US Taxation of a Liechtenstein Anstalt & Offshore Reporting

US Taxation of a Liechtenstein Anstalt & Offshore Reporting

US Taxation of a Liechtenstein Anstalt

U.S. Taxation of a Liechtenstein Anstalt: Outside of the United States, there are various different types of entity formations, which may resemble a U.S. Corporation or limited liability company in part — but have their own unique nuances regarding ownership and taxation.

One common form of foreign entity is the Liechtenstein Antsalt.

Oftentimes, when a U.S. Person has an ownership in a Liechtenstein Anstalt they will be unaware that they have any U.S. tax or reporting requirement to the IRS.

In fact, U.S Person owners of a Liechtenstein Anstalt  may have to disclose the entity on multiple IRS international information reporting forms such as form 5471, FBAR, PFIC and FATCA Form 8938. 

The following is a brief summary about what the Liechtenstein Anstalt is, and how to identify whether the U.S. Person owner should have any reporting requirements for having an interest in this type of entity —

What is a Liechtenstein Anstalt?

The Liechtenstein Anstalt is a private company formed in Liechtenstein.

This type of entity a similar to the type of entity a person may find in Panama, as the Liechtenstein Anstalt navigate somewhere between a foundation and a corporation.

The Liechtenstein Anstalt is not restrictive in terms of the types of business it can operate and therefore is a very common entity type for organizations outside of the United States.

In addition, it can have only a single member, which makes it comparable to the US SMLLC (Single-Member Limited Liability Company).

This type of entity is not required to conduct any business and therefore is commonly used as a holding company as an alternative entity to a Panamanian foundation or BVI.

It may also have various beneficiaries, which is what makes it similar to the Panamanian Foundation.  

Moreover, the Anstalt is no required to maintain any local representatives or have residents in Liechtenstein — which is what makes it very alluring.

Oftentimes it is held by one person — or closely held –and used as a holding company.

Is a Liechtenstein Anstalt a Per se Corporation List

No. (which is a good thing).

The United States has certain foreign corporations which they deem per se corporations, which means they are unable to disregard the entity.

For example in Liechtenstein, a Liechtenstein, Aktiengesellschaft is a per se a corporation that cannot be disregarded.

8332 (Limited Liability)

As provided by the IRS:

“Foreign default rule.

Unless an election is made on Form 8832, a foreign eligible entity is:

  • A partnership if it has two or more members and at least one member does not have limited liability.
  • An association taxable as a corporation if all members have limited liability.
  • Disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.”

The owners of the Liechtenstein Ansalt have limited liability.

Therefore, even in a situation where there is a single owner similar to an SMLLC — because it is a foreign company that has a single owner that does have limited liability — it would not qualify as disregarded unless the taxpayer makes the election.

AM2009-012 Liechtenstein Anstalts and Stiftungs Entity Classification

In 2009, the IRS posted a Memorandum to provide assistance for taxpayers to determine if the Liechtenstein Anstalt should be treated as a trust or a business trust.

The IRS deemed it more comparable to a business trust, which would limit the 3520/3520-A reporting.

As provided in pertinent part by the IRS:

“Based upon the information submitted, we believe that, subject to the facts and circumstances of each situation, Liechtenstein Anstalts generally are not properly treated as trusts under §301.7701-4(a) of the regulations because, in most situations, their primary purpose is to actively carry on business activities. Therefore, in most cases, Liechtenstein Anstalts are properly classified as business entities under § 301.7701-2(a).

Based upon the information submitted, we believe that, the classification of Liechtenstein Stiftungs must be determined on a case by case basis, dependent upon the facts and circumstances of each case. Generally, however, Stiftungs will be classified as trusts, unless under the facts and circumstances, the entity was created primarily for commercial purposes.

The IRS based its decision on the following:

“The capital of an Anstalt is usually not divided into shares. Anstalts may hold patents and trademarks, hold interests in other companies, and may conduct any type of business except banking. If the articles permit the Anstalt to engage in commercial or industrial activities or a trade, the Anstalt is required to keep proper books and records as well as prepare annual financial statements.

The liability of an Anstalt is limited to the extent of its assets. No personal liability extends to the Founder, the Anstalt’s Board, or the beneficiaries. You have indicated that in most situations you have seen, the primary purpose for the establishment of an Anstalt is to conduct an active trade or business and to distribute the income and profits therefrom to the beneficiaries of the Anstalt.

You further indicated that the beneficiaries of an Anstalt are usually the previous owners of the business assets contributed to the Anstalt, and that in most situations the Founder acts as a nominee or agent of the beneficiaries in conducting the active trade or business of the Anstalt.”

Form 5471 & Liechtenstein Anstalt

Unless the owner of this type of Corporation properly disregarded the entity, chances are it would be reportable on form 5471 if any of the five categories are met.

There are some overlapping rules between form 5471 (CFC) and PFIC form 8621 to avoid duplicate reporting.

*When this entity type is being used as a holding company, there is a high likelihood it will be a PFIC.

FBAR & Liechtenstein Anstalt

Since the Liechtenstein Ansalt is a company, the actual interest in the company is not reportable on the FBAR. But, any accounts held by the Liechtenstein Ansalt maybe reportable on the FBAR.

FATCA & Liechtenstein Ansalt

A Liechtenstein Ansalt is the type of investment that is also reportable on FATCA Form 8938. but, in general a taxpayer does not have to duplicate reporting of the same Liechtenstein Ansalt in the same year both unforms 5471 and 8938.

PFIC & Liechtenstein Anstalt

When the Liechtenstein Ansalt is being used as a holding company to generate investment income , chances are it will be considered a PFIC (Passive Foreign Investment Company). The PFIC rules are complicated, but if the PFIC asset test or income test is met, then reporting is required on Form 8621 – and the tax becomes subject to the PFIC excess distribution calculation rules.

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