Fund location Liechtenstein
Why is the Principality of Liechtenstein a good fund location? What advantages does Liechtenstein offer to initiators and investors?
We sometimes still encounter the prejudice that Liechtenstein could be problematic for foreign institutional investors. Therefore, we would like to try to give an insight into Liechtenstein as a fund location and its advantages and disadvantages with the following information, which is provided by the Liechtenstein Investment Fund Association, among others.
For initiators, the choice of location for their investment product plays a major role. Here, of course, decisions are made according to the legal, tax and actual requirements of the location, but in particular also according to the target group of investors for the product. Nowadays, institutional investors in particular have detailed requirements and a strict code of values. Countries that are associated with tax evasion or tax fraud are rightly an absolute no-go for institutional investors.
Liechtenstein has been a member of the European Economic Area (EEA) since 1995 and has implemented the European directives for UCITS and AIFM with the laws on certain undertakings for collective investment in transferable securities (UCITSG) and on alternative investment fund managers (AIFMG). Liechtenstein funds and their providers thus have identical rights and obligations as those in the EU member states, including equal participation in the European single market via passporting. Investors, in turn, enjoy the same legal protection as for products from the EU.
The OECD has also given Liechtenstein high marks in its country reviews since 2015. Liechtenstein now has the same rating as Germany and the UK, for example, and is taking effective action against tax fraud and tax evasion.
Liechtenstein also committed to the OECD’s AEOI standard (exchange of certain information on financial accounts in tax matters) back in 2014. Including the EU states, Liechtenstein’s AEOI now covers well over 100 countries. This also provides Liechtenstein with more tax transparency for foreign investors. However, investors do not suffer any tax disadvantages when acquiring Liechtenstein funds. On the contrary: Liechtenstein funds are subject to unlimited tax liability in Liechtenstein and therefore basically have the same declaration and cooperation obligations as other taxable entities. However, the income from the managed assets of Liechtenstein funds is exempt from taxation. As a result, Liechtenstein funds are not subject to effective taxation. Furthermore, Liechtenstein has no withholding tax on fund distributions and no “taxe d’abonnement” (subscription tax). Thus, investors are only subject to the taxes of their home country.
In addition to the legal and fiscal conditions, as explained, the Principality of Liechtenstein has another practical advantage; the deadlines or response times of the Financial Market Authority Liechtenstein (FMA). The legislation provides a very short approval period for UCITS funds (10 days) and a reasonably short one for AIFs (20 days). However, the average effective response time of the FMA is only 4-5 working days.
The fund location Liechtenstein is therefore legally, fiscally and actually interesting for initiators and investors of investment products.
By the way, XOLARIS Capital AG, our AIFM in Liechtenstein is a member of the Liechtenstein Investment Fund Association.
XOLARIS is now in its eleventh year of existence. Having started as a classic back-office outsourcer based in Constance, we have now developed into an international structuring and fund management platform for real assets, with offices in Liechtenstein, Germany, France, Singapore and Hong Kong.
In this regard, our growth is consistently breaking new ground.
When we made the decision to set up KVG, an independent service, in 2014, many people agreed that there would be no market for this service.
Today, the ManCo market is one of the fastest growing markets. Expansion into Asia in 2018 laid the foundations for internationalisation, which, in the capacity of first foreign market participant, reached another milestone in 2020, with relocation of the holding company to Liechtenstein and acquisition of the AIFM licence. As the next AIFM location, Paris is the logical next step of the XOLARIS Group’s success story.
In this context, it was and is always important to us that we remain true to our roots in the real asset business. We will continue to maintain this focus as we move towards becoming a global real asset investment group.
With our new CI, we want to break new ground in this area. The first edition of Market News as well as our podcasts, constitute another step in the development of the Group.
I would like to take this opportunity to thank all my colleagues, without whose great work the success of XOLARIS would not have been possible.
I hope you like our new format as well. Even so, we are open to suggestions and criticism and look forward to your feedback.