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Liechtenstein


Liechtenstein

 

LIECHTENSTEIN

HISTORY AND POLITICAL STRUCTURE

The Principality of Liechtenstein nestles in the picturesque Rhine valley, between Switzerland and Austria and is surrounded by the Alps. There is a 35 km border with Austria and a 41 km border with Switzerland; total land area is 160 km. The Principality is landlocked. The terrain is mountainous, with the Rhine Valley occupying the westernmost third of the country. The lowest point is Ruggeller Riet at 430 m and the highest elevation is Grauspitz at 2,599 m.
The climate is continental with frequent snow falls, cloudy conditions, rain and cold in winter and cool to reasonably warm, cloudy summers. Only 24% of the land is arable and there are no permanent crops grown. Sixteen percent of the land is permanent pasture and 35% is forest.

There are a number of international airports within driving distance: Zurich (1hr 30 min), Basle (2 hrs), Stuttgart (2 hrs 30
min) and Munich (2 hrs 30 min). The closest international airport is Altenrhein in Switzerland, 30 minutes away.
The population of Liechtenstein is just over 34,500 (July 2009 est), most of them living in the capital, Vaduz. The of-
ficial language is German and there is also an Alemannic dialect. English and French are quite widely spoken. Ethni-
cally, Liechtenstein is 90% Alemannic, with small groups of Italian, Turkish and other races. There is a large expatriate
population.

Liechtenstein has been settled since Neolithic times. The Romans occupied the Principality from 15th to the 5th centu-
ries BC, being succeeded by the Aleamanni. In the Middle Ages Liechtenstein passed through various different hands,
finally being acquired by the present ruling family in 1712. Liechtenstein became a Principality in 1719, and a sovereign
state in 1806.

Culturally, Liechtenstein is quite similar to the Germanic cantons of Switzerland that lie alongside it. Indeed, Switzerland is responsible for the defence of Liechtenstein, which also shares its currency, a customs union, diplomatic representation, and many aspects of social and business infrastructure. The monetary union of Liechtenstein and Switzerland took place in 1980. The Roman Catholic religion is dominant.

Liechtenstein is a hereditary constitutional monarchy, with a democratically elected Parliament (the Diet). A first Constitution was signed in 1862 by Prince Johannes II; in 1921 a Constitution which remained essentially valid until 2003 was promulgated by Johannes II. In 1938 Prince Franz Joseph II became the first Prince to reside in the castle of Vaduz. Prince Hans Adam II is currently the monarch and Head of State. The cabinet is elected by the Diet and confirmed by the Prince. The Prince usually appoints the leader of the majority party in the Diet as the head of government and the deputy head of government is usually the leader of the largest minority party in the Diet.

In March, 2003, the principality took a step towards becoming an absolute monarchy after a referendum gave the ruling Prince Hans-Adam II sweeping new powers. The vote showed a substantial majority for the Prince, with 64% supporting the move, and 36% against it.

The new constitution gives the Prince the right to veto parliamentary bills, sack the entire government and introduce emergency powers. However the constitution also provides for a further referendum to abolish the monarchy.

In 2004, Prince Hans-Adam II formally transferred the day-to-day running of the principality to his eldest son, Prince Alois. “A large responsibility has come to me today,” Crown Prince Alois, 36, told reporters after the handover. “But I have the luxury that my father has included me in many important decisions and so I am well prepared.”

The unicameral Diet or Landtag has 25 seats. Members serve a four year term and are elected by universal suffrage using proportional representation.

Liechtenstein law is a mixture of Austrian and Swiss law with some local peculiarities. There is a High Court (Landgericht), a Court of Appeal (Obergericht), and finally a Supreme Court (Oberste Gerichtshof). There is a Constitutional Court with powers in the area of public law.

Liechtenstein has been a member of the EEA since 1995, and a member of EFTA, but does not wish to join the EU. It belongs to the UN, and a wide range of other international organisations.

ECONOMY

Since uniting in a customs and economic union with Switzerland in 1924, and in spite of limited natural resources,
Liechtenstein has developed from an agrarian society into a highly industrialised, free-enterprise economy. Industries
includes electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments
and tourism.

The standard of living equals or exceeds that of the urban areas of neighbouring Europe. GDP per head is about $122,000 (2007); inflation and unemployment are both below 2%; there are trading and budget surpluses and the country has zero external debt.

The financial services sector has been extremely successful: key activities include private banking, trust services and investment management.

Liechtenstein’s national currency is the Swiss Franc; there is no exchange control.

Since the signing of a customs treaty in 1924, Liechtenstein and Switzerland have represented one mutual economic area with open borders between the two countries. Liechtenstein also uses the Swiss franc as its national currency, and Swiss customs officers secure the border with Austria.

Liechtenstein is a member of EFTA and joined the European Economic Area (EEA) in 1995 in order to benefit from the European Union (EU) internal market. The liberal economy and tax system make Liechtenstein a safe, trustworthy, and success-oriented place for private and business purposes, especially with its highly modern, internationally laid out infrastructure and nearby connections to the whole world. In 2007, Liechtenstein had an obligation under the EEA treaty to harmonize its laws with EU directives 2005/36 and 1999/42 on the mutual recognition of EU and EEA university and professional diplomas. Liechtenstein is also part of the EU fund on research and technology and is entitled to participate in EU projects and subsidies.

The Principality of Liechtenstein has gone through dramatic economic and cultural development in the last 40 years. In this short period of time, Liechtenstein developed from a mainly agricultural state to one of the most highly industrialized countries in the world.

The Principality of Liechtenstein ranks among the strongest industrialized areas of Europe according to a 2008 government economic study. The strong industrial sector focuses on ‘’machine - tool industries, vehicle manufacturing, and the electrical and optical areas was well able to sustain its position in spite of the growing service sector. Approximately 5% of the country’s revenue is invested in research and development.

The significance of the industrial sector for the Liechtenstein economy is reflected in foreign trade. As a result of the global economic crisis, total exports decreased by 27.4% and 0.1% in 2009 and 2008, respectively, compared to an increase of +14.5% in 2007, and imports decreased by 21.8% and 0.8% for 2009 and 2008 compared to an increase of +15.2% in 2007.

The export economy is tied to Western Europe. Approximately 60% of all Liechtenstein exports go to Western Europe,
followed by North America and East Asia. In 2009, about 61% of Liechtenstein’s goods were exported to Western Eu-
rope, 14.7% to the Americas, 12.49% to Asia, and the remaining share to the rest of the world. In 2008, the U.S. was
one of the most important trading partners for Liechtenstein, with approximately $452 million (SFr. 490 million) worth
of exports and $40 million (SFr. 43.3 million) of imports. Germany was first with a total trade value of $1.76 billion (SFr.

1.9 billion).

The Liechtenstein industrial sector contributes 39% of the country’s GDP, services 54%, and agriculture 6%. Despite Liechtenstein’s overall good competitive performance, some large manufacturing companies outsource their production to low-cost countries.

In addition to the industrial sector, Liechtenstein has developed a strong services sector, with an important financial center that includes a multitude of related service enterprises. In particular, branches such as real estate, information systems, and other services for enterprises showed a sharp increase, followed by trust companies and legal services. Five out of 10 employees now work in the services sector. As a rule, these newly established enterprises tend to be small. The 2008 economic study showed that approximately 99.5% of businesses located in Liechtenstein are mostly small and medium-sized enterprises.

The economy of the Principality of Liechtenstein provides approximately 33,000 jobs, of which about two-thirds are filled by commuters from Switzerland, Austria, and Germany.

WHY CHOOSE LIECHTENSTEIN WHEN STARTING A BUSINESS?

Liechtenstein offers an extremely stable and efficient business environment with modern infrastructure and excellent telecommunications. There is a wide variety of corporate forms available for most purposes and the legislative structure is flexible and liberal. Although Liechtenstein is a ‘civil code’ jurisdiction, legislation has created a trust regime which is widely used.

There are stringent banking and tax secrecy laws. Liechtenstein signed a mutual assistance treaty with the US in July, 2002, but it excluded civil tax matters. In December 2008, however, it was announced that the United States and Liechtenstein had signed an agreement to allow for the exchange of information on tax matters between the two countries. The Tax Information Exchange Agreement (TIEA) between Liechtenstein and the US went into force on December 4, 2009. By May 2010, Liechtenstein had concluded TIEAs with 14 countries, including France, Germany, the Netherlands, Belgium, Luxembourg and the UK.

A double tax treaty with Austria contains provision for exchange of information regarding Austrian commuters working
in Liechtenstein (there are some thousands of these). Liechtenstein is a signatory to some international conventions
allowing exchange of information in criminal cases. Liechtenstein has also concluded a double tax agreement with
Luxembourg.

The dramatic growth of the Liechtenstein economy in the last 50 years has led to the development of very extensive professional and financial services. English is widely spoken in business life, but this is after all a German-speaking country, and that is a factor to be taken into account.

 

Along with Switzerland, in 2004 Liechtenstein accepted the EU’s Savings Tax Directive, and imposed a 15% initial withholding tax on interest and other savings returns paid to citizens of the member states of the EU from 1st July 2005. The 15% rate rose to 20% for three years from July 1, 2008, and will remain at 35% thereafter.
Liechtenstein is a relatively expensive jurisdiction. However taxation is low, even for domestic and resident individuals and companies; and it is lower still for those who are offshore or non-resident.

Advantages of the Jurisdiction of Liechtenstein

The following are the advantages of starting a Business in Liechtenstein:

Through its entry in the European Economic Area, the Principality of Liechtenstein can secure and expand its advantages as an “offshore center”. International investors can profit from Liechtenstein trust laws, which are unique in Continental Europe, as well as liberal company law rules, low-taxes and the high standards required with respect to professional, tax and bank secrecy. All these advantages are secured in an internationally recognized and respected, fully-fledged member of the European Economic Area enjoying political stability in a market economy.

The special property tax regime for holding and domicile companies is not affected by the European Economic Area
Agreement. European company law does not affect the important corporate forms in Liechtenstein, such as the foun-
dation, the establishment and the trust enterprise. Even in the case of the stock company under Liechtenstein law,
there will only be a few modifications since Liechtenstein stock company law already provides much creditor protec-
tion. Similarly, European Economic Area membership does not affect the areas of bank, tax and professional secrecy.

The essential framework that Liechtenstein can offer is:

•   A stable political and economic order;

•   A strong currency;

•   Holding company privileges (unaffected by EEA membership);

•   Extensive bank, professional and tax secrecy;

•   No tax harmonization;

•   No legal assistance in tax matters;

•   Ultramodern infrastructure;

•   Few scandals and economic and social policies which remain consistent over a long period of time and char-
acterize the political culture in the Principality. The annual budget, which today amounts to approximately FR
600-million, regularly shows a surplus. Liechtenstein has no public debt. The social climate between employers
and employees is characterized by peace and a spirit of partnership. The last strike was in 1898 and lasted only
two days; and

•   An extremely well-developed network of banks and trust companies, whose ultramodern data processing technol-
ogy and highly qualified, multilingual and motivated workforce are the foundation of healthy competition, which
guarantees further dynamic development.

•   High international standing authority of Liechtenstein

•   Opportunity of registration of offshore and holding company

Placing an order for the formation of a company

The Incorporation of Liechtenstein off-shore companies is governed by the Company Act 1926, Civil codex. The formation of a Liechtenstein International Business Company can take place by using an order form which can be provided by the Registry Agent.

You can also buy a ready-made company from the list available. A ready-made company normally has an open configuration (its directors are not yet appointed and the shares are not yet issued). Therefore the final configuration of a shelf company is made at a later stage.

The Registry Agent will check the name availability of the company (whether there is no company under such name already). In Liechtenstein the law requires that all financial service providers know the identity of their client so the actual contact details must be indicated at the Registry Agent.   This information remains confidential.

Requirements for the Registration of an IBC

•   Director: Minimum of one Director. Corporations are permitted.

•   Secretary: A secretary is not required.

•   Shareholder: Minimum of one shareholder. Corporations are permitted.

•   Shareholders and Directors may be the same.

•   Shares & Capital: In Liechtenstein, there is minimum Authorized Share Capital, though the standard is for public
corporation - Aktiengesellschaft is 50000 CHF, 100 % should be paid at the moment of registration for enterprise -
Anstalt, and foundations - Stiftung is 30000 CHF, 100 % should be paid at the moment of registration.

•   Name of the Company: Must end with one of the following suffixes: Limited or Ltd, Corporation or Corp, Incor-
porated or Inc.

•   Company must have a registered office and a registered agent in Liechtenstein.

 

 

Required Documents to register the company:

•           Notarized copy of your Passport.

Notarized Copy of utility bill for address verification less than 3 months old

•           Application documents.

When all the details are confirmed and the payment for the relevant fees received, the Registry Agent will prepare the
Memorandum and the Article of Association of the new International Business Company. These will be filed with the
Registry of International Business Companies in Liechtenstein. There is no need to sign any statutory info, the initial
company formation documents are prepared and signed on your behalf by the Registered Agent always under the
procedures set by the Liechtenstein Company Act 1926, Civil codex. The Registered agent will file the corporate docu-
ments of the company, will pay the applicable registration fees and arrange for the documents to be submitted to the
Liechtenstein Registrar of companies for registration. All the relevant documents will be kept in the Registered Agents
office.

Corporate documents of an IBC

•   Original certification of incorporation of IBC

•   Memorandum and article of Association

•   First minutes and Corporate Resolutions containing the appointment of directors, allocation of shares, share cer-
tificates, copies if the Registry of Directors and the Registry of shareholders need it.

•   Share transfer forms, trust declarations, appointments of representative (power of attorney) and the Corporate
Seal.

The Principality of Liechtenstein is known as an important financial center primarily because it specializes in financial services for foreign entities. The country’s low tax rate and traditions of strict bank secrecy have contributed significantly to the ability of financial intermediaries in Liechtenstein to attract funds from outside the country’s borders. In November 2009, the Organization for Economic Cooperation and Development (OECD) recognized Liechtenstein as a jurisdiction that has implemented international cooperation standards in tax matters, and it has removed Liechtenstein from the so-called OECD “grey list”.

Liechtenstein has chartered 15 banks, 3 non-bank financial companies, and 71 public investment companies, as well as insurance and reinsurance companies. Its 395 licensed fiduciary companies and 112 lawyers serve as nominees for, or manage, more than 75,000 entities (primarily corporations, institutions, or trusts), mostly for non-Liechtenstein residents. Approximately one-third of these entities hold the controlling interest in other entities, chartered in countries other than Liechtenstein. The Principality’s laws permit the corporations it charters to issue bearer shares. Until recently, the Principality’s banking laws permitted banks to issue numbered accounts, but new regulations require strict know-your-customer practices for all accounts.

Make no mistake about this compact country, it offers accommodations in every form you could wish. Visitors can choose from the usual hotels and hostels, or expand their experience to include guesthouses, cabins, campsites, and the ever-popular farm holidays. Liechtenstein is proof that great things can come in small packages.

Held in the country’s capital city of Vaduz, the July Vaduz Film Festival is an open-air event where a variety of films are screened over a two-week period. In August, the country hosts its State Celebrations festival complete with fireworks from the Vaduz Castle, lighting up the sky over the Rhine Valley.

Throughout the year, Liechtenstein plays host to a variety of fine food and wine festivals. It is also a great winter ski destination as well as a paragliding, hiking and cycling destination during the summer months. It is home to the Museum of Fine Arts and the Postage Stamp Museum. The creation of high-quality postage stamp designs originated in Liechtenstein, making stamps one of the country’s largest exports.

For the purpose of translating entrepreneurial initiative, Liechtenstein law provides a variety of instruments which are unique in continental Europe.

The Liechtenstein economic miracle of the postwar years owes its success in no small part to the freedom which is granted by the Liechtenstein legal system. Membership in the European Economic Area opens to the Liechtenstein industry and service sectors new opportunities. The successes of the past as well as the flexibility of the Liechtenstein economy suggest a positive prognosis for the future.


 

 

GENERAL OVERVIEW

Location

Central Europe, between Switzerland and Austria.

Time zone

CET - Central European Time.

Population

35,000 approx.

Capital

Vaduz.

Airport(s)

None (120 km to Zurich airport).

Language

German (Swiss-German Dialect).

Currency

Swiss Franc (CHF).

Political system

Political power shared between hereditary monarch and democratically elected government; extremely stable.

International dialling code

+423.

Legal system

Civil law system based in part on Swiss law, in part on Austrian law, and incorporating the common law concept of 'trust'.

Centre’s expertise

Renowned for numerous types of offshore vehicle (e.g. foundation, establishment, company, trust, trust enterprise); strict banking and professional secrecy; highly-educated personnel.

TAX

Personal income tax

Up to 18%.

Corporate income tax

0.2% capital tax; up to 15% income tax for residents, plus surcharge up to 5% depending on level of dividend/distribution; 4% coupon tax (e.g. on dividends); 7.6% value added tax.

Exchange restrictions

None.

Tax treaties

Limited double taxation agreement with Austria and Switzerland.

SHARE CAPITAL

Permitted currencies

CHF, €, US $.

Minimum authorised capital

CHF 30,000.

Minimum share issue

Depends on type of vehicle.

TYPE OF ENTITY

Shelf companies

Public limited company (AG); private limited company (GmbH); establishment (Anstalt); foundation (Stiftung); trust enterprise (Trust Reg.); etc.

Timescale for new entities

2 - 3 days.

Incorporation fees

CHF 800 approx.

Annual fees

Professional fees - approx CHF 3,000 - 5,000 depending on time spent, etc. Possibly also ac­countancy and audit fees, variable according to work involved.

DIRECTORS

Minimum number

One.

Residency requirements

Yes.

Corporate directors

Yes.

Meetings/frequency

Depends on type of vehicle.

SHAREHOLDERS

Disclosure

No.

Bearer shares

Yes.

Minimum number

Two.

Public share registry

No.

Meetings / frequency

Depends on type of vehicle.

ACCOUNTS

Annual return

Depends on type of vehicle.

Audit requirements

Depends on type of vehicle.

OTHER

Registered office

Yes.

Domicile issues

Registered agent/trustee.

Company naming restrictions

Name availability to be checked with registrar.