Foundations & Asset Protection

What is the difference between a German and a Liechtenstein foundation?

• The Control vs. Tax Trade-off:A German foundation (Stiftung) allows the founder to maintain a higher degree of direct influence, but it is significantly less attractive from a tax perspective. In contrast, a Liechtenstein foundation offers a robust “shield” for your assets. It provides a strategic gateway to mitigate German inheritance, gift, and wealth taxes through a legal separation of assets.
• Pro-Tip (The Loan Strategy):Instead of a simple donation to the foundation, you can grant the foundation a loan. This allows you to live off the tax-free loan repayments (principal) rather than taxable distributions—a sophisticated way to maintain liquidity while protecting your capital.

Why should I choose a Seychelles foundation over “unbeatable” Cook Islands or “prestige” Liechtenstein?

• The Price-Performance Ratio:The decisive factor is achieving maximum control at a sustainable cost. While Liechtenstein often burdens founders with expensive trustees and mandatory audits, and the Cook Islands charge premium fees for their “legal tank” status, the Seychelles offer a compelling middle ground.
• The 2-Year Rule:The Seychelles provide a 2-year statute of limitations for creditor claims. Once your assets have been held by the foundation for 24 months, they become virtually untouchable under local law.
• Operational Flexibility:The Seychelles outperform other jurisdictions in administrative freedom. As the Founder, you can simultaneously sit on the Foundation Council and maintain full operational control. When structured correctly, this does not jeopardize the legal separation of assets. For entrepreneurs with setups in regions like Montenegro, this offers the perfect balance between affordable protection and active management.

Are foundations in Panama or the Caribbean still viable?

• The Panama Problem:Panama foundations are frequently scrutinized and often fail to gain legal or tax recognition in Germany.
• Superior Alternatives:For true asset protection, Kitts & Nevis or the Cook Islands remain the gold standard. These jurisdictions are tax-exempt, offer higher levels of anonymity, and present nearly insurmountable legal hurdles for creditors.

Comparative Analysis: Seychelles vs. The World

Seychelles vs. Cook Islands / Nevis

Think of the Seychelles as “Business Class security at an Economy price.” Unless you are facing an imminent, high-stakes lawsuit where you absolutely need the “heavy armor” of the Cook Islands, the Seychelles provide more than enough protection for standard high-end asset management.

Seychelles vs. Liechtenstein

For “Non-EU scenarios” (such as holding assets in Montenegro or outside the EEA), the Seychelles are often the superior choice. Due to Liechtenstein’s ties to the EEA (European Economic Area), it is becoming increasingly transparent to European tax authorities. The Seychelles remain significantly more discreet and independent from EU regulatory pressure.

Seychelles vs. Panama

Since the “Papers” scandal, Panama-based entities face significant hurdles with global banks. A Seychelles foundation is currently perceived as a “cleaner” alternative. It is widely accepted by international banks in Tier-1 hubs like Mauritius or Singapore, making your daily financial operations much smoother.

Corporate Structures & Taxation

How to bypass Withholding Tax on German Dividends?

• The Intermediary Solution:Direct distributions from Germany to Dubai often trigger a 25% withholding tax. This can be strategically reduced to 15% (or less, depending on the structure) by interposing a holding company in a jurisdiction that maintains a Double Taxation Agreement (DTA) with Germany—such as Liechtenstein, Cyprus, Luxembourg, or Malta. This bridge allows for much more efficient capital flow.

The Cooperative Advantage: Avoiding the “Exit Tax” Trap

• Valuation Strategy:When moving your tax residency abroad, Germany often levies an “Exit Tax” based on the fair market value of your company. However, with a Cooperative (Genossenschaft), the tax is often calculated only on the nominal paid-in capital (e.g., €3,000) rather than the actual enterprise value.
• Control:You can maintain 100% operational control even if you legally hold less than 1% of the shares, making it a premier tool for relocating entrepreneurs.

Are US-LLCs safe for Residents in Dubai?

• The Substance Requirement:The risk is currently low, provided you can demonstrate “Economic Substance.” To bulletproof this setup, one can appoint an offshore Managing Director (e.g., from Paraguay) to ensure the place of management is clearly outside of jurisdictions that might attempt to claim tax sovereignty.

Tax Planning Strategies of the Ultra-Wealthy

The “Threshold” Question: Is this only for Multi-Millionaires?

• Myth vs. Reality:It is a common misconception that tax optimization is only for the elite. In reality, these structures become strategically viable once you reach €500,000 in investable assets. Waiting until you hit €10 million means losing vast sums to taxes that could have been fueling your compound growth. You should build the system while you grow, not after you’ve arrived.

The “Substance” Challenge: UAE vs. Home Country

• Professionalism over Amateurity:“Will the tax office simply ignore my UAE or Seychelles holding?” Only if you set it up like an amateur. The era of “PO Box” companies is dead. Today, we rely on Economic Substance: real offices, local management, and residency visas. When documented correctly, this is not a “trick” but a legitimate international corporate setup that withstands any audit.

The “Exit Strategy”: Realizing Capital Gains Tax-Free

• The Protected Cycle:If you hold a real estate portfolio (e.g., in Montenegro) via a UAE foundation, the goal is to break the chain of personal tax liability. The sale occurs at the foundation or holding level, where 0% tax The capital remains within this “protected cycle” for reinvestment.
• Liquidity:If you need personal liquidity, we often use loan constructions or the repayment of capital contributions instead of taxable dividends. The key is to let the wealth grow in a tax-free environment and only extract what is necessary for your lifestyle—as efficiently as possible.

The “Loss of Control” Concern in Foundations

• Ownership vs. Power:It is the ultimate paradox: Legally, the assets belong to the foundation—which protects them from creditors—but through the bylaws, you remain the “Protector.” You retain full investment control and decision-making power. Your assets are in a legal vault that no one can touch, and your name remains absent from public registers.

The “Anonymity vs. Banking” Dilemma

• Professionalization over Secrecy:Total anonymity from banks no longer exists in the age of Automatic Exchange of Information (AEOI). However, there is discretion from the public and creditors. The strategy of the wealthy is not “hiding from the bank,” but professionalization. A Tier-1 bank in Switzerland or Singapore will accept a Seychelles foundation immediately if it is managed by a licensed trustee and has a clean compliance history. You appear to the bank as a sophisticated investor, while your name stays out of the public eye.

The “Insurance Wrapper” (PPLI) Strategy

• The Ultimate Compounder:PPLI (Private Placement Life Insurance) acts as a tax-efficient “shroud” for your brokerage account. Your portfolio becomes the legal property of an insurance company in Luxembourg or Liechtenstein. Inside this wrapper, you can trade and realize gains without triggering immediate capital gains tax. It is the most powerful tool for compounding wealth used by billionaires today.

The “Exit Scenario”: The Spain / Seychelles Combination

• Asset Protection & Share Deals:Does a foundation help with foreign real estate, for example, in Spain? Yes, immensely. By holding the property via a company owned by your foundation, you can execute a “Share Deal” upon exit. You don’t sell the physical house (which triggers local taxes); you sell the shares of the company. This transaction is realized tax-free at the UAE/Seychelles holding level. Furthermore, “Debt Shielding” (placing a mortgage on the property in favor of your own foundation) makes the asset unattractive and “worthless” to external creditors.

Investments (Crypto & Private Equity)

Where is the best place to hold Cryptocurrency?

• Prioritizing Decentralization:To maintain the core advantage of digital assets—their decentralization—it is often best to hold them either privately (self-custody) or within a specialized Offshore Foundation (e.g., a Nevis Foundation).
• The “Nevis” Shield:A Nevis structure is particularly powerful because it treats the foundation as a separate legal personality, providing a world-class layer of asset protection. This ensures that your crypto holdings remain out of reach from personal liability while preserving your ability to trade and manage them globally without the interference of restrictive onshore regulations.

What is the premier solution for Private Equity and Corporate Holdings?

• The Gold Standard for Equity:For managing significant corporate participations, a Luxembourg Holding Company (SOPARFI) is widely considered the professional benchmark.
• Strategic Participation:This is especially recommended for equity stakes exceeding 1% in European or US-based companies. Luxembourg offers an unparalleled network of double taxation treaties and a stable legal environment. It allows for the tax-efficient receipt of dividends and realizes capital gains with minimal tax leakage, making it the “hub of choice” for international private equity investors and family offices.

The “Where” and “How” of Foreign Incorporation

Offshore Incorporation via the Internet: 15-Minute Reality or Myth?

• The Danger of the “PDF Business”:You often hear claims that you can set up a “shell company in 15 minutes” online. If you are satisfied with a worthless PDF certificate, then yes, it is that simple. However, if you want a legitimate entity capable of participating in the global market, this approach is dangerous.
• Customization is Key:Legally, an offshore company is simply an entity incorporated outside your country of residence. The real skill lies not in the act of incorporation, but in the choice of jurisdiction. It is a bespoke process: what works perfectly for a fund manager in the Cayman Islands could be a total nightmare for an e-commerce merchant in Hong Kong.

Hong Kong: The Gateway to Asia vs. Classic Island Nations

• The “Midshore” Advantage:Hong Kong is considered a “midshore” jurisdiction with an excellent international reputation. The highlight is its territorial tax system: you pay 0% tax on all income earned outside of Hong Kong.
• Credibility vs. Privacy:To benefit from this, you must maintain clean, audited accounting records. It is the perfect location for those who require corporate substance and prestige while operating internationally. If your goal is absolute anonymity and zero bookkeeping, you would typically look toward “classics” like the British Virgin Islands (BVI) or the Bahamas.

Nominee Services: Are they still relevant in 2026?

• From Hiding to Protecting:In the past, using nominees—individuals who lend their names to keep yours off the register—was the standard for “hiding.” Today, nominees serve more as a shield against prying eyes or for operational convenience.
• The Reality Check:Every reputable bank now requires full disclosure of the Ultimate Beneficial Owner (UBO). Anyone who believes a nominee can hide their account from tax authorities in 2026 will fail at the banking stage.

The Banking Bottleneck: Why some companies never get an account.

• The Needle’s Eye:This is the biggest hurdle in the offshore world. Incorporating a company takes days; opening a bank account can take months. Many banks no longer touch entities from certain “tax havens.”
• The Hybrid Strategy:I always tell my clients: Find the bank first, then choose the jurisdiction. The most tax-efficient company in the world is useless if it cannot receive payments. Professionals often use hybrid setups—incorporating in one country while banking in a stable financial hub like Singapore or Mauritius.

Estate Planning: Can you really “erase” Inheritance Tax?

• Strategic Optimization:“Erase” is a strong word, but you can certainly optimize it to a massive degree. When real estate or a portfolio is owned by an offshore company rather than you personally, you technically pass on shares in a foreign entity rather than the physical asset.
• Perpetual Structures:When combined with a foundation, the concept of an “inheritance event” essentially disappears because the foundation has a perpetual existence. This not only saves taxes but also prevents wealth from being dismantled by inheritance disputes.

The Gold Standard: Where to incorporate for maximum flexibility?

• Premium Options:If budget is not an issue, the Cayman Islands are the gold standard for investments, while Singapore is unmatched for operational business.
• Efficiency and Modernity:For those looking to start efficiently and modernly, the UAE or the Seychelles are the top choices.
• The Golden Rule:The most vital piece of advice is to work with an expert who has established relationships with banks. An offshore setup without functional banking is like a Ferrari without an engine—it looks great, but it won’t move you a single inch forward.

Key Takeaways for Our Clients:

1. Reputation vs. Anonymity:Why Hong Kong’s prestige often outweighs the privacy of a lonely island.
2. The Banking Bottleneck:Why a company is worthless without the right banking relationship.
3. Nominees:Why they are a protective shield, not a hideout from the bank.
4. Estate Planning:How corporate ownership secures the transfer of wealth across generations.