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Double Benefit for Investors in Liechtenstein, 1999

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Double Benefit for Investors in Liechtenstein, 1999 F.L. TRENDING 1999 Double benefit for investors in Liechtenstein Investors profit from membership of the European Economic Area and ties with Switzerland The Principality of Liechtenstein is the only country in Europe belonging with Austria. The same year saw the to two economic regions simultaneously. The Customs Treaty and Currency beginnings of a rapprochement with Agreement with Switzerland tie Liechtenstein into the Swiss economic ter- Switzerland. An embassy was estab- ritory. At the same time, thanks to its membership of the European Econo- lished in Bern, and Switzerland took mic Area (EEA), Liechtenstein is also one of the countries of the European over diplomatic representation of Single Market. Switzerland on the other hand is not a member of the EEA. Liechtenstein in other countries. A For Liechtenstein and, above all, for investors wishing to place their money Postal Treaty negotiated in 1920 here, this unique situation brings many advantages. came into effect on 1 January 1921 (and is due to lapse in 1999 following Liechtenstein’s close association the Austrian krone (then the official privatisation of postal services). with Switzerland goes back to the legal tender in Liechtenstein), the years following the First World War. country lost virtually all its savings. On 1 January 1924, after conclud- Previously, this tiny country on the ing a Customs Treaty in the previous upper Rhine had because of ancient Liechtenstein turns to Switzerland year, Liechtenstein became part of connections between the princes of On 2 August 1919 the Liechtenstein the Swiss customs territory. From Liechtenstein and the House of parliament (the Landtag) voted to May 1924, the official national cur- Habsburg been intimately connected terminate the 1852 Customs Treaty rency became the Swiss franc (CHF). with the «Danube Monarchy» of Austria-Hungary. European Economic Area (EEA) – the way forward What had proved advantageous in the nineteenth century now became For years two economic blocs have faced each other in Europe: the EEC of the a disadvantage. Like Austria, during 1958 Rome treaties (the later EC), and since 1959 the European Free Trade the 1914-18 War Liechtenstein was Association (EFTA). In 1972 the member-states of both bodies signed a free- placed by the Allies under a raw- trade agreement. In 1989 the president of the EC Commission, Jacques Delors, materials blockade. Many businesses proposed the creation of a joint economic region for all EC and EFTA countries. had to close. The customs revenue so In 1991 the agreement concerning the European Economic Area (EEA) was essential to the national exchequer signed. dropped to a tenth of what it had Switzerland voted in a referendum against joining the EEA. All other EFTA been. When food too became scarce, countries voted in favour. The EEA came into existence on 1 January 1994 – Switzerland stepped in with sup- without Switzerland and initially also without the Principality of Liechtenstein, plies. As a result, by 1919 Liechten- which first had to negotiate with Switzerland over the future of the two coun- stein had run up a debt of 450,000.-- tries’ bilateral relations. The voters of Liechtenstein approved the new agree- Swiss francs, which it was able to ments with Switzerland on 9 April 1995, and on 1 May 1995 Liechtenstein repay only thanks to a donation from became a member of the EEA. the prince. Following the collapse of Liechtenstein’s integration in the Swiss currency territory does not affect its autonomy as financial centre. In the period that followed, close ment followed in 1980. This under- recognition of Liechtenstein sover- relations formed between the two lined, in terms of international law, eignty. countries. These provided an essen- what had long been in practice the tial foundation for Liechtenstein’s integration of Liechtenstein in the Economically integrated in Europe economic upswing. The Principality Swiss currency territory. Alongside achieving autonomy in adopted more and more legal regu- the financial sector and developing a lations from Switzerland. On the one A self-confident foreign policy self-confident foreign policy, Liech- hand it was committed to doing so In terms of economic and foreign tenstein also sought to join the move- under the Customs Treaty; on the policy, until the 1960s Liechtenstein ment towards economic integration other hand, wholly practical reasons marched in step with Switzerland. in Europe. favoured the adoption of Swiss law. Then, however, the Principality’s As early as 1959, when EFTA increasing economic upswing (European Free Trade Association) Autonomy in the financial sector strengthened national self-confi- was founded, Liechtenstein’s partici- However, in the fields of financial, dence and Liechtenstein began (tim- pation was governed by a supple- company and tax law Liechtenstein idly at first) to develop independent mentary protocol, and on 21 May has gone its own way. An innovative foreign-policy initiatives. It joined 1991 Liechtenstein was admitted to tax law came into effect in 1923, and various international organisations full membership. With this step, the Liechtenstein’s liberal Persons and as a member in its own right. In 1975 government enabled the Principality Companies Law followed in 1926. the country received observer status to take part in the negotiations con- Since then the holding privilege for at the Council of Europe, and in 1978 cerning the EEA as an independent domiciliary companies and the many it became a full member. Even before treaty partner. Just over a year later corporate forms possible in Liechten- that it had sent its own delegation to this turned out to have been particu- stein have attracted foreign investors the Conference for Security and Coo- larly advantageous when Switzer- to the country and stimulated the peration in Europe (CSCE, the fore- land voted against signing the EEA development of Liechtenstein as a runner of today’s OSCE). Member- Agreement on 6 December 1992 financial centre. ship of the United Nations followed while a few days later the citizens of The country’s banks are closely in 1990. This signified international Liechtenstein voted in favour. tied in with the Swiss financial system. The first Banks Act of 1961 Tax advantages and currency in the EEA drew heavily on its Swiss counter- part. Liechtenstein’s banks maintain Taxes are not covered by the EEA Agreement. Unlike EU membership, mem- close business relations with finan- bership of the EEA does not require Liechtenstein either to harmonise national cial institutions in Switzerland, rates of taxation or to provide international cooperation in tax matters. Con- which for them constitute an impor- clusion of double-taxation agreements with other EEA states is not compulsory. tant investment address for the Special tax concessions for holding and domiciliary companies are not affected. funds entrusted to them. At an early stage Liechtenstein’s banks also The single currency (the EURO) need not be introduced. The Swiss franc became members of the Swiss Ban- remains in place as Liechtenstein's national currency. kers’ Association. A Currency Agree- F.L. TRENDING 2 Banking secrecy and tax advantages for investors are unaffected F.L. TRENDINGby Liechtenstein’s EEA membership. These conflicting referendum re- ments apply there with regard to (unlike in Switzerland) finance com- sults were to have repercussions. The «free movement of persons». What panies, lawyers, and trustees. How- EEA states postponed their agree- form those arrangements will take in ever, foreign investors remain ano- ment (which was originally to have future is currently the subject of nymous so far as banks are concern- come into effect on 1 January 1994) negotiations. ed if the professional diligence is by one year, during which Switzer- exercised by a lawyer or trustee. land and Liechtenstein discussed Liechtenstein as a financial centre Liechtenstein’s banks also benefit how to structure their bilateral rela- and the EEA from the EEA in that they are now tions in such a way as to allow Liech- Liechtenstein’s reputation as a finan- able to offer services and open tenstein to join the EEA despite cial centre has gained added en- branches in every other EEA country. Switzerland’s «no» vote. For a time hancement from the country’s mem- this appeared impossible. However, bership of the EEA. Investor confi- IMPRINT in the summer of 1994 the two coun- dence is based on the fact that this Publisher and Copyright Owner: tries reached an agreement that re- official link with 17 European coun- ArComm Trust Company Establishment ceived the assent not only of the EEA tries is tantamount to international Responsible for Contents Law Office of Dr. iur. et lic. oec. states but also of the Swiss parlia- recognition of Liechtenstein’s status Norbert Seeger ment and the people of Liechten- quo and offers exceptional condi- Editing and Arrangement stein. Accordingly, on 1 May 1995 tions in the financial services sector. Dr. iur. et lic. oec. Norbert Seeger Address for Publisher, Editor and all Liechtenstein became a member of Crucially, however, the whole field Responsible Persons the EEA. of taxation is excluded from the EEA P. O.Box 1618, FL-9490 Vaduz Am Schrägen Weg 14 Agreement. So even future EU reso- Telephone: +423 - 232 08 08 Special features in the EEA lutions regarding withholding tax, Facsimile: +423 - 232 06 30 E-mail: [email protected] Because of Liechtenstein’s unique tax harmonisation, and international Homepage: http://www.seeger.li situation,
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