Liechtenstein and Switzerland: customs, currency and a common economic area

From the Austrian to the Swiss orbit

Until the end of the First World War, Liechtenstein belonged economically to Austria. It had formed a customs union with the Habsburg monarchy since 1852, it used the Austrian currency and its administration relied in many respects on Austrian officials.¹ The collapse of the monarchy in 1918 destroyed this arrangement at a stroke. The Austrian krone lost value rapidly: by the end of the war one hundred kronen were already worth only about thirty Swiss francs, after which the decline accelerated. The population of the principality reacted before the state did. As early as 1918, shoemakers reported that they had to pay their suppliers in francs and therefore wanted to be paid in francs by their customers.² The principality’s reorientation towards Switzerland was thus driven from below by the everyday experience of inflation. Treaties formalised it only later.

Politically, the break with Austria was completed in 1919. In that year Liechtenstein terminated its customs treaty with Austria, opened a legation in Bern and asked Switzerland to represent its interests abroad, a function that the Confederation has exercised ever since in countries where Liechtenstein has no mission of its own.³ The monetary transition followed in stages. On 27 August 1920 the Landtag unanimously adopted the so-called Frankengesetz, which allowed taxes and fees to be paid in Swiss francs. The state accounts were kept in francs as well as kronen from 1919 and exclusively in francs from 1922. In 1924, the Swiss franc became legal tender in Liechtenstein by an act of the Landtag.⁴

The customs treaty of 1923

The legal cornerstone of the relationship is the treaty between Switzerland and Liechtenstein on the inclusion of the Principality of Liechtenstein in the Swiss customs territory, signed on 29 March 1923. It is published in Liechtenstein as LGBl. 1923 Nr. 24 and appears in the Liechtenstein collection of treaties under the number 0.631.112.⁵ The treaty entered into force on 1 January 1924. It made the territory of the principality part of the Swiss customs area and provided that Swiss customs legislation, together with the other federal legislation required for the functioning of the customs union, applies in Liechtenstein. The Swiss federal customs administration, today the Federal Office for Customs and Border Security, took over the control of the border between Liechtenstein and Austria, while the border between Liechtenstein and Switzerland became an internal one.⁶

The significance of this treaty for the financial centre is indirect but fundamental. By joining the Swiss customs area, Liechtenstein became part of the Swiss economic space, a formulation that the Federal Department of Foreign Affairs still uses to describe the relationship.⁷ Liechtenstein’s banks gained access to Swiss clearing, the Swiss franc money market and Swiss clients. Its companies could trade freely with Switzerland, and Swiss law in areas such as customs, indirect taxes and many technical regulations became part of the legal environment of the principality. For Zurich lawyers and bankers, Liechtenstein was from this point onwards a jurisdiction next door that used the same currency and many of the same rules while retaining full sovereignty over company law, tax law and the law of persons.

The currency treaty of 1980

For more than half a century, the use of the Swiss franc in Liechtenstein rested on unilateral Liechtenstein legislation and on the tacit acceptance of the Swiss authorities. The currency treaty of 19 June 1980, published in Liechtenstein as LGBl. 1981 Nr. 52, placed this arrangement on a contractual basis. It confirmed the Swiss franc as legal tender in Liechtenstein and made specified Swiss monetary legislation applicable in the principality. According to the current Liechtenstein notice of the applicable Swiss provisions, these include the Federal Act on Currency and Payment Instruments, the Coinage Ordinance, the National Bank Act and the National Bank Ordinance, as well as selected provisions of the Financial Market Infrastructure Act on market conduct. Cooperation on data under these provisions is restricted to the Liechtenstein Financial Market Authority.⁸

In practical terms, the currency treaty means that the Swiss National Bank conducts monetary policy for Liechtenstein as well, and that the principality’s banks are subject to the Swiss National Bank’s instruments and statistical requirements in the monetary sphere. Liechtenstein has no central bank and no seigniorage of its own beyond what the treaty provides. For the financial centre, this arrangement produces a unique combination. Liechtenstein banks operate in Swiss francs under the umbrella of the Swiss National Bank, but they are licensed and supervised by the Liechtenstein Financial Market Authority under European banking law. When the Swiss National Bank introduced negative interest rates in 2015 or raised them again from 2022, the effect on the Liechtenstein banks was identical to that on Zurich banks. When the European Union introduced new prudential rules, by contrast, they reached Vaduz through the EEA Agreement.

An economic area with two sovereigns

The customs and currency union has produced an integrated labour market as well. At the end of 2025, some 41,330 persons worked in Liechtenstein, more than half of them cross-border commuters, and roughly sixty percent of those commuters lived in Switzerland. About 5,600 Swiss nationals lived in Liechtenstein in 2025, representing some thirteen percent of its population, while 1,773 Liechtenstein citizens lived in Switzerland. Free movement of persons between the two countries is nevertheless limited: under the regime agreed within EFTA in 2003, Liechtenstein grants Swiss nationals only a small annual quota of permits for gainful employment and residence.⁹ The principality thus combines a high degree of economic openness with a restrictive residence policy, a feature that shapes its financial sector, since a large part of the bank and trust company staff commutes from the cantons of St. Gallen and Graubünden or from Vorarlberg.

For Zurich, the result is a neighbouring jurisdiction that is economically Swiss in many respects but legally independent where it matters most for private wealth: company law, trust and foundation law, tax law and financial market supervision. The bilateral relationship is rarely a matter of public controversy in Switzerland and tends to attract attention only on anniversaries, as in 2023 when the centenary of the customs treaty was celebrated in both countries. That calm is itself a resource. Advisers in Zurich can rely on the fact that the currency, the payment infrastructure and the basic economic framework of Liechtenstein will not diverge from Switzerland’s, while the legal instruments on offer in Vaduz supplement those available under Swiss law.

Notes

1. Wikipedia, “Geschichte Liechtensteins” (German edition), https://de.wikipedia.org/wiki/Geschichte_Liechtensteins, which records the customs treaty with Austria of 1852, its termination in 1919 after the collapse of the Habsburg monarchy and the customs treaty with Switzerland of 1923. ↩
2. 100 Jahre Zollvertrag Schweiz–Liechtenstein, “War es der Schmied oder doch der Schuhmacher?”, https://www.zollvertrag.li/geschichte-meilensteine/war-es-der-schmied-oder-doch-der-schuhmacher. ↩
3. EDA, “Bilaterale Beziehungen Schweiz–Liechtenstein”, https://www.eda.admin.ch/eda/de/home/vertretungen-und-reisehinweise/liechtenstein/schweiz-liechtenstein.html. The legation in Bern was raised to the status of an embassy in 1969, and Switzerland appointed its first ambassador to Liechtenstein in 2000. ↩
4. 100 Jahre Zollvertrag Schweiz–Liechtenstein, “War es der Schmied oder doch der Schuhmacher?” (note above). ↩
5. Lilex, Gesetzesdatenbank des Fürstentums Liechtenstein, “Vertrag vom 29. März 1923 zwischen der Schweiz und Liechtenstein über den Anschluss des Fürstentums Liechtenstein an das schweizerische Zollgebiet”, https://www.gesetze.li/konso/1923024000. ↩
6. Vertrag vom 29. März 1923 zwischen der Schweiz und Liechtenstein über den Anschluss des Fürstentums Liechtenstein an das schweizerische Zollgebiet (SR 0.631.112.514, LR 0.631.112), Art. 1 (connection to the Swiss customs area), Art. 4 (application of Swiss customs legislation and other federal legislation) and the final provision (“Der gegenwärtige Vertrag tritt auf den 1. Januar 1924 in Kraft”), https://www.gesetze.li/konso/pdf/1923024000. ↩
7. EDA, “Bilaterale Beziehungen Schweiz–Liechtenstein” (note above). The page also reports more than 105 bilateral agreements between the two states and the celebration of the centenary of the customs and currency union in 2023 and 2024. ↩
8. Kundmachung vom 24. März 2022 der aufgrund des Währungsvertrages im Fürstentum Liechtenstein anwendbaren schweizerischen Rechtsvorschriften, Lilex, https://www.gesetze.li/konso/pdf/2022080000?version=1. ↩
9. EDA, “Bilaterale Beziehungen Schweiz–Liechtenstein” (note above). The figures cited refer to December 2025 and to the year 2025. ↩

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.