Liechtenstein and its tax haven reputation, for the curious traveller

Few labels have stuck to a country as firmly as “tax haven” has to Liechtenstein. For decades its name came up in any conversation about secret accounts and shell companies. This page isn’t about opening an account or paying less tax, which isn’t my field. It’s about where the reputation came from, how much of it still holds, and why, if you’re travelling, something else entirely matters.

How the reputation was earned

The story begins in the 1920s. After the First World War the government went looking for outside money with low taxes, a very liberal 1926 law on persons and companies and a 1928 trust law. The Historisches Lexikon describes how this gave rise to a trust industry that set up and ran foreign-owned companies registered in the country, the notorious letterbox firms. By the 1990s there were seventy times as many as in the 1930s, and in 1995 half of them were family foundations.

The banks grew alongside. The first, today’s Liechtensteinische Landesbank, opened in 1861 as a savings bank for a population of small farmers and craftsmen. The Bank in Liechtenstein was founded in 1920 and bought by the princely house in 1930, which still owns it under the LGT name; more on the family at the princely house of Liechtenstein. The third, VP Bank, followed in 1956. The 1960 banking act put banking secrecy into law for the first time, and the Lexikon adds a telling detail, that the government deliberately kept the number of banks low so as not to draw foreign attention.

2008, the turning point

International pressure built from around 2000, with the OECD and the European Union accusing Liechtenstein of harmful tax competition and of doing too little against money laundering. The country tightened supervision and in 2005 set up an independent financial regulator, the FMA. Some steps came much earlier. As far back as 1977 the banks signed a due diligence agreement with the government, promising not to help clients move capital illegally, a law followed in 1996, and in 2004 Liechtenstein agreed with the EU to tax cross-border interest payments.

The decisive blow came in February 2008. Stolen data on clients of LGT, the princely family’s bank, ended up with the German tax authorities thanks to Germany’s intelligence service. LGT announced that from then on it would only manage money declared in its clients’ home countries, and in March 2009 the government committed to meeting the OECD tax standard. It has since signed a long list of information-exchange and double taxation agreements.

Is it still a tax haven?

What I can tell you, with sources, is what has changed. Liechtenstein has had a FATCA agreement with the United States since 16 May 2014 and has applied the OECD automatic exchange of tax information since early 2016, which means data on foreigners’ accounts flows to their home tax authorities without anyone asking. In October 2018 the EU’s economic and finance ministers certified that its legislation met the minimum standards against aggressive tax planning by multinationals. I haven’t been able to read the EU’s current list of non-cooperative jurisdictions, so I won’t tell you whether it appears on it or not.

In numbers, the sector is now smaller in headcount of banks and bigger in money. In 2024 there were 10 banks, against 16 in 2010, with 2,985 staff and CHF 217.3 billion under management. It’s worth keeping in proportion, though. Financial services and insurance make up 10.1% of the country’s value added, while industry makes up 40.4%. The full breakdown of the economy is in why Liechtenstein is so rich.

What matters if you’re just visiting

None of this changes your trip. What does affect you is that the currency is the Swiss franc, thanks to the 1924 union with Switzerland, and that the country belongs to the EEA and Schengen without being an EU member. How to pay and what happens with euros is on my page about currency and payments in Liechtenstein, and how it fits with Europe is on the page about Liechtenstein, the EU and Schengen.

What I find most striking in all this is the speed of the change. The Lexikon stresses that the 2009 shift happened quickly and without major political upheaval at home, despite resistance from parts of the trust industry. For a country that lived with that reputation for decades, that’s no small thing.