Liechtenstein is a well-known destination for entrepreneurs interested in setting up an investment fund that is compatible with other EU similar funds. This way, the founders of the investment fund in Liechtenstein will have access to the European market and will benefit from investor protection and confidentiality offered by the banking secrecy.
Other advantages are those related to the economic and political stability, the developed banking system and economic policies and taxation that are favorable to the foreign investors etc. The investment funds are monitored by Financial Market Authority (FMA), an entity that is recognized in EU, and that can approve the establishment of a fund in just a few weeks.
- the Undertakings for Collective Investments in Transferable Securities Law, also known as the UCITS legislation;
- the Alternative Investment Fund Managers (AIFM) Directive;
- the Investment Company Act.
It is important to know that Liechtenstein has also adapted most of its laws related to setting up funds to the EU legislation and has even adopted most of the directives which allow an easy access to EU investors.
You can watch the video below for information on how to open an investment fund in Liechtenstein:
Requirements for opening an investment fund in Liechtenstein
The investors who want to set up a fund in Liechtenstein need a minimum capital of CHF 2 million and they have to provide a list of documents for the incorporation. If you want to find out more about the requirements for opening an investment fund, our company formation advisors in Liechtenstein can provide them. They will help you choose the proper fund type tailored to your business needs and interests.
After you submit all the necessary documents for establishing an investment fund, you have to wait between two and five months, depending on the fund type, and this is a short period compared to the deadlines in other countries. Qualified investors don’t need a formal permit for joining an investment fund and they are subject only to a simplified procedure.
Documents needed to create an investment fund in Liechtenstein
- a prospectus containing information on the services and organization of the fund;
- the company name which must contain references to the services of the fund;
- the address of the company – the company managing the fund must have a Liechtenstein address;
- the management company must submit a sustainable business plan with the FMA;
- a guarantee of the proper management of the fund is also required.
This guarantee is presented under the form of the qualifications and experience of the fund manager.
Types of investment funds in Liechtenstein
You can choose from the following types of investment funds, such as:
Investment Undertakings for Securities which can be set up asunit trusts;
Investment Undertakings for other values which can also take the form of unit trusts;
Investment Undertakings for real estate which can be created as investment companies;
Investment Undertakings for qualified investors which can be set up as trusts or investment companies.
The legal forms you can establish a fund in Liechtenstein are: as an investment fund and as an investment company. In the future, the funds in Liechtenstein will be divided into two categories - funds undertaking the collective investment of transferable securities and the others.
Types of investment companies when opening a fund in Liechtenstein
Not only investment funds are categories in Liechtenstein, but so are the types of structures used to set up a fund in the Principality.
The investment company is the main type of form which is used for creating a Liechtenstein fund. Investment companies may have a fixed or a variable capital and are suitable for UCITS funds. Investment companies can only be registered as public limited liability companies in Liechtenstein or as limited partnerships.
The minimum share capital of an investment company which will be self-managed is 300,000 CHF, while for companies hiring a manager under the AIFM (Alternative Investment Funds Manager) Directive, the minimum amount required is 125,000 CHF.
Investment funds can also be set up a collective trusts or common contractual funds with no legal personality which must be registered with the Companies Registrar in Liechtenstein.
No matter the type of investment company one decides to register in the Principality, an authorization from the Liechtenstein Financial Market Authority is required.
Organization of investment funds in Liechtenstein
Depending on the type of fund and the services offered, the following organizational structures must be ensured:
- all types of funds need to have a compliance officer who will make sure the fund operates in accordance with the FMA’s regulations;
- funds must also ensure the risk compliance functions with respect to the risks of investors;
- funds must also appoint an internal auditor who will verify the fund’s accounting;
- funds must appoint a person or authority who handles clients’ complaints.
Why open an investment fund in Liechtenstein?
Liechtenstein is a preferred destination when it comes to establishing investment funds because of the low taxes investors must pay. Even if the investment company is subject to the income tax on all its earnings, the tax rate is one of the lowest in Europe and in the world – 12.5%. Also, Liechtenstein funds are deemed non-taxable entities when it comes to the stamp duty. This provision applies in accordance with the Swiss legislation, as Liechtenstein has a customs union with Switzerland.
Other tax incentives related to investment funds in Liechtenstein are the exemptions from the turnover tax for the issuance of fund shares, as well as the exemption from the property tax. Liechtenstein has abolished the property tax a few years ago, which makes the country very appealing for opening companies in other industries also.
Other advantages of creating a Liechtenstein fund are:
- easy access to other markets;
- a quick licensing process;
- enhanced investor protection.
Taxes applies to fund vehicles in Liechtenstein
In order to create a fund in Liechtenstein, an investor must first choose a company which will serve as a structure for the administration of the fund. These fund vehicles can be corporate or non-corporate entities which will be taxed according to the tax legislation applicable in Liechtenstein. While fund set up by using a corporate vehicle, such as investment companies with variable or fixed capital will be subject to the corporate tax rate mentioned above, funds created by using a non-corporate vehicle such as a contractual fund will be subject to the income tax in Liechtenstein.
In order to be applied the income tax, a fund or the management company administering it must be registered in Liechtenstein. The same law specifies that the corporate income obtained from the assets managed by the fund will be exempt from the corporate tax applied to the net income.
The stamp tax applied to investment funds in Liechtenstein
Considering Liechtenstein follows certain tax regulations imposed in Switzerland, those interested in opening an investment fund in the Principality should know that a stamp duty will be levied upon the formation of the company managing the fund. The value of the stamp duty is 1% and applies to legal entities.
The transfer of securitiesof an investment fund will also be taxed upon the change of ownership of the respective securities. The tax will be divided between the issuer and the buyer of the securities.
The benefits of taxation in Liechtenstein
An important benefit is that the dividends obtained from investments in legal entities are exempt from income tax, as well as the capital gains obtained after the liquidation of investments in legal entities. There is a tax of 1% applied at the issuance or increase of the nominal value of the shares and this is for public limited companies and public EU companies that are in charge with the management of the investment fund in Liechtenstein. The same rate is applied in case of investment companies with fixed capital.
There is no tax in case of the shares of the investment companywith variable capital. There is a tax exemption for properties and there is a special taxation rule for the legal entities named PVS (Privatvermögensstruktur).
The investment funds on a contractual basis are not subject to pay the income tax on their income and on their net wealth.
The investment funds with variable or fixed capital don’t have to pay the income tax for the investments in the fund or for its income and there is no withholding tax for the distribution to the holders of units in the fund. The individuals who are residents in Liechtenstein are exempt from income tax on the incomes obtained from an investment fund.
For more information on the advantages when opening an investment fund, you may contactour company formation consultants in Liechtenstein who will help you open any type of company available in this country.
Call us now at (+44) 203-287 0408 to set up an appointment with our specialists in company formation. Alternatively you can incorporate your company without traveling to Liechtenstein.
As our client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Liechtenstein.
The team from CompanyFormationLiechtenstein.com is very qualified and benefits from extensive expertise in this area. I would definitely recommend them to any entrepreneur decided to start his own business here.
Mihai Cuc, Partner of
MHC Law Firm www.romanianlawoffice.com