstein, the founder and the beneficiaries are subject to another jurisdiction and the assets might be governed by the same or another jurisdiction. It might occur that we have to deal with three jurisdictions and the above statements which only reflect the Liechtenstein law must be considered together with the founder's/beneficiaries'/assets' domicile and/or nationality in order to know under which law the endowment is governed in the end. There does not exist an international hereditary law which would avoid overlaps and negative surprises.

  1. According to the Liechtenstein International Private Code (Internationales Privatrecht - IPR) of 19.9.96 (Art. 9 IPR), a natural person has the domicile in the jurisdiction of his habitual permanent residence. The forum and the applicable law would be in his habitual permanent residence.
  2. The personal statute of a natural person is guided by the nationality (Art. 10 al. 1 IPR). If a person has several nationalities including Liechtenstein, the Liechtenstein nationality will be the connecting factor. In other cases where a person has more than one nationality the nationality with the strongest tie is the connecting factor.
  3. The personal statute as mentioned before will have relevance in order to determine the applicable law to decide upon the succession (rights) of the testator (Art. 29 al. 1 IPR).
  4. If Liechtenstein has jurisdiction (e.g. in case of Liechtenstein real estate; if the founder and/or first beneficiary of foreign nationality has domicile or residence in Liechtenstein) and if the Liechtenstein forum will hear the succession case, Liechtenstein law will be applied (Art. 29 al. 2 IPR). There are two exceptions:
    1. The testator of foreign nationality (if the domicile/residence is different from nationality) can choose that the hereditary law of the country of his nationality or of his last permanent residence should govern the succession issue (Art. 29 al. 3 IPR).
    2. The Liechtenstein testator living outside of Liechtenstein can choose that the hereditary law of the country of his nationality or of his last permanent residence should govern the succession issue (Art. 29 al. 4 IPR).

  5. The law of the jurisdiction where the debtor (of a donation) has his ordinary permanent residence is applicable in case of donations/endowments (Art. 41 IPR). If the foreign founder endows assets to a Liechtenstein Foundation the foreign law will then be applied for any dispute in connection with the endowment. However, the founder and the Foundation can choose another legal right (and the forum) as the donation is a bilateral action (unilateral contract) with rights and obligations (Art. 39 al. 1 IPR).

Problems arise when a donation forms part of the assets under the forced heirship rules where there is no eligible jurisdiction (law to be applied).

The founder (testator; and first beneficiary) of a Liechtenstein Foundation must bear in mind that the testator's estate (part of which is in the Foundation) will be governed by the situation (permanent residence, nationality) at the time of his death and not at the time when he made the endowment. The effects planned could therefore change during his life and the existence of the Foundation.

To summarize the above comments with an example: A Swiss founder (nationality) who lives in Switzerland will always be subject to Swiss law when it comes to deciding if forced heirship rules are infringed. This will always be the case when the founder is the first beneficiary. If the first beneficiary is not a family member of the founder who benefits from forced heirship rules, it is possible according to Liechtenstein law that after some time no forced heirship rules will apply. If the Swiss civil law has the same attitude (it has!), no forced heirship rules will apply after some time (generally five years).

The above complex topic can even become more complex when considering the matrimonial status of the founder. The married founder should take care that he (she) endows assets into the foundation with the consent of his (her) partner or making sure that he (she) does not infringe the spouse's rights.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.