Liechtenstein 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.
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