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All Answers to Crypto Tax Issues.

A natural person with unlimited tax liability in Liechtenstein is liable to pay taxes on worldwide income, therefore cryptocurrencies are subject to tax and declaration. The assets are valued in CHF at the beginning of the tax year (01.01). Finally, 4% of this is added to the taxable income as debit income which is taxed at the personal tax rate.     In Liechtenstein tax law, care is taken to avoid double taxation. To put this in practical terms: Assets that are taxed by wealth tax are no longer subject to income tax, therefore speculative gains of cryptocurrencies are tax-free. This has a beneficial impact on declaration and documentation efforts. Mining, on the other hand, is considered a source of income in Liechtenstein and is therefore subject to income tax. Mining expenses, such as IT and electricity costs, can be deducted from the taxable income. In the case of legal persons or entities, the realized changes in value (through a sale or accounting revaluation) must be declared, and are subject to income tax at 12.5%. As a result, a general reduction of the tax rate can be achieved through the equity interest deduction.

Proof of Stake (PoS) is an alternative consensus mechanism to Proof of Work, and is used to validate transactions. Blockchain participants lock and hold some coins with it for a certain period of time and make them available to validate blocks. A reward is given for staking these coins. In most cases, the "locked" coins cannot be sold in the short term. There are several variations of selection methods for determining the validators. Some selection methods are explained below: Staking size: The more coins made available for staking, the higher the probability of being selected for staking. Staking age: In this selection process, the network selects the validator in accordance with how long the tokens have been staked. Validators who have been staking their tokens for a longer period of time have a greater chance of being selected. Randomization: The validators are picked based on a formula that accounts for the lowest hash value in addition to the stake amount. In the PoS algorithm, the selection of a validator is one of the most important aspects.

By holding a stakeable cryptocurrency, returns can be generated. Especially in low-interest periods, this is an appealing option. Furthermore, Coin Staking is resource efficient unlike PoW.

Natural persons (FL) Wealth tax: Staking is classified as a loan receivable and is included in the tax calculation with the other assets as debit income (4%). Wealth tax can be characterized as a "hidden" income tax. In the tax calculation, the total taxable income is used for the calculation of the tax rate. The total taxable foreign income is excluded, as it is only relevant for progression calculation. Subsequently, the state tax and municipal tax are calculated, as well as the municipal tax surcharge. Income tax: The stake is not subject to taxation, since the “loan” provided is recorded and taxed under the wealth tax. Legal entities (FL) Income tax: the coins received ("interest") from staking are part of the taxable net income and are taxed at the regular tax rate of 12.5%.

PoW is the original consensus algorithm of the earliest blockchain networks. The algorithm is used to verify the transaction and create a new block in the chain. In this algorithm, miners compete against one another to complete the transaction on the network.

At their core, ICOs are similar to the concept of a traditional initial public offering (IPO). In an ICO, the investor buys the newly issued cryptocurrency in exchange for fiat money or other cryptocurrencies.

For the VAT assessment of an ICO, it is essential that the functionality of the coins/tokens is analyzed and appropriately classified according to the definition framework presented by the Swiss Federal Tax Administration.

Generally, a distinction is made between three different main types of tokens; these and their respective VAT implications in the case of an ICO and TGE are shown below. Token type: Payment Tokens VAT: Not subject to VAT / not taxable Token type: Utility Tokens VAT: Subject to VAT Token type: Security Tokens VAT: Not subject to VAT / exempt from VAT The use of a payment coin/ token for the purchase of a service is equivalent to the use of legal tender. The provision of a payment coin/token as payment therefore does not constitute an additional service. Therefore, in contrast to the issuance of utility coins/tokens, no exchange or exchange-like transaction is assumed. Since the Swiss Federal Tax Administration considers utility coins/tokens to represent a specific or determinable service, the use of a utility coin/token is taxable at the time the service is provided, unless the service is covered by exemptions from tax under Article 21 (2) of the Swiss VAT Act and was already taxed at the time of issuance. The FTA (Swiss Federal Tax Administration) defines the use of an investment coin/token in terms of a payment to the coin/token holder as part of the debt claim against the issuer. Consequently, these constitute expenses at the issuer/debtor.

Art. 47 of the Liechtenstein Tax Act (SteG) standardizes the authority of the annual financial reporting that must be drawn up in accordance with the Persons and Companies Law. Consequently, commercial law is also the basis for tax law in Liechtenstein and its provisions are to be observed for the determination of the income tax, unless the tax law provides for deviating regulations. According to EXPERTsuisse, the current accounting practice is that the payment of investors under the TGE is to be accounted for under commercial and tax law in accordance with the following table: Own funds taken at the TGE: Debit: Crypto / Fiat Credit: Prepayment Recognition of revenue in the amount of the incurred expenses Debit: Orders in progress Credit: Income From an income tax point of view, this means that the income from the TGE would in principle be taxable, but by means of an offsetting entry (the company must still regularly provide a service for this) there is usually no actual tax burden. Ultimately, the company normally commits itself to build something with the collected funds (e.g. a platform).

An airdrop is when coins are sent to a wallet address to generate awareness for a cryptocurrency. However, it can also represent a hidden distribution of profits.

For legal entities in Liechtenstein, cryptocurrencies are recorded as "other assets/securities" and are not currencies from an accounting perspective. The realized changes in value or the gains from the sale of cryptocurrencies ("capital gains" from cryptocurrencies) - must be declared and taxed by legal entities as part of the annual income tax return. There is NO exemption provision applicable, according to which such gains would be tax-free. For natural persons in Liechtenstein, the assets (value of cryptocurrencies) are declared and taxed as of the beginning of the tax year as part of the wealth tax. Disposals during the year, on the other hand, are tax-free.

The principles of proper accounting pursuant to §1045-1062a of the Persons and Companies Act (PGR) apply. These are namely: Completeness and accuracy Clarity and materiality Principle of prudence Ensuring the continuation of the company's activities Consistency in presentation and valuation Prohibition of offsetting (gross principle) Accrual principle Documentation Timeliness and topicality

A hardfork is defined as follows: a blockchain can be seen as a book that documents the transactions. In general, there is a protocol in addition to the blockchain, which is supported by the miners and nodes in the network. In case of any changes, for example rule alterations, the miners and nodes have to accept this. Disagreements can occur, causing a fork/split in the blockchain. The end result is that there is an "old" and a "new" blockchain. Well-known hardforks happened with Ethereum and Bitcoin. The tax issue regarding this is not entirely clear yet. Therefore, it should be declared in the tax return to eliminate the risk of unknowingly committing tax evasion.

A natural person with unlimited tax liability in Liechtenstein is liable to pay taxes on worldwide income, therefore cryptocurrencies are subject to tax and declaration. The assets are valued in CHF at the beginning of the tax year (01.01). Finally, 4% of this is added to the taxable income as debit income which is taxed at the personal tax rate.     In Liechtenstein tax law, care is taken to avoid double taxation. To put this in practical terms: Assets that are taxed by wealth tax are no longer subject to income tax, therefore speculative gains of cryptocurrencies are tax-free. This has a beneficial impact on declaration and documentation efforts. Mining, on the other hand, is considered a source of income in Liechtenstein and is therefore subject to income tax. Mining expenses, such as IT and electricity costs, can be deducted from the taxable income. In the case of legal persons or entities, the realized changes in value (through a sale or accounting revaluation) must be declared, and are subject to income tax at 12.5%. As a result, a general reduction of the tax rate can be achieved through the equity interest deduction.

Proof of Stake (PoS) is an alternative consensus mechanism to Proof of Work, and is used to validate transactions. Blockchain participants lock and hold some coins with it for a certain period of time and make them available to validate blocks. A reward is given for staking these coins. In most cases, the "locked" coins cannot be sold in the short term. There are several variations of selection methods for determining the validators. Some selection methods are explained below: Staking size: The more coins made available for staking, the higher the probability of being selected for staking. Staking age: In this selection process, the network selects the validator in accordance with how long the tokens have been staked. Validators who have been staking their tokens for a longer period of time have a greater chance of being selected. Randomization: The validators are picked based on a formula that accounts for the lowest hash value in addition to the stake amount. In the PoS algorithm, the selection of a validator is one of the most important aspects.

By holding a stakeable cryptocurrency, returns can be generated. Especially in low-interest periods, this is an appealing option. Furthermore, Coin Staking is resource efficient unlike PoW.

Natural persons (FL) Wealth tax: Staking is classified as a loan receivable and is included in the tax calculation with the other assets as debit income (4%). Wealth tax can be characterized as a "hidden" income tax. In the tax calculation, the total taxable income is used for the calculation of the tax rate. The total taxable foreign income is excluded, as it is only relevant for progression calculation. Subsequently, the state tax and municipal tax are calculated, as well as the municipal tax surcharge. Income tax: The stake is not subject to taxation, since the “loan” provided is recorded and taxed under the wealth tax. Legal entities (FL) Income tax: the coins received ("interest") from staking are part of the taxable net income and are taxed at the regular tax rate of 12.5%.

PoW is the original consensus algorithm of the earliest blockchain networks. The algorithm is used to verify the transaction and create a new block in the chain. In this algorithm, miners compete against one another to complete the transaction on the network.

At their core, ICOs are similar to the concept of a traditional initial public offering (IPO). In an ICO, the investor buys the newly issued cryptocurrency in exchange for fiat money or other cryptocurrencies.

For the VAT assessment of an ICO, it is essential that the functionality of the coins/tokens is analyzed and appropriately classified according to the definition framework presented by the Swiss Federal Tax Administration.

Generally, a distinction is made between three different main types of tokens; these and their respective VAT implications in the case of an ICO and TGE are shown below. Token type: Payment Tokens VAT: Not subject to VAT / not taxable Token type: Utility Tokens VAT: Subject to VAT Token type: Security Tokens VAT: Not subject to VAT / exempt from VAT The use of a payment coin/ token for the purchase of a service is equivalent to the use of legal tender. The provision of a payment coin/token as payment therefore does not constitute an additional service. Therefore, in contrast to the issuance of utility coins/tokens, no exchange or exchange-like transaction is assumed. Since the Swiss Federal Tax Administration considers utility coins/tokens to represent a specific or determinable service, the use of a utility coin/token is taxable at the time the service is provided, unless the service is covered by exemptions from tax under Article 21 (2) of the Swiss VAT Act and was already taxed at the time of issuance. The FTA (Swiss Federal Tax Administration) defines the use of an investment coin/token in terms of a payment to the coin/token holder as part of the debt claim against the issuer. Consequently, these constitute expenses at the issuer/debtor.

Art. 47 of the Liechtenstein Tax Act (SteG) standardizes the authority of the annual financial reporting that must be drawn up in accordance with the Persons and Companies Law. Consequently, commercial law is also the basis for tax law in Liechtenstein and its provisions are to be observed for the determination of the income tax, unless the tax law provides for deviating regulations. According to EXPERTsuisse, the current accounting practice is that the payment of investors under the TGE is to be accounted for under commercial and tax law in accordance with the following table: Own funds taken at the TGE: Debit: Crypto / Fiat Credit: Prepayment Recognition of revenue in the amount of the incurred expenses Debit: Orders in progress Credit: Income From an income tax point of view, this means that the income from the TGE would in principle be taxable, but by means of an offsetting entry (the company must still regularly provide a service for this) there is usually no actual tax burden. Ultimately, the company normally commits itself to build something with the collected funds (e.g. a platform).

An airdrop is when coins are sent to a wallet address to generate awareness for a cryptocurrency. However, it can also represent a hidden distribution of profits.

For legal entities in Liechtenstein, cryptocurrencies are recorded as "other assets/securities" and are not currencies from an accounting perspective. The realized changes in value or the gains from the sale of cryptocurrencies ("capital gains" from cryptocurrencies) - must be declared and taxed by legal entities as part of the annual income tax return. There is NO exemption provision applicable, according to which such gains would be tax-free. For natural persons in Liechtenstein, the assets (value of cryptocurrencies) are declared and taxed as of the beginning of the tax year as part of the wealth tax. Disposals during the year, on the other hand, are tax-free.

The principles of proper accounting pursuant to §1045-1062a of the Persons and Companies Act (PGR) apply. These are namely: Completeness and accuracy Clarity and materiality Principle of prudence Ensuring the continuation of the company's activities Consistency in presentation and valuation Prohibition of offsetting (gross principle) Accrual principle Documentation Timeliness and topicality

A hardfork is defined as follows: a blockchain can be seen as a book that documents the transactions. In general, there is a protocol in addition to the blockchain, which is supported by the miners and nodes in the network. In case of any changes, for example rule alterations, the miners and nodes have to accept this. Disagreements can occur, causing a fork/split in the blockchain. The end result is that there is an "old" and a "new" blockchain. Well-known hardforks happened with Ethereum and Bitcoin. The tax issue regarding this is not entirely clear yet. Therefore, it should be declared in the tax return to eliminate the risk of unknowingly committing tax evasion.