Foundations, trusts and the data affair of 2008

The Persons and Companies Act of 1926

The instrument that made Liechtenstein famous among wealthy families in the German-speaking area is its law of foundations and trusts. Its source is the Personen- und Gesellschaftsrecht (PGR) of 20 January 1926, a comprehensive codification of the law of legal persons and companies that the small state adopted a few years after the customs treaty with Switzerland.¹ The PGR offered a remarkable range of legal forms, among them the Anstalt, a legal entity without members that could be used for commercial or holding purposes, the foundation under Articles 552 ff. PGR, and the Treuhänderschaft and Treuunternehmen under Articles 897 ff. PGR, which adapted the Anglo-American trust to a civil law system.² The reception of the trust was particularly unusual. At a time when Switzerland and Germany regarded the trust as a foreign institution incompatible with their property law, Liechtenstein codified it and thereby made the principality attractive to clients who wanted the flexibility of the trust with the proximity of a German-speaking jurisdiction.

The law was designed with a clear economic objective. After the collapse of the Austrian connection, Liechtenstein needed new sources of revenue, for which the combination of a modern company law, low taxes on holding and domiciliary companies and the Swiss franc proved effective. Foreign entrepreneurs and families from Germany, Austria and later from much further afield established foundations and Anstalten in Vaduz, administered by local trustees and holding assets deposited with Swiss and Liechtenstein banks. Zurich played a central role in this system from the start. Zurich lawyers and banks advised clients on the use of Liechtenstein structures, many of which held their assets in accounts in Zurich. The typical German structure of the post-war decades consisted of a Liechtenstein foundation with a Liechtenstein trustee on its council, a mandate agreement with the founder that reserved his influence, and a securities account at a Zurich or Liechtenstein bank.

The foundation law reform of 2008

The foundation law of 1926 was comprehensively revised by a law of 26 June 2008, which entered into force on 1 April 2009.³ Prepared over several years, the reform responded to criticism of the old law’s lack of governance rules, its uncertainty about the rights of beneficiaries and the ease with which founders could use foundations as mere shells. The revised law distinguishes between charitable foundations, which are subject to state supervision, and private-benefit foundations, which are not subject to state supervision unless they submit to it voluntarily. It strengthens the rights of beneficiaries to information, clarifies the powers that a founder may reserve and introduces rules on control bodies.⁴

The date of entry into force, only weeks after the Liechtenstein Declaration of March 2009, is no coincidence. The reform was part of the effort to reposition the Liechtenstein foundation as a legitimate instrument of estate planning and asset protection, compatible with international transparency standards. For Zurich advisers, the reformed foundation remains a common tool. It is used for succession planning in families with members in several DACH countries, for holding company shares in a manner that preserves unity of ownership and for charitable purposes. The tax treatment in the country of residence of the founder and the beneficiaries has become the decisive question. The transparency of the structure under the automatic exchange of information and the registers of beneficial owners has replaced the anonymity that once defined it.

The LGT data affair of 2008

The event that ended the old model began with a data theft. Heinrich Kieber, an employee of LGT Treuhand, the fiduciary subsidiary of LGT, copied client data in 2002. Years later, he sold the data to the German Federal Intelligence Service for about 4.2 million euros. On 14 February 2008, German investigators searched the home and office of Klaus Zumwinkel, the chief executive of Deutsche Post, who was suspected of evading about one million euros in tax through a Liechtenstein foundation. Some 600 to 700 persons in Germany came under suspicion, and investigations followed in the United States, the United Kingdom, France, Finland, Canada, Australia and several other countries.⁵ Zumwinkel, whose arrest in front of television cameras became the defining image of the affair, resigned from his position soon afterwards.

The affair had consequences for all three countries. For Germany, it established the practice of buying stolen client data, which the tax authorities of several Länder later applied to data from Swiss banks. It also provided the political momentum for the German campaign against tax havens that Chapter K.I describes. For Liechtenstein, it triggered a diplomatic crisis with Germany and a reputational shock that accelerated the reforms already under way. For Zurich, it was a warning. The data came from a Liechtenstein trust company, but many of the structures it revealed held assets in Swiss banks. The affair showed that the combination of Liechtenstein entities and Swiss accounts that had served German clients for decades no longer offered protection. The United States Senate subcommittee investigation of the same year into LGT and UBS confirmed that the two financial centres would be judged together.⁶

The affair also illustrates the role of trust companies in the DACH wealth business. The fiduciary sector of Liechtenstein, with its trustees and trust companies, was the link between the client, the legal structure and the bank. It is today regulated and supervised. According to the FMA, 126 individual trustees and 219 trust companies held a licence in 2024.⁷ Their Zurich counterparts, the trustees and fiduciaries organised in the Swiss fiduciary industry, operate under the Financial Institutions Act since 2020 insofar as they act as trustees of trusts. The two professions cooperate closely in the administration of structures for DACH clients.

Notes

1. Lilex, “Personen- und Gesellschaftsrecht (PGR) vom 20. Januar 1926”, https://www.gesetze.li/konso/1926.004. ↩
2. Liechtenstein Finance, “Where is the law on foundations enshrined?”, https://finance.li/en/knowledge/where-is-the-law-on-foundations-enshrined/. ↩
3. Liechtenstein Finance, “Where is the law on foundations enshrined?” (note above). The revised provisions remain in Articles 552 ff. PGR, and supervision of charitable foundations lies with the Stiftungsaufsichtsbehörde (STIFA). ↩
4. Marxer & Partner (eds.), Liechtensteinisches Wirtschaftsrecht, Manz 2021, chapter “Die liechtensteinische Stiftung”, https://www.marxerpartner.com/files/media/Downloads/Die_Stiftung_DEU.pdf, on the reform adopted on 26 June 2008 and in force since 1 April 2009: supervision of charitable foundations by the Stiftungsaufsichtsbehörde, private-benefit foundations “nicht behördlich beaufsichtigt” unless voluntarily submitted, the beneficiaries’ information rights, reserved rights of revocation and amendment and the control body. ↩
5. Wikipedia, “2008 Liechtenstein tax affair”, https://en.wikipedia.org/wiki/2008_Liechtenstein_tax_affair, consulted for orientation. Chapter K.I of this book treats the German side of the affair, including the legality of the purchase of stolen data. ↩
6. Wikipedia, “2008 Liechtenstein tax affair”, https://en.wikipedia.org/wiki/2008_Liechtenstein_tax_affair, which reports that the Permanent Subcommittee on Investigations of the US Senate named Switzerland’s UBS and Liechtenstein’s LGT Group in its 2008 findings on offshore tax havens. The committee report itself was not opened. The UBS case is treated in Part C of this book. ↩
7. FMA, Finanzplatz Liechtenstein, edition 2025, https://www.fma-li.li/fma-li/documents/publikationen/finanzplatz-liechtenstein/fma-broschuere-finanzplatz-liechtenstein-2025.pdf. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.