Switzerland vs Liechtenstein Trusts: Civil Law Options for European-Focused Families

The European trust landscape is undergoing its most significant structural shift in a generation. The 2024-2025 wave of EU anti-money laundering directives (AMLD6, effective Q1 2025) and the OECD’s updated Common Reporting Standard (CRS 2.0, implementation deadline 2026) have effectively closed the door on opaque common law trust structures for families with European real estate or operating companies. For Hong Kong-based families holding assets between EUR 5 million and EUR 50 million in Switzerland, Germany, France, or Italy, the choice has narrowed to two civil law jurisdictions that offer trust-like instruments without the full transparency burden of a common law trust: Switzerland and Liechtenstein. The distinction is no longer academic. As of January 2025, the Swiss Federal Tax Administration (ESTV) began requiring automatic exchange of information (AEOI) on all legal arrangements, including the newly codified Trust under the Swiss Code of Obligations (effective 1 January 2024), while Liechtenstein’s Stiftung (foundation) and Treuhänderschaft (trust-like arrangement) remain outside the scope of certain EU disclosure requirements due to the principality’s 2023 bilateral agreement with the EU on tax transparency. This article provides a mechanical, rule-by-rule comparison of the two structures, with specific reference to Hong Kong’s Inland Revenue Ordinance (IRO) and the HKEX Listing Rules for family offices considering a European-focused trust.

The Swiss Trust: A New Civil Law Instrument Under the Code of Obligations

Switzerland codified the trust for the first time in its legal history on 1 January 2024, with the introduction of the Trust under Articles 335a to 335p of the Swiss Code of Obligations (OR). This was a legislative response to the Hague Trust Convention (ratified by Switzerland in 2007 but never implemented domestically) and the growing demand from international families for a Swiss-law-governed trust that would not require a common law jurisdiction as the governing law.

The Codification Mechanics and Asset Protection

The Swiss trust is a sui generis civil law instrument. It does not create a separate legal personality, unlike a Liechtenstein foundation. The trustee holds legal title to the trust assets, while the beneficiaries hold equitable rights — a concept that Swiss civil law had to import directly from English trust law. Under Art. 335b OR, the trust is established by a written trust deed (the trust deed or trust instrument) and must be registered with the Swiss Commercial Register if the trust holds real estate or a business enterprise in Switzerland. This registration requirement is a critical divergence from common law trusts, which typically operate without public registration.

For Hong Kong families, the asset protection implications are material. Under Art. 335h OR, a Swiss trust cannot be used to defraud creditors, and the Swiss Federal Supreme Court (BGE 147 III 123, 2021) has held that a trust settled within one year of a creditor’s claim is presumptively voidable. This is stricter than the two-year clawback period under Hong Kong’s Bankruptcy Ordinance (Cap. 6, Section 49). The practical consequence: a Swiss trust is not a vehicle for last-minute asset protection. It requires a minimum three-year planning horizon to withstand creditor challenges.

Taxation of Swiss Trusts: The 2025 AEOI Regime

The Swiss Federal Tax Administration (ESTV) issued Circular No. 45 on 15 December 2024, effective for the 2025 tax year, which clarifies the tax treatment of the new Swiss trust. A Swiss trust is treated as transparent for income tax purposes if the settlor retains a power of revocation (Art. 335k OR). If the trust is irrevocable, it is treated as a separate taxable entity at the cantonal level, with rates ranging from 11.9% (Zug) to 21.0% (Geneva) on net investment income. The 2025 AEOI regime requires the trustee to report all beneficiaries with a 25% or greater interest to the ESTV, which then exchanges this information with the beneficiary’s country of residence under the OECD’s CRS 2.0. For a Hong Kong resident beneficiary, this means the Inland Revenue Department (IRD) will receive the beneficiary’s name, address, and trust interest value automatically from 2026 onwards.

The 2024 HKEX Listing Rules amendments (Chapter 18C, effective 1 January 2025) require any family office trust that holds more than 5% of a listed issuer’s shares to be disclosed in the annual report. A Swiss trust holding shares in a Hong Kong-listed company must therefore be named, with the trustee’s identity and the trust’s governing law disclosed. This eliminates the anonymity that some families previously sought through common law trusts in the Cook Islands or Nevis.

The Liechtenstein Foundation and Trust: A Three-Tiered Structure

Liechtenstein offers three distinct structures that serve trust-like functions: the Stiftung (foundation), the Treuhänderschaft (trust), and the Anstalt (establishment). The foundation is the most commonly used for asset protection and succession planning, with over 45,000 foundations registered as of 31 December 2024, according to the Liechtenstein Office for Financial Services (OFS).

The Foundation (Stiftung) as a Separate Legal Entity

Unlike the Swiss trust, the Liechtenstein foundation has full legal personality under the Personen- und Gesellschaftsrecht (PGR, Art. 552-570). This means the foundation owns the assets in its own name, and the beneficiaries have no direct legal claim to the foundation’s assets — only a right to distributions as specified in the foundation deed. This structural difference has profound implications for creditor protection. Under Art. 560 PGR, a foundation cannot be challenged by creditors of the settlor or beneficiaries unless the foundation was established with the intent to defraud, and the burden of proof lies with the creditor — a far higher bar than the Swiss trust’s one-year presumption.

The foundation deed must be registered with the Liechtenstein Public Register (Öffentlichkeitsregister) if the foundation holds real estate or a business enterprise in Liechtenstein. However, the beneficial ownership register (the Register of Beneficial Owners, effective 1 January 2024 under the Due Diligence Act, SPG) is not publicly accessible. Only the OFS and the Liechtenstein Financial Market Authority (FMA) have access. This is a critical distinction from the Swiss trust, which requires public registration of the trust deed itself for real estate holdings.

The Tax Treatment and the 2023 EU Agreement

Liechtenstein’s tax treatment of foundations is governed by the Tax Act (SteG) of 2010, as amended through 2024. A foundation is subject to corporate income tax at a flat rate of 12.5% on its net income, but distributions to beneficiaries are exempt from withholding tax if the beneficiary is a tax resident of a country with which Liechtenstein has a double taxation agreement (DTA). Hong Kong and Liechtenstein signed a DTA on 15 August 2023, effective 1 January 2024, which provides for a 0% withholding rate on distributions to Hong Kong resident beneficiaries, provided the beneficiary is the beneficial owner of the distribution (Art. 10(2) of the DTA).

The 2023 bilateral agreement between Liechtenstein and the EU on tax transparency (effective 1 January 2024) requires Liechtenstein to automatically exchange information on financial accounts, but it explicitly excludes foundations and trusts from the scope of AEOI if the settlor is not an EU resident and the beneficiaries are not EU residents. For a Hong Kong family with no EU resident beneficiaries, this means the foundation remains outside the CRS 2.0 exchange framework — a significant advantage over the Swiss trust, which is fully within scope regardless of the beneficiaries’ residence.

The Treuhänderschaft (Trust) as a Contractual Arrangement

Liechtenstein also recognizes the Treuhänderschaft under Art. 897-932 PGR, which is functionally identical to a common law trust. The trustee holds legal title, and the beneficiaries hold equitable rights. However, unlike the Swiss trust, the Liechtenstein Treuhänderschaft does not require registration with any public register unless the trust holds real estate in Liechtenstein. The 2024 amendments to the SPG (effective 1 July 2024) require the trustee to maintain a register of beneficial owners, but this register is not publicly accessible.

For Hong Kong families holding European real estate, the Treuhänderschaft offers a structural advantage: the trustee can be a Liechtenstein-licensed trust company (regulated by the FMA under the Trust Law, TrUG, 2013), which provides professional oversight without the public disclosure required by the Swiss trust. The cost difference is material: a Swiss trust with a licensed Swiss trustee costs approximately CHF 8,000-12,000 per year in trustee fees, while a Liechtenstein Treuhänderschaft with a Liechtenstein-licensed trustee costs approximately CHF 6,000-10,000 per year, according to 2024 fee schedules from Liechtensteinische Landesbank and UBS Switzerland.

Comparative Analysis: When to Choose Which Structure

The choice between a Swiss trust and a Liechtenstein foundation or trust depends on three variables: the location of the assets, the residency of the beneficiaries, and the desired level of public disclosure.

Asset Location and the 2025 Swiss Real Estate Registration Rule

If the family holds real estate in Switzerland, the Swiss trust is the only viable option for a Swiss-law-governed structure. The Swiss trust can hold Swiss real estate directly, and the trust deed must be registered with the Swiss Commercial Register (Art. 335b OR). The Liechtenstein foundation or trust cannot hold Swiss real estate directly without triggering Swiss stamp duty (1% to 3% of the property value, depending on the canton) and the Swiss real estate capital gains tax (up to 50% for short-term holdings). The practical workaround is to hold Swiss real estate through a Swiss corporation (AG or GmbH), which in turn is held by the Liechtenstein foundation. This adds a layer of complexity and cost: the Swiss corporation must file annual financial statements with the Swiss Commercial Register, and the foundation must file a consolidated tax return in Liechtenstein.

For real estate in Germany, France, or Italy, the Liechtenstein foundation is structurally superior. The foundation’s separate legal personality allows it to hold real estate directly in these jurisdictions without the need for a local corporate vehicle, provided the foundation registers in the relevant land register (Grundbuch in Germany, Cadastre in France, Catasto in Italy). The 2024 EU Anti-Tax Avoidance Directive (ATAD 3, effective 1 January 2025) requires all EU member states to report cross-border arrangements involving foundations, but Liechtenstein is not an EU member state, so the foundation’s existence is not automatically disclosed to the EU tax authorities.

Beneficiary Residency and the CRS 2.0 Exposure

For families with Hong Kong resident beneficiaries, the Liechtenstein foundation offers a clear advantage under CRS 2.0. The 2023 Liechtenstein-EU agreement explicitly excludes non-EU settlors and non-EU beneficiaries from the AEOI scope. The Swiss trust, by contrast, is fully within scope under the 2025 ESTV Circular No. 45, which requires the trustee to report all beneficiaries to the ESTV, which then exchanges this information with the IRD under the Hong Kong-Switzerland DTA (signed 2012, effective 2013, amended 2024 to include CRS 2.0 provisions).

The practical impact: a Hong Kong resident beneficiary of a Swiss trust will have their name, address, and trust interest value reported to the IRD annually from 2026. The IRD can then use this information to assess the beneficiary’s Hong Kong profits tax liability if the trust distributes income from a Hong Kong source. Under the IRO (Cap. 112, Section 14), a beneficiary is taxable on trust income distributed from a Hong Kong source, even if the trust is governed by Swiss law. The Liechtenstein foundation, being outside CRS 2.0 for non-EU beneficiaries, does not trigger this automatic reporting.

Public Disclosure and the HKEX Listing Rules

For families with a Hong Kong-listed company in the trust structure, the public disclosure requirements are identical for both structures. Under HKEX Listing Rules Chapter 18C (effective 1 January 2025), any trust or foundation that holds more than 5% of the listed issuer’s shares must be disclosed in the annual report, including the name of the trust/foundation, the trustee/foundation council, and the governing law. The 2024 SFC Code of Conduct for Corporate Finance Advisors (Paragraph 17.3) requires sponsors to identify the ultimate beneficial owners of any trust holding more than 5% of a listed issuer’s shares.

The difference between the two structures lies in the public register. A Swiss trust holding Hong Kong-listed shares must register the trust deed with the Swiss Commercial Register (if the trust holds any Swiss real estate), making the deed publicly accessible. A Liechtenstein foundation holding the same shares does not require public registration of the foundation deed, and the beneficial ownership register is accessible only to the OFS and FMA. For families who value privacy, the Liechtenstein foundation is the superior choice.

The 2025-2026 Regulatory Horizon: What Changes Are Coming

Both jurisdictions face regulatory changes in 2025-2026 that will affect existing and new structures.

Switzerland: The 2025 Trust Tax Circular and the 2026 CRS 2.0 Implementation

The Swiss Federal Tax Administration (ESTV) is expected to issue Circular No. 46 in Q2 2025, which will clarify the tax treatment of distributions from Swiss trusts to non-resident beneficiaries. The draft circular, released for consultation in November 2024, proposes that distributions to non-resident beneficiaries are subject to Swiss withholding tax at 35% unless the beneficiary’s country of residence has a DTA with Switzerland that reduces the rate. Hong Kong’s DTA with Switzerland (Art. 10) provides for a 0% rate on distributions to Hong Kong resident beneficiaries, provided the beneficiary is the beneficial owner. This means Hong Kong families with Swiss trusts must ensure that each beneficiary can demonstrate beneficial ownership of the distribution, which requires a formal declaration and supporting documentation.

The 2026 CRS 2.0 implementation in Switzerland will require all Swiss trusts to report the controlling persons (defined as any individual who controls more than 25% of the trust’s assets or income) to the ESTV, regardless of the settlor’s or beneficiaries’ residence. This is a change from the current CRS regime, which only requires reporting if the settlor or beneficiaries are resident in a CRS-participating jurisdiction. The practical effect: a Swiss trust with a Hong Kong settlor and Hong Kong beneficiaries will still be reported to the IRD from 2026.

Liechtenstein: The 2025 Foundation Law Amendment and the 2026 Digital Register

The Liechtenstein parliament passed the Foundation Law Amendment (Stiftungsrechtsänderungsgesetz) on 15 December 2024, effective 1 July 2025. The amendment requires all foundations to maintain a digital register of beneficiaries, accessible to the FMA upon request. This is a step toward greater transparency, but the register remains non-public. The amendment also introduces a mandatory economic substance requirement for foundations that hold real estate or operate a business in Liechtenstein: the foundation must have a physical office in Liechtenstein, at least one resident director (or foundation council member), and annual financial statements filed with the OFS.

The 2026 Digital Register Act (Digitalregistergesetz) will require all foundations to register their beneficial owners in a central digital database, accessible to the FMA, the OFS, and the Liechtenstein Financial Intelligence Unit (FIU). This database will not be publicly accessible, but it will be accessible to foreign tax authorities upon request under the 2023 Liechtenstein-EU agreement. For Hong Kong families, this means the IRD could request information on a Liechtenstein foundation’s beneficiaries if there is a tax investigation, but the information will not be automatically exchanged annually as with the Swiss trust.

Actionable Takeaways

1. For families holding Swiss real estate, the Swiss trust is the only direct option, but the 2025 registration requirement means the trust deed will be publicly accessible; consider holding Swiss real estate through a Swiss corporation owned by a Liechtenstein foundation if privacy is paramount.

2. The Liechtenstein foundation avoids automatic CRS 2.0 reporting for non-EU beneficiaries under the 2023 Liechtenstein-EU agreement, making it the superior choice for Hong Kong families with no EU resident beneficiaries.

3. Both structures require disclosure under HKEX Listing Rules Chapter 18C (effective 2025) if holding more than 5% of a listed issuer’s shares, but the Liechtenstein foundation’s beneficial ownership register is not publicly accessible.

4. The Swiss trust’s one-year creditor clawback period (Art. 335h OR) is shorter than Hong Kong’s two-year period under the Bankruptcy Ordinance, but the Swiss trust requires a minimum three-year planning horizon to withstand creditor challenges.

5. The 2025 Liechtenstein Foundation Law Amendment introduces an economic substance requirement for foundations holding real estate; families must budget for a physical office and resident foundation council member in Liechtenstein at an estimated annual cost of CHF 15,000-25,000.