The Liechtenstein financial centre is guided by the principle of ‘thinking in generations’ and aims to protect assets not just for a single generation, but for those to come. Liechtenstein’s stable political, economic and social environment, combine to make it an ideal location for long-term wealth preservation
Liechtenstein is a small country and as such is not necessarily at the centre of world events. However, given the backdrop of the prevailing geopolitical uncertainties, it is definitely worth taking a look at this small Alpine nation in the heart of Europe. After all, the Principality boasts framework conditions that few countries can currently match.
A country with a difference
It is important to understand that, for over 300 years. Liechtenstein has been continuously ruled by the Princes of Liechtenstein as a constitutional hereditary monarchy on a democratic parliamentary basis. The form of government is a combination of direct democracy and monarchy, in which power is shared between the Prince and the people. This results in the necessity to seek compromise and consensus within the political system, which ensures stability and continuity.
Business and innovation-friendly conditions aided Liechtenstein’s development from a poor agricultural state to become a country with a high economic performance. In fact, at over 42,000, the number of jobs exceeds the population of around 40,000.
Economic integration via two market accesses
Due to the small size of the domestic market, the widely diversified, highly industrialised economy with around 5,500 companies, numerous global market leaders such as Hilti and Hoval and a broad-based financial centre, is heavily export-oriented. Consequently, the financial centre players are focused on international, cross-border asset management.
With this in mind, it is worth noting that Liechtenstein has a unique feature: On the one hand, it has maintained a customs union with Switzerland for over 100 years and thus has the Swiss franc as its national currency. At the same time, unlike Switzerland, Liechtenstein has been a member of the European Economic Area since 1995 and is therefore part of the European single market with free access to services and goods. This means that financial market participants are subject to the same legal framework conditions as in the EU countries.
Innovation as a driver of growth
The small-scale, consistent niche strategy and adaptability have led to a high level of innovation in Liechtenstein’s economy. Private research expenditure in relation to GDP is more than double the European average.
A governmental innovation framework and the Office for Financial Market Innovation and Digitalisation ensure the continuous improvement of business location conditions and a high degree of legal certainty for private individuals and companies. For example, Liechtenstein was the first country in the world to introduce a Token and TT Service Providers Act (TVTG) in 2020 in order to protect users and ensure confidence in digital legal transactions.
No national debt – how come?
Liechtenstein has succeeded in capitalising on the advantages of its small size and sovereignty. Key legal and economic policy cornerstones for this were already established in the 1920s, for example through the creation of a liberal economic and legal system combined with a low tax and duty burden. The small state’s short political, administrative and economic channels and the associated efficiency, flexibility and speed of action were, and continue to be, helpful in this respect.
In addition, a prudent financial policy pursued by business and politics has led to a high level of public sector reserves and strong equity capitalisation of companies. Liechtenstein is one of the few countries in the world with no national debt and has one of the lowest public expenditure ratios in Europe (government spending in relation to GDP). This is one of the reasons why the country has been consistently awarded a triple-A country rating by S&P Global Ratings for many years. Liechtenstein’s accession to the International Monetary Fund (IMF) at the end of 2024 was also welcomed by S&P Global Ratings as a further stabilising factor.
Compliant with international standards
The strict laws and rules on combating money laundering, cross-border tax offences and terrorist financing guarantee the stability and security of the financial centre. The implementation of the standards for the exchange of tax information in Liechtenstein was awarded the top rating of ‘largely compliant’ by the Global Forum. In its fifth report, the Council of Europe’s Committee of Experts on Combating Money Laundering and Terrorist Financing (Moneyval) attested Liechtenstein a high degree of effectiveness and ranked the country among the top 5 of its member states. Liechtenstein’s strong commitment to international standards enables financial centre players to develop their core competencies in long-term, cross-border asset matters in the interests of their clients.
An expert in sustainable wealth preservation
Managing and preserving assets over generations has a long tradition in Liechtenstein. Today, a broad range of financial services has allowed Liechtenstein to establish itself as a centre for banking, foundations and funds, for example. It is interesting to note that Liechtenstein banks traditionally pursue a conservative business model and do not engage in investment banking; their focus is on private banking and international wealth management. In addition, the Liechtenstein banking sector has above-average stability and resilience by international standards. With a Tier 1 capital ratio of over 21 per cent, Liechtenstein banks are among the best capitalised banks in the world.
Liechtenstein also offers first-class conditions for philanthropic engagement. Named the world’s Number 1 philanthropy location in 2022 by the Global Philanthropy Environment Index, Liechtenstein is characterised by its flexible foundation law, innovative company law, short official channels and high level of advisory expertise. Around 1400 charitable foundations benefit from Liechtenstein’s ideal framework conditions for their social or ecological commitment. Thanks to its innovative company law, Liechtenstein is one of the few countries to offer the possibility of setting up charitable trusts. Trusts offer a familiar alternative to foundations, especially for philanthropists from Anglo-American countries.
Thinking in generations
With its many years of experience and wide range of services, the Liechtenstein financial centre stands for first-class wealth solutions and wealth preservation over generations. Liechtenstein, as a country, and its financial centre offer not only unique locational advantages but also a high degree of stability. In view of the geopolitically challenging times we are facing, this attribute is anything but self-evident. It arouses interest that extends far beyond the country’s borders and has brought Liechtenstein into focus as a safe haven in uncertain times.
Further information
www.finance.li
