New VAT Regulations for Online Platforms in Liechtenstein

Liechtenstein is set to implement significant changes to its VAT law by Law No. 641.20, introducing VAT liability for online marketplaces, new data-sharing obligations, and updated place-of-supply rules. These changes, aligned with revisions to Swiss VAT law, are expected to significantly impact online businesses operating in the region.

Timeline

The changes will come into force on January 1, 2025.

Impact

Liechtenstein, having established a common customs area with Switzerland in 1923, subsequently aligned its VAT system with Switzerland in 1995. This alignment mandates the incorporation of Swiss VAT's substantive provisions into Liechtenstein's national law, ensuring a harmonized VAT regime between the two countries.

VAT Liability for Online Platforms:

One of the most notable changes is the imposition of VAT liability on online platforms. Platforms that facilitate sales of goods or services will be considered service providers, responsible for VAT registration, compliance, and tax payment. This means platforms will need to register for VAT, issue invoices, and remit taxes to the tax authorities.

Liechtenstein introduces a broad definition of "electronic platform" to encompass diverse online business models, including marketplaces, portals, and apps. For the purposes of the Amendment ‘electronic platform’ is an electronic interface enabling direct online contact between several persons for the purpose of providing a supply or service.

To avoid this liability, platforms must meet specific criteria. These include not being involved in the ordering process, generating revenue directly related to the business, or merely providing payment processing or advertising services.

New Data-Sharing Obligations:

The revised VAT law also introduces data-sharing obligations for online platforms. Platforms that connect service providers and recipients, such as those in the sharing and gig economy (e.g. offering services like holiday home rentals or transportation), will be required to provide information to the tax authorities upon request.

Location-Based Taxation Rules:

The taxation of services will also be affected. Services not directly provided to physically present individuals, such as online training, will be taxed at the recipient's location. This change aligns with international trends and ensures that services are taxed where they are consumed.

Implications for Online Businesses:

• Increased Administrative Burden: Online businesses, especially platforms, will face increased administrative burdens, including VAT registration, invoicing, and tax payment.
• Potential Tax Liability: Platforms may be liable for VAT on sales facilitated through their platform, even if they do not directly sell the goods or services.
• Impact on Cross-Border Transactions: Businesses engaged in cross-border transactions will need to carefully consider the implications of the new rules, particularly regarding the taxation of services.

Prepare for Compliance

As Liechtenstein aligns its VAT law with Switzerland, businesses operating in the region should stay updated on the specific requirements to ensure compliance. Failure to comply with the new rules could result in significant penalties.