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LIECHTENSTEIN
PRIVATE AND FAMILY
FOUNDATIONS

 

 

YOUR SECURE ASSET PROTECTION TOOL
Liechtenstein - Excellence in Fiduciary and Financial Services
While Liechtenstein is one of the smallest countries in Europe, landlocked between Austria and Switzerland, it is also one of the richest countries in the world on the basis of per-capita GDP. Liechtenstein is closely linked with Switzerland and uses the Swiss Franc as its official currency. There is also a customs union between Switzerland and Liechtenstein, and for Value Added Tax (VAT) purposes Liechtenstein is part of the Swiss VAT system. Liechtenstein is a member of the European Economic Area but not the European Union. This unique position gives this small country numerous advantages, including full access of its banking and insurance industry to the EU market.

Liechtenstein has one of the world's most sophisticated banking, financial services and fiduciary industry, which also represents the major part of its economy. Liechtenstein welcomes quality business from clients all over the world and maintains strictest due diligence requirements in order to protect its reputation. Recent legislation has been introduced to further reinforce Liechtenstein's position as one of the world's top-tier financial services jurisdictions. All financial and fiduciary services providers are strictly regulated and supervised.

 


THE LIECHTENSTEIN FOUNDATION, A LIVING WILL
The Liechtenstein Foundation is an ideal portfolio investment vehicle from the management of numbered accounts to the structuring of complicated estates. Investors wishing to shelter their assets from high taxes, to maximize asset protection and at the same time to maintain personal control over their assets as well as provide for the orderly devolution of their worldly goods upon their death are well advised to consider the Liechtenstein foundation.
Liechtenstein foundations, which manage offshore funds, pay practically no taxes in Liechtenstein and are free from official supervision. All information concerning the foundation is inaccessible to the public and to all authorities.

CONCEPT: AN INCORPORATED ESTATE
A foundation is an incorporated estate, which has been set up for specified purposes. The estate has the status of a legal person and exists entirely separate from the founder's personal assets. The formation of the foundation makes possible the severance of certain assets from the personal estate of the founder and assures the legal autonomy of assets so severed. The assets must be exclusively administered so as to realize the intentions of the founder.

SIMPLE AND DISCRETE FORMATION
The founder may be a natural person or a legal entity of any nationality or residence. The formation of the foundation is achieved by means of an endowment either in the form of a deed or by testamentary disposition. The foundation deed must state the name and residence of the foundation, its objects, the foundation assets, the method of designating the foundation executive and the use to be made of the foundation assets, should the foundation be liquidated.
As a general rule a foundation may not be revoked, nor may its purpose be altered unless the foundation deed expressly so provides.

NO REGISTRATION REQUIREMENTS FOR FAMILY FOUNDATIONS
Normally the foundation only acquires legal personality when entered in the Public Register. However, certain types of foundations, depending upon their purpose, may acquire legal personality upon formation and need not be registered. These include ecclesiastical foundations, family and mixed family foundations, being foundations created for the purpose of maintaining and educating the members of one or more families, as well as foundations whose beneficiaries are specifically designated or ascertainable. If, however, such foundations engage in commercial activities they must nevertheless be registered. Such foundations as do not require registration must deposit the deed (but not the by-law) of the foundation with the Public Register Office. Deeds so deposited are not accessible to the public. Any information whatsoever concerning the foundation, including the foundation name, the founder, the executive and so forth, are not available to the public.
The existence of the non-registered foundation and the assets owned by it, is held absolutely confidential. Therefore, the foundation is an excellent vehicle for maintaining investor anonymity.

INVESTOR CONTROL OVER A PROFESSIONAL ADMINISTRATION
An executive consisting of one or more members, one of whom must be a qualified Liechtenstein attorney-at-law or fiduciary, administers the foundation assets. The foundation executive must realize the founder's wishes as stated in the constitutive foundation documents.
The founder may make special arrangements in order to retain full control over the foundation during his lifetime. A protector may be appointed to supervise the activities of the foundation executive after the decease of the founder.

FOUNDATION ASSETS
At the time of formation the foundation requires a minimum paid-up capital of 30.000,- CHF. It may, at the time of its formation or at any time thereafter, receive further assets from the founder or third parties.

LIMITED LIABILITY AND UNLIMITED STRUCTURING POSSIBILITIES
Only the foundation assets are available to creditors in satisfaction of the foundation debts. The foundation has neither members nor shareholders.
If the constitutive documents provide accordingly, the foundation may have beneficiaries who may be named in the foundation deed or the deed may describe the manner of naming beneficiaries at a later date, possibly by means of a separate by-law. In this way the identity of the beneficiary will never be revealed to the Public Register with whom a copy of the foundation deed, but not of the by-laws, must be deposited.
Foundations may also be set up for charitable or ecclesiastical purposes. Many employers form a foundation, which manages employee pension and benefit funds.
The foundation may not be formed to pursue commercial objects unless such activities are ancillary or necessary to the pursuit of the non-commercial foundation objects.
The law places practically no limits whatsoever upon the structuring of beneficial interests which may be absolute, conditional or entirely discretionary.
The founder may designate himself as a beneficiary for life and provide successive generations with successive life interests in the foundation assets. Liechtenstein law does not have a rule against perpetuities or accumulations. The beneficial entitlements may be conditional or unconditional, discretionary or vested, subject to time limitations or to positive or negative obligations. Inasmuch as the foundation assets will not form part of the founder's testamentary estate, the legal norms of his personal law cannot restrict the structuring of the rights of heirs and remainder men. The constitutive instruments may provide that any person who challenges the same is to be automatically deprived of any entitlement from the foundation. These possibilities are very important for founders who live in countries where a fidei commis is not possible or may only be limited to one or two generations. It is of a major importance to founders living in jurisdictions having high succession taxes, which considerably reduce the share, which each successive generation may inherit. Foundation assets are not subject to succession taxes.

LEGALLY RECOGNIZED ASSET-PROTECTION VEHICLE
A founder can judgement-proof the rights of his beneficiaries.
In the case of family foundations, the founder may specify that the creditors of specifically designated beneficiaries may not deprive such beneficiaries of any gratuitously acquired benefits, whether by means of injunction, execution or bankruptcy proceedings.
Through the implementation of a foundation, the founder has a maximum range of possibilities in settling his estate. He can for example circumvent future problems posed by a spendthrift child by providing the child with a non-assignable, non-attachable monthly pension for life and leaving the corpus of the estate to his grandchildren.
The wishes of the founder are executed by the foundation executive without the knowledge or interference of public authorities.

NO BOOK-KEEPING AND FILINGS
Unless the foundation carries on business or a trade, the law does not require it to keep accounts, nor to submit financial statements of any sort to authorities.


WHAT TAXES ARE PAYABLE BY THE FOUNDATION?
If the foundation qualifies as an offshore company, it is not subject to income tax or capital gains tax in Liechtenstein. It must merely remit an annual tax on capital, which is currently the greater of one per mille of the foundation equity or CHF 1.000,-. This tax is reduced to three quarters per mille for foundations with equity in excess of CHF 2.000.000,- and to one-half per mille for those with equity in excess of CHF 10.000.000,-. Payments to beneficiaries residing outside of Liechtenstein are not subject to any Liechtenstein taxes.

CONCLUSION
A unique combination of factors, being the practical non-existence of taxes and filing requirements, the guarantee of investor anonymity and a wide range of structuring possibilities enables the Liechtenstein attorney to structure a foundation which optimally meets individual requirements.

THE LIECHTENSTEIN PERSONS AND COMPANIES CODE
BY - LAW OF F.L. FOUNDATION, VADUZ
By virtue of article 8 of the deed of F.L. Foundation, Vaduz, the Council of the Foundation (Council) unanimously adopts the following
BY - LAW:
1. The Founder is designated as first beneficiary of the Foundation for life and shall be entitled to all of the income with power to encroach upon the capital of the Foundation for life.
2. After the decease of the Founder, his/her spouse is designated as second beneficiary for life.
The Founder's spouse has a right to the net income of the foundation for life.
Such income as the second beneficiary has not drawn effectively prior to his/her death shall remain in the Foundation and at the disposal of the third beneficiaries according to the terms of the by-law.
3. After the decease of the second beneficiary, he/she shall be succeeded by the children of the Founder (the children).
4. After the decease of the first and second beneficiaries, the Council of the Foundation must use the income of the Foundation, and if necessary its capital as well, for the better care, maintenance and education of the children, who can be granted loans or advance payments out the assets of the Foundation by the Council of the Foundation e.g. for business activities, purchase of furnishing of a home. The Protector shall determine and instruct the Council as to how and to what extent the income and capital of the Foundation is to be applied in order to care for the children. The Protector must first approve all sums thus expended. The determinations made by the Protector shall be binding for the Foundation. It is left to the discretion of the Protector to determine the interest rates of loans or advance payments.
5. In the event of the death of any of the children prior to or during their enjoyment of the beneficial rights of the Foundation, the direct descendants of such deceased beneficiary shall replace the deceased child and assume his/her rights in equal shares per strips. In the event that a child dies without leaving surviving direct descendants, his/her rights shall pass to the remaining children or their descendants in equal shares per strips.
6. As soon as the youngest child is 35 years old, and provided always that both the first and second beneficiaries are dead, the Foundation shall be liquidated.
7. The proceeds of liquidation shall be distributed to the children in equal parts per strips.
Should the descendants of any deceased child be a minor at the time of a final distribution, the Foundation shall continue to exist for the purpose of managing the assets of such minor beneficiary according to the terms hereof until such beneficiary shall have attained the age of majority at which time his/her share of the assets shall be distributed to him/her.
8. No beneficial entitlement hereunder shall form part of any matrimonial property regime, in particular community of property to which any beneficiary may be subject, nor shall the spouse of any beneficiary, save as specifically provided, acquire any rights whatsoever, whether legal or equitable, whether a right of administration or otherwise, in the beneficiary's entitlement hereunder.
9. No beneficiary shall be entitled to transfer, sell, assign, pledge, encumber, anticipate or hypothecate his/her interest hereunder.
10. The Founder may direct the Council of the Foundation to change these regulations at any time.
11. After the death of the Founder the Council of the Foundation may only make such modifications as shall not violate the essential provisions hereof. In no way shall the Council be entitled to substitute, add or remove beneficiaries, nor to vary the conditions concerning the right to benefit, nor the size of the share to which each beneficiary shall be entitled.
Vaduz, The Council of the Foundation

F.L. BULLETIN
In 1993 Liechtenstein's banks had a balance sheet total of approximately 22 Billion Fr. Combined, the Liechtenstein banks would be equivalent to the seventh largest bank in the Swiss Liechtenstein economic region.

The financial services sector is assuming an increasingly dominant role in the Liechtenstein treasury. According to the recently published study prepared by the St. Galler Center for Future Research, in 1991 this sector generated approximately one half of the 291,8 Mio. Fr. in tax revenues. The greatest portion was 72,6 Mio. Fr. attributed to the special corporate tax for offshore companies.

This sector is also becoming increasingly important for the employment market. In 1992 banks, lawyers, trustees and finance companies together employed approximately 2,800 persons. This represents 14 percent of the total of 20,000 jobs held in Liechtenstein.

At this time the Liechtenstein government is in the process of enacting a law regulating the management of investment funds. Combined with the Liechtenstein's Persons and Companies Law, the new law will create interesting new investment possibilities.

 

THE FOUNDATION STRUCTURE

I. CONCEPT AND LEGAL NATURE
The Liechtenstein Persons and Companies Law (PGR) treats the Foundation in its second section, "The Legal Entities". The Foundation is a juridical person without members, having its own internal organization for the conduct of its affairs, and possessed of endowments. It is in essence an incorporated estate. The Founder transfers specific assets to the Foundation which are then endowed for specific purposes. The assets pass from the personal estate of the Founder to the Foundation. The Founder specifies the objects of the Foundation and appoints its administrators. Assets so endowed are not subject to gift or inheritance taxes in Liechtenstein provided that the Founder transferring the assets is not resident in Liechtenstein. The special sections of the PGR relating to Foundations, Articles 552-570, are supplemented by the regulations pertaining to Trust Enterprises and the general regulations concerning legal entities. The regulations contain few mandatory provisions, the dominating principle particularly with respect to Foundations, being based upon the right and freedom to contract.

II. THE OBJECTS AND TYPES OF FOUNDATIONS
The Founder may stipulate the objects of the Foundation with complete freedom, provided that the objects are not immoral or illegal. The objects of the Foundation may be expressed in detail, or may be generally stated, provided the same are unequivocal and not subject to misinterpretation. Only in exceptional circumstances may the Foundation pursue commercial objects. The most common types of Foundations are:

1. THE FAMILY FOUNDATION
a) The Pure Family Foundation
This form of Foundation provides that the Foundation's assets and/or the income thereof, be applied to defray the costs of rearing and educating members of certain specified families, providing them with dowries, or gifts and support. The Founder is also free to designate the Foundation for purely support purposes if he so desires.
b) The Mixed Family Foundation
A mixed family Foundation is formed when other general, charitable, or religious objects are included in addition to the family purposes designated above in paragraph 1.a).

2. THE BENEVOLENT FOUNDATION
A Foundation whose assets and/or the income thereof are designated for objects which enhance the common welfare is known as a benevolent Foundation. Examples of such purposes would be the support of scientific research, the arts, humanitarian or charitable undertakings, or the support of organizations engaged in such activities.

3. THE EMPLOYEE WELFARE FOUNDATION
Basically such a Foundation is established for the benefit of certain employees, in order to provide for the event of their retirement, disability, or death. Normally the assets managed by such a Foundation are provided, partially by the employer and partially by the employees.

4. THE ECCLESIASTICAL FOUNDATION
As the name implies, such Foundations are established in order to serve ecclesiastical or religious objects.

A Foundation may only carry on business to the extent that the same is necessary in order to achieve its objects. Such activities must be absolutely subordinate to the main activities/objects of the Foundation.

III. THE FORMATION OF A FOUNDATION
A Foundation may be formed by either a natural or a juridical person. The Founder may be of any nationality or residence. No official permission need be obtained to form a Foundation. A Foundation may be formed by a Founder on his own behalf, or for third persons pursuant to a power of attorney or fiduciary agreement. Normally, Foundations are formed by a Liechtenstein attorney or professional fiduciary acting as Founder in order that the identity of the actual Founder be kept anonymous.

1. THE FORMATION
Formation of a Foundation takes place by one of the following means:
· The filing of a Foundation charter, bearing the authenticated signature of the Founder;
· By last will or testamentary disposition;
· By contract (joint will) in the nature of a testamentary disposition
In the Foundation's charter, the Founder pledges specific assets. With the signing of the charter, these assets pass from the personal estate of the Founder and become the legal property of the Foundation.

 

2. FOUNDATION DOCUMENTS
a) The Foundation Charter and the Articles
The Founder is free to determine the content and extent of the charter and the articles. The articles are either a part of the charter or included therein, however the following information, necessarily included in the charter, may also be included in the articles. For the purposes of the following, the expression "charter" shall also include the articles.
· The name and registered office of the Foundation;
· Objects and assets of the Foundation;
· Designation of the Foundation's administrators and their signing authority;
· The method by which new administrators may be appointed;
· Stipulation as to the distribution of the Foundation's assets in the event of liquidation;
· Designation of the Foundation's agent for service
b) Modification of the Foundation's Articles
In addition to the above, the charter must state the circumstances under which the articles may be amended. The Founder may expressly reserve for himself the right to amend the articles. The right to change or amend the articles may also be vested by the Founder in the administrators of the Foundation, or vested in them with the condition that certain modifications require the approval of the Founder, the beneficiaries, a third person, or all of the above-mentioned parties. The Founder may also provide that, after his demise, the articles may not be amended, or that only certain portions may be amended, either with or without the approval of the beneficiaries. Should the Foundation's charter make no provision for the supplementation or amendment of the articles then same may in principle not be varied. In such case amendments may be made only upon demonstrated necessity, with the approval of the competent court and only with the consent of the Founder, the administrators, and the beneficiaries. It therefore is highly advisable that the charter makes provision for the amendment of the articles to accomodate possible changes in circumstances.
c) By-Laws and Rules
The Founder may, in the charter, reserve for himself or others the right to issue by-laws and rules. The by-laws may be used to supplement or further define certain provisions contained in the articles. They may designate beneficiaries, or beneficiaries of liquidation proceeds. Rules define the scope, manner, and methods of the conduct of the Foundation's affairs. As a practical matter, by-laws and rules are preferred in order to regulate certain aspects of the Foundation's affairs, as neither of these documents must be submitted to the Foundations Register or the Public Registry.

3. THE FOUNDATION ASSETS
Article 122 of the PGR prescribes that the value of the assets to be transferred to the Foundation shall total at least Swiss francs 30.000,-. The assets may also take the form of property or claims receivable. Rights of various kinds, which may be transferred merely by way of assignment, become the property of the Foundation upon its legal formation. At the time of the formation of the Foundation, it is sufficient that the Founder has obligated himself to donate the assets at such time as the Foundation has been legally formed and is in existence. The pledge of the assets by the Founder provides the Foundation with a legal claim against the Founder for the fulfilment of his pledge.

4. THE NAME OF THE FOUNDATION
The name of the Foundation is basically a matter of free choice. Words or phrases supplementing the basic name may refer personally to the Founder or to heirs or beneficiaries, or to the registered office of the Foundation, or may be pure fantasy, provided that the name as a whole, is not misleading, immoral, or illegal. The name must include the word "Foundation" (German: "Stiftung", French: "Fondation", Italian: "Fondazione", etc.).

5. REGISTERED AND UNREGISTERED FOUNDATIONS
a) Registered Foundations
Basically a Foundation acquires legal personality upon being entered in the Foundation Register. Registration requires submission of the Foundation's charter and articles, proof of the donation of assets, and evidence that the registration fees have been paid. The following information is entered in the Foundation Register:
· The name and registered office of the Foundation;
· The objects of the Foundation;
· The date of organization;
· The organization and representatives of the Foundation;
· The name of the Foundation's agent for service.
The Foundation Register abstract contains no information concerning the Foundation other than that hereinbefore set forth. The identity of the Founder thus remains anonymous. Should an unregistered Foundation pursue or commence the pursuit of commercial activities in order to achieve its objects, it is obliged to register.

b) Unregistered Foundations
The unregistered Foundation acquires legal personality without registration. Its charter and articles are simply deposited with the registry officials in order that they may determine that the Foundation does not pursue illegal or immoral purposes and qualifies as an unregistered Foundation. Article 557 of the PGR exempts the following types of Foundations from the obligation to register: die reine Familienstiftung;
· Pure family Foundations;
· Mixed family Foundations;
· Foundations whose beneficiaries are specifically designated or identifiable juridical or natural persons
· Ecclesiastical Foundations.
Only such persons as have a demonstrated, direct interest in an unregistered Foundation can apply for an abstract from the registry officials confirming that the Foundation exists, the amount of its assets, the identity of its administrative organs, and its agent for service (legal representative).

IV. THE ORGANIZATION OF THE FOUNDATION

1. THE FOUNDER
It is the Founder's obligation to make provision in the charter for the administration of the Foundation, and to prescribe the functions and coordination of administrative organs in order to ensure the proper management of the Foundation's assets. The Founder may guarantee his influence upon the Foundation's affairs by naming himself as an administrator, or by reserving to himself certain rights when formulating the articles, such as:
· The appointment and discharge of the administrators;
· The control over and designation of the signing authorities;
· Variation of the articles;
· Revocation of the articles;
· The appointment of beneficiaries and the definition of the scope of their beneficial entitlement;
· The appointment of the remainderment;
· Supplements to the articles by means of by-laws and regulations;
· Termination or liquidation of the Foundation.
The Founder has the right in any case to assure himself that the various administrative organs of the Foundation adhere to the provisions set forth in the articles.

2. THE FOUNDATION ADMINISTRATORS
a) Duties of the Administrators
Normally, the administrators are the supreme organ of the Foundation. The Founder defines the function of the member or members of the board of administrators in the articles. The administrators may be one or more juridical or natural persons of which one must be domiciled in the country. This member must also be a qualified lawyer, trustee or auditor, or have other qualifications recognized by the government. There are no other requirements as to the nationalities or residences of the remaining administrators. Unless otherwise provided in the articles, the administrators organize the board meetings themselves, and their decisions are reached by simple majority vote. The duties and obligations of the administrators are those set forth in the articles, and, normally, those not specifically assigned to another administrative organ of the Foundation. Included in their duties are the conduct of the Foundation's affairs, and its representation as regards third parties as well as the beneficiaries. The conduct of the Foundation's affairs includes the investment and management of its assets and the distribution of income and/or capital to the beneficiaries as per the stipulations contained in the articles. The administrators are responsible for the proper management and conservation of the Foundation's assets as provided by the law and the articles. The administrators may delegate the conduct of business and management to one of their members or to a third party. In the articles, the Founder may reserve for himself the right to discharge and appoint administrators.
b) Appointment of the Administrators
Normally the first board of administrators is named by the Founder in the charter. The articles will prescribe the procedure for the appointment of new administrators. The Founder may reserve for himself the right to discharge and appoint administrators, or he may designate a third person to exercise this right. Provision may also be made for the board to elect its own members, or for an outgoing administrator to designate his successor.
c) Responsibilities of the Administrators
The administrators are required to adhere to the articles. They are personally responsible to the Founder and to the beneficiaries for damages resulting from their failure to comply with the articles. The Founder and the beneficiaries may apply to the court to assure compliance with the Foundation's articles.

3. THE PROTECTORS
Whereas the administrators are responsible for the management of the Foundation's assets, decisions as to the distribution of income or assets to beneficiaries may be delegated to the collators who act independently of the administrators. In such a case the duties of the administrators are limited to the administration of the Foundation's affairs. Collators are often appointed in the case of benevolent Foundations.

4. THE TRUSTEE
In addition to the administrators, the charter of the Foundation may provide for a trustee with special functions and responsibilities. His duties and functions may include:
· Supervision of the board of administrators;
· Review of the propriety of distributions to beneficiaries;
· The investment and management of benefits payable to beneficiaries whose whereabouts are unknown or who are presumed dead.

5. THE AUDITORS
Although the law does not require that auditors be appointed in respect of such Foundations as do not carry on business, the articles may so provide. Article 193 PGR provides that auditors may be appointed for a first term of not more than one year and that successive terms may not exceed three years. The auditors review whether the financial statements comply with the law and the articles. Irregularities or infractions of the law or articles discovered in the course of the auditor's review, must immediately be brought to the attention of the Foundation's supreme executive authority.

6. THE AGENT FOR SERVICE – LEGAL REPRESENTATIVE
According to paragraph 239 of the PGR each Foundation must have a legal representative or agent for service which must be a natural person, resident in Liechtenstein or a Liechtenstein corporate entity. The legal representative or agent for service represents the Foundation as regards the authorities and is the recipient for the purposes of service of notice upon the Foundation. Unless specifically otherwise authorized, the legal representative has no other functions and is not authorized to conduct the business of the Foundation.

V. THE BENEFICIARIES OF THE FOUNDATION
The articles and by-laws of the Foundation are the primary regulatory instrument concerning the Foundation's beneficiaries. Supplementary thereto, the regulations of Article 932 a, §§ 1-170 PGR concerning the incorporated Trust are applicable. The beneficial interests of the Foundation are not subject to the rule against perpetuities or accumulations. Moreover, in practice the personal succession law of the Founder including forced heirships as well as matrimonial property regimes, in no way effect the Foundation.

1. BENEFICIARIES AND REMAINDERMEN
Beneficiaries are natural or legal persons having the right to receive a present or future benefit from the Foundation, such as participation in the income or assets of the Foundation, the right to the use or the occupancy of Foundation assets or property, or the right to receive stipends, support, rewards for outstanding performance, etc. Remaindermen are those persons designated to succeed to rights and benefits upon the demise of the beneficiaries and in particular, are entitled to the enjoyment of the rest and residue of the Foundation assets.

2. DESIGNATION OF THE BENEFICIARIES
The Founder has the right to designate the beneficiaries in the charter, the articles, or by-laws of the Foundation, or he may delegate such right to the administrators or third persons. Should the beneficiaries not be designated, the Founder is presumed to be the sole beneficiary during his life and, upon his demise, his beneficial interest passes to his heirs.

3. RIGHTS OF THE BENEFICIARIES
In the articles, the Founder sets forth the extent to which the beneficiaries have a claim to the income from the Foundation's assets. Beneficiaries may be bound by conditions, time limitations, obligations, or other stipulations. Conditions may include, for example, the existence of offspring, or the pursuit of a specified profession. Acceptance of the right to benefit from the Foundation will be assumed if the conditions are such that obviously only advantages accrue to the beneficiary and no circumstances exist from which it could be inferred that the beneficial interest will not be accepted.

The Founder may stipulate that the rights of beneficiaries to benefits from the Foundation be immune from legal claim or process by creditors of the beneficiaries, provided that the beneficial interests were obtained by the beneficiaries for no consideration. Provided that the articles so stipulate, the beneficiaries may not be deprived of the Foundation's benefits through execution, foreclosure, or bankruptcy proceedings brought by creditors of the beneficiaries. The law provides the beneficiaries with the right to request information concerning the condition and placement of the Foundation's assets, as well as access to the accounting records. The Founder may limit or totally exclude this right in the articles or by means of a written disposition. Unless all beneficiaries or remaindermen request information concerning the Foundation's affairs at a particular time, the management may decline to provide information if there is reason to fear that the request for information is based upon less-than-honorable intentions, or that the provision of information will be detrimental to the beneficiaries as a , or that the request is made in bad faith.

4. THE CREATION AND EXTINCTION OF BENEFICIAL INTERESTS
Beneficial interests arise by virtue of the provisions in the articles or by-laws, and by the acceptance of the same by the beneficiaries. Benefits are extinguished by.
· Notice, if the Founder has reserved this right for himself:
· Revocation or exclusion due to unworthiness, or in the event that legal
relationships within the family have basically changed;
· Settlement, when provision for the waiver of a claim in exchange for a lump
settlement has been made;
· Satisfaction, namely payment in full of benefits out of income and capital;

5. RECORD OF THE BENEFICIARIES
The administrators must establish and maintain a record of the beneficiaries, and their respective places of abode, particularly in the case of family Foundations.

VI. THE LIABILITY OF THE BENEFICIARIES
Article 563 PGR limits the liability of the Foundation to the extent of its net assets. The Founder and the members of the administration and management of the Foundation have no personal liability for debts incurred by the Foundation. The Founder is only obligated to fulfil his pledge to transfer the endowed assets to the Foundation. No further liabilities exist either on the part of the Founder or the members of the administrative organs of the Foundation.

VII. THE ACCOUNTING FOR THE FOUNDATION
Foundations as do not carry on business are not obliged to establish and maintain orderly accounting records.

However, in the interests of the beneficiaries, inventories should be taken and maintained, and records kept from which the financial status of the Foundation may be determined. There is no requirement for the filing of financial statements with any authority, and the Foundation is not subject to official review of any sort.

VIII. THE REVOCATION OF A FOUNDATION
The Founder may in the articles reserve the right to revoke the Foundation at any time. Should he exercise this power and revoke the Foundation, the entire net assets of the Foundation revert to the personal estate of the Founder. If the Founder has made no provision in the articles for the revocation of the Foundation, then the following principles apply:
a) In the case of a Foundation which is, by law, required to be registered, the
Foundation may only be revoked prior to the registration of the same;
b) In the case of a Foundation not required by law to be registered, the Foundation may only be revoked prior to authenticating the charter and articles;
c) In the case of a Foundation formed by last will or testamentary disposition, the Foundation may only be revoked if such a revocation is provided for according to the law applicable to the will or testamentary disposition. (A will may be revoked by the testator, but not the heirs.)


IX. THE TERMINATION AND LIQUIDATION OF THE FOUNDATION
The Foundation is terminated by:
· Liquidation as prescribed in the articles;
· Under certain circumstances the law requires that the Foundation be wound-up;
· Conversion to another form of legal entity.
The Foundation's charter will provide conditions pursuant to which the Foundation will be liquidated, and the procedures to be followed. The Founder may provide that the Foundation is perpetual and may not be liquidated, or that it may only be liquidated at a particular point in time, or that it may be liquidated only upon the happening of certain events. Should no provision be made in the charter, then the Foundation may only be liquidated with the consent of all participating parties (the Founder, the administrators, and the beneficiaries). The law may require that the Foundation be wound-up if the objects of the Foundation are no longer realizable (for example: expiration of time, or depletion of assets). A registered Foundation must follow prescribed liquidation procedures, including notice to creditors. An unregistered Foundation need only notify the registry office of the intent to liquidate. There is no required liquidation procedure in the event that the Foundation is to be converted into another type of legal entity (such as an Establishment). Only if the articles of the Foundation provide for the conversion to another type of entity, may the Foundation be converted, in which case the new administrative organs are appointed and articles for the new entity are formulated. If the Foundation is liquidated, the assets are distributed among the beneficiaries in accordance with the provisions in the charter, or articles or by-laws as the case may be.

X. OFFICIAL SUPERVISION
The following types of Foundations are not subject to official supervision:
· Pure and mixed family Foundations;
· Such Foundations the beneficiaries whereof are designated or may be designated, or are natural or legal persons susceptible of being ascertained, or the heirs-at-law and successors of such natural or legal persons;
· Such Foundations, the sole objects whereof are to manage their assets as well as to hold participations and other rights and to distribute profits and an eventual liquidation dividend;
· Ecclesiastical Foundations.
The registration officials must report to the government concerning such Foundations as must be entered into the Public Registry.

XI. DOUBLE TAXATION TREATIES

1. LIECHTENSTEIN - AUSTRIA
Liechtenstein has only one comprehensive double-taxation treaty, that being with Austria. Its purpose is to avoid the double taxation of income, property, and inheritances. The treaty basically provides:
· Income taxes may be levied only by the state in which the person receiving the income is resident.
· In the case of income from immovables, in that state in which the immovable property is located.
Provisions which are available to avoid double-taxation are reservations concerning the marginal rate, foreign-tax credits as well as provisions concerning the refund of taxes at source.

2. TAX TREATY WITH SWITZERLAND
Before 1995 there was no tax treaty with Switzerland. After the new federal taxation code entered into force on the 1st day of January 1995 concerning direct federal taxes as well as taxes at source, it was necessary for Liechtenstein to enter into a tax treaty with Switzerland in order to avoid the double-taxation of commuters and retired persons at the federal level. The basic premises of the treaty provide that:
· Interest paid on mortgages may only be taxed by the resident state of the mortgagee.
· The income of commuters may only be taxed by the country of their residence and no taxes may be imposed by the state where the place of work is.
· Pensions, annuities and lump sum pensions may only be taxed by the state of residence of the payee.

 

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