Liechtenstein Crypto Tax 3

Liechtenstein Crypto Tax

Liechtenstein Crypto TaxLiechtenstein is famously known as a financial centre in Europe. Conveniently nested between Switzerland and Austria, this small country boasts a stable economy and strong public sector, offering a favourable business environment for international businesses. The benefits also carry into the practical side of business: the company registration process is simple and quick, allowing the establishment of a fully incorporated company within only a few working days. This is a major selling point for global investors, who also take into account Liechtenstein’s inclusion in the European Economic Area (EEA).

In Liechtenstein, the tax year corresponds with the business year. Resident companies must file their tax return by 1 July of the following calendar year (by 1 July 2024 for 2023, for instance).

Standard tax rates:

  • Corporate Income Tax: 12.5%
  • Value Added Tax (VAT): 8%
  • Withholding Tax: 0%
  • Social Security Contributions: 7.4% + occupational pension scheme

Liechtenstein has concluded double taxation treaties with a total of 24 countries, including Germany, Austria, Switzerland, the UK, the Netherlands, UAE, Hong Kong, Singapore, Luxembourg, Malta, Czech Republic, Hungary, and Uruguay. This number is constantly increasing as well.

Double taxation treaties allow you to avail of the preferential tax rate or tax exemption. To do so, you must supply a certificate of residence proving the location of the taxpayer’s seat for tax purposes.

Corporate Income Tax

Net profits of resident companies in Liechtenstein are subject to a flat rate of 12.5%. In addition, a minimum fee of 1,200 Swiss francs applies to companies with moderate annual revenue.

The same income tax rate applies to non-resident companies as well. They are obliged to pay the full tax amount for the entire tax period. An exception applies to companies whose revenues do not exceed CHF 500,000 for a period of three years.

Corporate income tax also includes intangibles, as there are no specific rules that would indicate a different treatment so this type of income. However, based on the arm’s-length rule, the tax authority could tax the local entity that developed the intangible, and attribute a respective royalty fee to its profits.

Value Added Tax

It’s legally required for crypto companies to apply for VAT registration prior to starting their economic activities in Liechtenstein. Then, VAT reporting is submitted on a quarterly basis (every 3 months).

The general VAT rate in Liechtenstein is 8%. It is one of the lowest rates in Europe.

Social security contributions

If your crypto company is envisaging the employment of people, you must take Social Security Contributions into account, regardless of the specifics of your activities. As is the standard for most countries, in Liechtenstein the contributions are collected to cover such categories as pension, disability and sickness benefits, maternity leave and insurance for injuries at work. The payments are split between employers and employees and made on a monthly basis.

Generally speaking, in Liechtenstein, the employer covers a greater part of social security contributions than the employee does. The amount of contributions is set at a fixed percentage of the salary. Each category of social security contributions carries a different rate and is split between the employer and the employee differently – some in half, some covered more or even fully by the employer.

If the employee is subject to the Liechtenstein social security system, the following compulsory social security contributions are concerned:

  • Old age, survivors’, and disability insurance. The general tax rate for this category is 9.6%, out of which 4.9% is covered by the employer.
  • Family compensation fund. It’s set at a tax rate of 1.9% which is fully covered by the employer.
  • Unemployment insurance / supplementary unemployment insurance. The general tax rate for this category is 1%, which is split evenly between the two parties.
  • Occupational accident insurance is set at a rate of 0.1%, which is entirely employer-financed.
  • Occupational pension scheme (2nd pillar). The tax rate for this category depends entirely on the pension plan selected by the employee. This contribution is shared evenly by the employer and the employee.

Tax credits and incentives

In Liechtenstein, businesses face a robust support system that creates favourable conditions in cases of financial loss. In particular, losses, may be carried forward to offset income for an unlimited period following the year of loss. Offset is limited to 70% of the taxable income of the respective financial year, and the rest of the losses carried forward can be used in the following years.

How do I pay taxes on crypto in Liechtenstein in 2024?

In 2024, Liechtenstein continues to strengthen its reputation as one of the most attractive and innovative financial centres for cryptocurrency investment and business, thanks to its progressive approach to the regulation of digital assets. The Liechtenstein government and local tax authorities have developed a clear and understandable taxation system for cryptocurrency income, thus providing a favourable environment for the growth and development of the cryptocurrency market.

Tax regulation of cryptocurrencies in Liechtenstein

Liechtenstein recognises cryptocurrencies and tokens as private assets, which means that income from trading or investing in cryptocurrencies is taxable. Liechtenstein’s tax policy aims to encourage innovation and investment in the digital asset sector while ensuring fair taxation.

Declaration of income from cryptocurrencies

All individuals who earn income from cryptocurrency transactions are required to declare this income on their tax return. This includes capital gains from the sale of cryptocurrencies, income from mining, and income from steaking or other cryptocurrency-related activities.

Capital gains tax

Gains from the sale of cryptocurrencies that exceed the original purchase price are subject to capital gains tax. The capital gains tax rate in Liechtenstein is competitive and is calculated based on the investor’s total profit.

Tax benefits

Liechtenstein offers a number of tax incentives for cryptocurrency investors and businesses. This includes preferential conditions for start-ups and technology companies, as well as opportunities to optimise tax liabilities through appropriate planning and structuring of activities.

VAT and other taxes

Cryptocurrency transactions in Liechtenstein are generally exempt from VAT, making the country even more attractive for cryptocurrency businesses. However, VAT may be charged for certain cryptocurrency-related services in accordance with the general rules.

Conclusion

Liechtenstein continues to reaffirm its reputation as a leading financial centre for cryptocurrency investments due to its progressive tax laws and openness to innovation. It is important for cryptocurrency investors and entrepreneurs to carefully plan their tax obligations and take advantage of the country’s tax optimisation opportunities. With a strong focus on transparency and compliance with international standards, Liechtenstein provides a favourable environment for the growth and development of the cryptocurrency sector.

 

Table with the main tax rates in Liechtenstein

Type of tax Tax rate
Income tax for individuals Progressive up to 24%
Corporate tax 12.5%
Capital gains tax Depending on the circumstances, exemptions may apply
VAT 7.7% (standard rate)

These rates reflect Liechtenstein’s tax policy aimed at attracting businesses and investors and maintaining a competitive and fair tax environment. With low tax rates and a progressive approach to regulating cryptocurrencies, Liechtenstein is an attractive jurisdiction for financial innovation and the development of the digital economy.

Also, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.



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