Banking and foundations in Liechtenstein: “a safe haven, not a tax haven”

Dateline: Vaduz, Liechtenstein

You wouldn’t know to look at it, but Landstrasse, the main road that runs through the European microstate of Liechtenstein, is one of the busiest banking streets in the world.

It takes less than thirty minutes to drive from Feldkirch, Austria to Sargans, Switzerland through this tiny country, but as we frequently discuss, small countries are often the best safe havens.

Indeed, this tiny nation of “Catholic peasants” has a long history of appealing to foreign investors by creating strong banks and a strong legal system that has in the past earned it the distinction as a “tax haven”.

Today, however, Liechtenstein says it is not a tax haven, but rather a “safe haven”; a country we can trust for asset protection in a dangerous world.

Liechtenstein is an old world European principality with all of 62 square miles to its name. The tourist information center is the only place to obtain a passport stamp for the country, albeit it an unofficial one.

Vaduz is home to a number of museums like the Ski Museum and the Postage Stamp Museum that range from seeming elitist to rather boring.

The Prince invites visitors to his wine cellars just outside the city. The fairy-tale terrain ranges from lowlands to centuries-old castles to gorgeous mountains.

Today, it might be more logical to assume someone like me is here for the beautiful views as much as banking or asset protection, because Liechtenstein has taken the same tack as Switzerland and abandoned much of its legendary bank secrecy in order to become compliant with increasingly draconian EU and US government guidelines.

Liechtenstein still remains an offshore wealth hub, but only for certain people. The place has always catered to the wealthy, but these days being wealthy alone isn’t enough. So I decided to cover all of the main flags you might want to plant in Liechtenstein in one article.

Banking in Liechtenstein

Up until several years ago, Liechtenstein was a haven of bank secrecy. Today, the western world’s demand for total financial transparency has caused the tiny country to throw in the towel and cooperate with foreign governments in disclosing account holders.

As a result, don’t even think about getting an account here if you’re a US citizen.

Like Swiss banks, banks in Liechtenstein operate on the old European model of wealth management. These aren’t Asian banks that take a transactional approach and charge lower fees. Banking in Liechtenstein isn’t cheap.

And if you’re a westerner, it’s also not particularly safe. The German government got its hands on a list of Germans with offshore accounts here a few years back, and the whole place has been on lockdown since.

The nearly 20 banks doing business here are still open to non-residents or else they wouldn’t be able to stay in business. However, you should not expect to be able to avoid any of your home country’s laws as bankers would help you do in the past, nor should you try.

As a result of the crackdown from Europe and the US, banking here is ill-advised.

Foundations in Liechtenstein

As a civil law country, Liechtenstein does not offer trusts, but instead foundations. Liechtenstein foundations are solid asset protection vehicles for the ultra-wealthy; the founder of Ikea runs his company’s intellectual property rights through his foundation here.

Liechtenstein foundations require a surprisingly minimal 30,000 Swiss francs in assets to set up, and are designed for the same purposes as any foundation: preservation of capital, limited liability, and passing wealth to heirs.

Most types of foundations are required to be listed in the public register before “achieving personhood”, however, certain family foundations do not have to be registered, adding one element of privacy.

However, foundations can not be redomiciled or moved to a new jurisdiction the way most trusts can. The cost of setting up a Liechtenstein foundation is rather costly compared to other European jurisdictions and especially compared to some trust jurisdictions. If you are from a common law country, it is probably not worth it.

Residence and Citizenship in Liechtenstein

Liechtenstein’s population is just 37,000, in line with other European microstates like Monaco and San Marino. And they would rather keep it that way.

Each year, approximately 28 EU nationals are allowed to obtain a work permit in Liechtenstein. The German girl I spoke to at one of the top hotels here bemoaned the total lack of parties and nightlife here, so perhaps that’s all they can fill.

I jest of course, but if you’re not European, you can practically forget about moving to Liechtenstein, especially if you don’t have a highly specialized skill. Even if you’re an entrepreneur with the next big thing, your chances of immigrating are about zero.

Getting Liechtenstein citizenship doesn’t have to take long, but it is difficult. Generally, you are required to maintain your main residence in the country for a staggering 30 years before becoming a citizen. However, you can apply to have the locals vote you in.

Like its neighbor Switzerland, Liechtenstein is very democratic. You’ll be expected to speak German before becoming a citizen, and dual citizenship is not allowed.

The faster way to obtain a Liechtenstein passport is to marry a citizen, at which point the wait is reduced to five years of continual residence so long as your spouse didn’t obtain his or her citizenship through naturalization.

You can see that while Liechtenstein may be a safe haven for wealth, chances are it’s far from the easiest or least expensive place for you to seek asset protection or practice flag theory.