Liechtenstein and Switzerland signed a tariff and trade agreement in 1924, which has evolved into an economic, monetary and postal union. As a result, the border between Switzerland and Liechtenstein is open and the Swiss franc is Liechtenstein’s legal currency. Liechtenstein joined the Council of Europe in 1978, the UN in 1990, the European Free Trade Association (EFTA) in 1991 and the European Economic Area (EFA) in 1995. The EFTA is made up of Liechtenstein, Switzerland, Iceland and Norway. The EFA is made up of Norway, Iceland and Liechtenstein. The EFA allows Liechtenstein to participate to al limited extent in the EU internal market and excludes agriculture, the customs union and monetary union.
Liechtenstein was blacklisted by the Financial Action Task Force as ‘noncooperative’ in the fight against money laundering in June 2000. Following significant changes to Liechtenstein’s legislation and supervision of the financial sector the FATF removed the country from its blacklist in June 2001.
The responsibilities of Liechtenstein’s Financial Market Supervisory Authority (FMSA), scheduled to begin operations on 1 January 2005, will integrate the supervisory tasks currently assumed by the government, the Financial Services Authority, the Office of Economic Affairs (Insurance Division) , and the Due Diligence Unit.
Current applications to set up a business are made to government's department for the national economy. All documents must be submitted in German. Documents submitted as part of the application must be translated and officially certified. Corporate bodies are formed under the Law on Persons and Companies 1926, as amended. The legislation allows the formation of a limited company by shares (AG/Ltd.), a limited company by shares (AG/Ltd.) structured as an offshore company (minimum fully paid up capital Sfr50,000 and the minimum annual capital tax is Sfr1,000. Companies formed as joint-stock companies must have an initial capital of at least Sfr50,000 -- divided into either bearer or registered shares. Companies formed as establishments, trust corporations or foundations must have initial capital of at least Sfr30,000. Establishments do not have to have their initial capital to be divided into shares. Companies formed as foundations may be family foundations and ecclesiastical foundations. There are an estimated 73,700 holding companies registered in Liechtenstein.
Financial service providers fall into four categories: banks and finance companies, investment undertakings, professional trustees, lawyers, auditors, and Insurance undertakings. The Financial Services Authority (FSA) is responsible for the supervision of banks, finance companies, investment undertakings, lawyers, professional trustees, patent attorneys and auditors. Financial institutions — primarily banks — are also required to meet the accounting guidelines of the Swiss regulatory authority (Swiss Federal Banking Commission).
The Law on Banks and Finance Companies of 1992, as amended, regulates banks and finance companies. Finance companies may not accept client deposits. Liechtenstein's 16 banks achieved a total net annual profit of Sfr331.8 million in 2003, a rise of 31.8% compared to the previous year. The total number of staff in the banking sector decreased to 1,527, a decline of 11.1%.
The Investment Undertakings Act 1996 is the main legislation for collective investment schemes. A distinction is made in the legislation between investment funds and investment companies. An investment fund may be formed as a trusteeship under the Persons And Companies Act. An investment company is an investment undertaking in the legal form of a joint-stock company under the Persons And Companies Act. Investment undertakings may be formed for securities for 'other values' or for real estate. Trust enterprises are formed under the Law Concerning the Trust Enterprise 1928. Professional trustees may found legal entities, serve on boards of directors and perform accounting and auditing services. Under Liechtenstein law a trust may be established for an indefinite period. The Insurance Supervision Act 1996 established Liechtenstein as a location for insurance business.
As of the end of 2003, there were 16 banks, one finance company and eight audit firms licensed under the Banking Act. There were also 107 Liechtenstein investment undertakings (compared to 91 in 2002) and 192 foreign investment undertakings (compared to 180 in 2002). There were 10 audit firms licensed under the Investment Undertakings Act, the same as the previous year. There were also 79 licensed trustees, 279 trust companies, 20 auditors, 28 audit firms, 12 audit companies, 103 lawyers and 27 law firms doing business in the country.
The Criminal Code contains provisions punishing money laundering and organised crime. To supplement these provisions, a new offence of terrorist financing is due to enter into force. In addition, the Due Diligence Act and the Due Diligence Ordinance establish rules governing financial transactions. The Due Diligence Act includes comprehensive customer identification requirements. Financial intermediaries are obliged under the law to know and identify their clients. Links: Guide on Creating a Company in Liechtenstein (PDF)
Commercial operations in Liechtenstein are subject to capital and profits taxes. A formation tax (stamp duty), payable on formation of a company and on a capital increase is assessed at 1% or with a tax-free allowance of Sfr250,000. Foreign companies operating a branch in Liechtenstein are also subject to the capital and profits tax requirement. The tax rate for capital taxes is 0.2%. Profits taxes are assessed on the entire annual net profit. The profits tax rate depends on the ratio of net profit to capital and lies between 7.5% and 15%. The tax rate may be increased by 1% to at most 5% depending on the relation between distribution and taxable capital. The maximum profits tax is therefore 20%. Holding companies, domiciliary companies, and investment companies (investment funds) domiciled in Liechtenstein pay no profits taxes, but pay capital taxes of 0.1% of the paid-up capital or assets invested in the company or Sfr1000 annually, whichever is higher. For foundations, the capital tax for the amount of assets including reserves exceeding Sfr2 million is reduced to 0.075% and for the amount of assets including reserves exceeding Sfr10 million to 0.050%. For Liechtenstein investment companies (investment funds), the tax is also reduced to 0.040% for the amount of assets including reserves exceeding Sfr2 million. Insurance companies under the Insurance Supervision Act exclusively operating as captives pay a capital tax of 0.1% on the company's equity. The tax rate for equity exceeding Sfr50 million is reduced to 0.075% and for equity exceeding Sfr100 million francs to 0.050%. Insurance companies operating both as captives and also for third parties are subject to the capital and profits taxes for the part arising from the insurance of third parties.
Indirect taxes include estate, inheritance, and gift tax, value added tax, stamp duties and a coupon tax. Coupon tax, levied on capital interest coupons from legal persons, bonds and other entities is payable at a rate of 4%. The stamp duty on domestic equities is usually 1% with a tax-free allowance of Sfr250,000. The transaction duty on transfers of securities is 1.5 or 3%. Residents and those employed in Liechtenstein are required to pay property and income taxes. General partnerships and limited partnerships are also subject to property and income taxes, as well as legal entities and trusteeships not subject to company taxes (capital and profits taxes and special company taxes). There is also a municipal tax surcharge. When calculated along with the average municipal tax surcharge, the minimum property tax rate is currently 0.162% and the maximum is 0.8505%. The minimum Income tax is currently 3.24% and the maximum is 17.01%. Employers are required to deduct a basic amount of the income tax from an employee's monthly salary and wage payments and forward it to the Liechtenstein Tax Authority.
Department for National Economy (Amt für Volkswirtschaft
Wirtschaft. Gerberweg 5
Tel: (+423) 236 64 59
Fax: (+423) 236 68 89
Liechtenstein Investment Fund Association
Herrengasse 21 A, PF 1507
Telephone ++423/791 07 91
Fax 235 07 78
Latest available figures
Official name: Principality of Liechtenstein. German is the national and official language. English is widely spoken in business.
Population (June 2002)
33,678 of which about 34 % are foreigners, mainly Swiss, Austrians and Germans.
Swiss franc. US$1 = Sfr1.23 Swiss franc (January 2004)
Liechtenstein law incorporates aspects of both Swiss and Austrian law with variations. The court system consists of a district court (Landgericht), a court of appeals (Obergericht), and a supreme court (Oberste Gerichtshof). The State Court deals with rights under the constitution and decides on conflicts of jurisdiction between the law courts and the administrative authorities. The State Court also acts as a disciplinary court for members of the government. Criminal cases first go through the regional court, made up of a magistrates court, the criminal court and the juvenile court.
The principality is a constitutional, hereditary monarchy with representative democracy through a parliament. The 1921 constitution introduced the concept of two 'sovereigns': the people and the reigning prince. Both sovereigns, the people and the prince, have to agree on important decisions like a change of the constitution, a new law, the formation of the government or the appointment of the judges. The prince is head of state and may introduce bills to be considered by parliament. On 15 August 2004, Liechtenstein's ruler, prince Hans-Adam II, turned over the day-to-day running of the principality to his eldest son, Alois, who has the authority to dismiss governments, veto new laws and cast the deciding vote for appointing judges. The parliament (Landtag) is made up 25 deputies elected for a four-year term by proportional representation in two multi-seat constituencies (the 15-seat Oberland and the 10-seat Unterland). Under the constitution, government is a collegial body consisting of five ministers including the prime minister. Each minister has an alternate minister. The prime minister, ministers and their alternates are appointed by the reigning prince on the recommendation of parliament. The constitution allows citizens the right to call a referendum (backed by a specified number of signatures collected within a time limit) whenever parliament takes a decision on a new law or on a change of the constitution. Voters also the right of initiative on introducing a new law or changing the constitution by collecting a specified number of signatures within a time limit. Parliament must then decide during its next session if it accepts or rejects the initiative. If parliament rejects the initiative a popular vote must be held on the initiative to determine whether it is accepted or not.
Reigning Monarch and head of state: Prince Hans Adam II
Prince Alois: Reigning Monarch's Representative (appointed 15 August 2004 to take over day-to-day running of government)
Prime minister, finance, general government, construction and public works: Otmar Hasler
Deputy prime minister, education, justice, transport and telecommunications: Rita Kieber-Beck
Public health, social affairs, economic affairs: Hansjörg Frick
Home affairs, cultural affairs, sports, environmental affairs, land use planning, agriculture and forestry: Alois Ospelt
Foreign affairs: Ernst Walch
In the elections of 11 February 2001 the the Fortschrittliche Bürgerpartei (FBP) won 13 seats (with 49.9% of the vote), the Vaterländische Union (VU) won 11 seats (41.3%) and the Freie Liste (FL) one seat (8.8%). The government is formed by the FBP. The next election is due to be held in February 2005.
Manufacturing accounts for about 45% of GDP and services 55%. About 40% of exports go to European Union countries. Switzerland accounts for an additional 12% of exports. The financial services sector employs about 2,000 people and accounts for about 30% of government revenues.
Gross Domestic Product (1999)
Sfr4 billion at current market prices.
Exports: Sfr4,422 million
Labour Force (2002)
Unemployment: 1.3% (September 2002). 35% of the resident population and more than 60% of the working population are not Liechtenstein citizens, most coming from EU countries
Government Accounts (2001)
Revenues: Sfr804.1 million. Total expenditures: Sfr751.4 million.
Public Holidays (2004)
1 January (New Year's day); 1 January (St Berchtold's Day); 6 January (Epiphany), 2 February (Candlemas); 24 February (Shrove Tuesday); 19 March (St Joseph's day); 9 April (Good Friday); 12 April (Easter Monday); 1 May (Labour day); 20 May (Whit Sunday or Pentecost); 30 May (Whit Monday); 10 June (Corpus Christi); 15 August (Assumption); 8 September (Nativity of Our Lady); 1 November (All Saints' day); 8 December (Immaculate Conception); 24 December (Christmas Eve); 25 December (Christmas day); 26 December (St. Stephens day); 31 December (New Year's eve).
GMT+1. The clock goes forward one hour at 1:00 on the last Sunday in March and back to normal time at 1:00 on the last Sunday in October.
Principality of Liechtenstein
International Monetary Fund
US State Department