27 Oct Interview with Thomas Zwiefelhofer, President, Vereinigung Liechtensteinischer Gemeinnütziger Stiftungen und Trusts
What factors make Liechtenstein an attractive place for philanthropy?
First, our innovative civil and corporate laws allow for the efficient establishment of legal structures. Our foundation law is a crucial instrument for philanthropic activities. It is globally recognized and compatible. Since its introduction in 2009, many jurisdictions have sought to replicate it due to its effectiveness. Second, Liechtenstein’s small size has fostered a highly international approach. Our economic reliance on exports has necessitated a customer-oriented mindset and a strong focus on global connections. Additionally, our streamlined administration enhances efficiency and allows clients to receive responses quickly — often within two or three days. Efficiency is vital for philanthropy. Our ability to communicate promptly with tax authorities and public registries is a significant advantage for those looking to establish a foundation. Our financial policies are also sound. Founders seeking to engage in philanthropy prefer a stable environment, free from frequent changes in laws and taxes that can occur with new elections. Politically and economically, Liechtenstein is stable, with elections held every four years. We have a triple-A rating from S&P Global and no public debt. Our central location in Europe — just one hour from Zurich and two hours from Munich — combined with our picturesque mountainous landscape add to our appeal. The monarchy has a 300-year tradition that symbolizes the stability of the nation.
“Small is beautiful” is a well-known saying. It emphasizes the advantages of simplicity and efficiency. Liechtenstein’s approach to philanthropy and governance prioritizes keeping things straightforward yet effective in contrast to complicated regulatory frameworks in other countries that lead to excessive bureaucracy. Our recent discussions with German colleagues highlighted the nightmare of new reporting rules imposed by their government that demand increasing resources from philanthropic organizations. In Liechtenstein and Switzerland, we share a commitment to simplicity and efficiency. This is reflected in our top ranking in the Indiana University Lilly Family School of Philanthropy’s Global Indices, where experts recognize our compliance with regulatory requirements and straightforward legal framework. As we approach the next evaluation, we are eager to maintain our number one position despite competition. Liechtenstein thrives on competition. We are known for our entrepreneurial spirit and adaptability, both of which are essential traits for the economic survival of small countries.
What legal framework allows for philanthropic companies to thrive in Liechtenstein?
A key concern for philanthropists is legal certainty. Liechtenstein’s protected cell company framework operates like umbrella foundations in Switzerland and Germany. It allows for multiple contributors to support philanthropic activities. Unlike our neighbors whose umbrella foundations lack a legal framework, the protected cell company is grounded in law. It enables different segments within a single foundation to pursue various philanthropic goals and ensures issues affecting one segment do not impact the others. This legal clarity is rare in many countries; our concept is unique. Liechtenstein’s corporate, foundation and trust laws are flexible and modern. They provide beneficiaries with clearly defined rights within our civil law framework rather than relying on court decisions like in common law systems.
How does Liechtenstein’s philanthropic approach differ from models in surrounding countries and the USA?
Liechtenstein is a global leader in philanthropy; we have evolved from a traditional donor model where gifts are given to those in need to a more impactful approach. Philanthropy is increasingly focused on encouraging recipients to improve their situations through economic activity. Rather than providing funds, we emphasize incentives for self-sufficiency. Venture philanthropy and impact investing highlight philanthropy’s role in creating motivation. Philanthropic endeavors take risks that governments and profit-driven entrepreneurs often cannot. While higher-risk investments may not always succeed, the potential for returns can fund new philanthropic activities and create a circular impact rather than a one-way donation model. With the support of Prince Maximilian of Liechtenstein and initiatives like LTG Bank’s LGT Venture Philanthropy, we have influenced our tax administration to recognize this approach. Previously charitable foundations were prohibited from engaging in business activities. However, recent regulations allow them to invest without losing their tax-exempt status. This significant progress, though not formal legislation, provides a clear incentive for philanthropic foundations to pursue venture philanthropy while maintaining their charitable missions.
Liechtenstein is among Europe’s closest allies to the USA. While US philanthropy operates differently and is often centered around individual personalities rather than foundations as a tool, we can learn from this dynamic. US philanthropy is heavily influenced by personal stories and ideas, which is in contrast to our more structured approach. The United States has a rich legacy of philanthropy and entrepreneurial spirit. It is one of the most efficient and innovative countries in the world. Despite its size and power, it is essential that it maintains this entrepreneurial mindset. As one of the smallest countries in the world, we also value being lean and efficient. Our collaborations with the US are currently less established than those with our neighbors in Central Europe.
Can you give us an overview of Vereinigung Liechtensteinischer Gemeinnütziger Stiftungen und Trusts’s (VLGST’s) role and responsibilities in 2024?
VLGST focuses on building alliances with neighboring countries. Liechtenstein is a German-speaking country like its neighbors Switzerland, Austria and Germany. We all share similar foundation laws, though our neighbors’ laws are less modern and client focused. Central European countries generally have a longer tradition of foundations due to their civil law systems. VLGST prioritizes its partnerships with German-speaking neighbors such as the Bundesverband Deutscher Stiftungen in Germany, which has thousands of members. Austria is still developing its philanthropic tradition in the foundation sector; all neighbors support our Austrian colleagues in developing their goals.
What stance does VLGST take concerning the promotion of sustainability among its members?
The United Nations’ Sustainable Development Goals (SDGs) guide both our association’s activities and those of our foundations. Liechtenstein’s charitable foundations are active in all key segments such as social welfare, healthcare and scientific research, including cancer research. While it is challenging to highlight specific SDGs, we use them as a tool to raise awareness among our members about their importance. As partners in the SDG Alliance Liechtenstein, we strive to assist and promote these goals within our activities. We encourage members to refer to SDGs to identify areas for greater focus and to enhance our collective impact.
While Liechtenstein may have a small impact on global warming due to its size, it is crucial that we set an example. Our government has a strong climate strategy supported by the parliament, and we actively participate in international climate conventions. VLGST aims to lead by example in promoting responsible investments among our members. We push charitable foundations to avoid investing in sectors such as fossil fuels that contradict their mission. We aim to raise awareness that our investment strategies are as impactful as our charitable activities. We host educational events, publish articles and encourage our members to adopt responsible investment practices. Every financial decision can contribute to a positive impact.