Companies have a duty to deduct income tax from their employees' salaries and to transfer this income tax to the taxation authorities. It is these taxation authorities that are responsible for determining the amount of income tax to be deducted, though provisions differ depending on the employee's place of residence.
All persons working on a self-employed basis in Liechtenstein must pay income tax (withholding tax) on revenue from self-employed activity as well as on other revenue. The amount of tax due is determined by the taxation authorities. A certain amount of revenue per year is tax-free. Tax bands range between 3% and a maximum of 24%. At the end of each year, citizens must complete a tax declaration. This is then used to determine how much tax should have been paid in the preceding year. This tax declaration is relatively simple and quick to complete.
Some workers living outside Liechtenstein may be subject to limited taxation. In such cases income tax (withholding tax) is levied on:
Taxation provisions vary according to the place of residence. Workers living in Switzerland have the easiest system: they do not pay tax in Liechtenstein. All income is taxed in their place of residence in Switzerland. Workers living in Austria have to pay a set-rate withholding tax of 4% deducted from their salary. This sum can be deducted from income tax in Austria. Workers who live in Germany pay taxes in both countries. A set-rate withholding tax is levied in Liechtenstein regardless of the amount a person earns. This is deducted from the income tax to be paid in Germany.
Workers living abroad who are employed by the civil service or other public institutions are subject to different provisions. Their income, but not their assets, are taxed in Liechtenstein. Therefore, they must fill in a complete tax declaration and submit it to the taxation authorities in Liechtenstein. There are two different categories of civil servant depending on where the person has his place of residence:
Non-resident workers employed by public authorities with sovereign powers simply have to pay income tax in Liechtenstein. However, for non-resident workers employed by public authorities without sovereign powers the tax paid in Liechtenstein can only be deducted from tax in their country of residence.