The Tax System in Andorra
The tax system in Andorra is known for its attractive low tax rates.
In practice, this means that Andorra is a country with tax rates between 0% and 10% maximum and is not considered a tax haven by the OECD.
The fact that Andorra is not a tax haven, makes many businessmen and entrepreneurs prefer to change their tax residences to Andorra in order to better optimize their taxes related to their professional earnings.
How do you become a tax resident in Andorra?
One of the easiest ways to become a tax resident in Andorra is to transfer your business to the Principality.
In this way, you will need to fulfill the following requirements to do so:
- Be part of an Andorran company with at least 21% of share capital.
- To be part of the administrative body of the company in Andorra.
- Make a transfer as a deposit to the Andorran Financial Authority (AFA) of €50,000. The latter was changed in December, as previously this amount was €15,000.
- Spend more than 183 days a year in Andorra to have your residency renewed.
- To have invoicing with your Andorran company.
- Once the first 3 requirements are fulfilled, you can start to be considered a tax resident in Andorra.
However, there are other types of residencies that may suit you better. Do not hesitate to contact us so that we can verify which is the residence that best suits your needs.
The benefits of the Andorran tax system
The major benefits of the Andorran tax system are the low tax rates and consequently the tax optimization for entrepreneurs.
That is, instead of paying 25% on your company’s profits, in Andorra you can simply tax the same profits at a maximum rate of 10%, which produces great tax savings.
Capital gains tax
Capital gains obtained in Andorra are taxed at the personal income tax savings rate for individuals.
The bracket depends on the amount obtained, since the first 3,000 euros are completely exempt from tax in Andorra.
Income tax
Personal income tax, in general, is one of the most sought after taxes for businessmen moving to Andorra.
This is because the rates and maximum brackets vary a lot from e.g. Spain or France to Andorra.
The following table shows the difference between the different personal income tax rates in Andorra:
Andorra vs. Spain.
The difference in tax rates makes many businessmen and entrepreneurs decide to move to Andorra in order to benefit from the IRPF in Andorra.
This is possible by fulfilling the requirements detailed above. However, it is very important to take into account that not all businesses can be established in Andorra since the substance is indispensable to be able to pay tax without problems in the Principality.
Value-added tax (VAT)
VAT is called Impuesto General Indirecto (IGI) in Andorra.
The general rate is set at 4.5%. There are also reduced and extended rates (the one applied in the banking sector for example).
In this other article you will find all the necessary information about the IGI/VAT, its tax rates, allowances and its history of application.
Andorran taxation is relatively young, but the differences that exist between it and that of other countries in Europe make the advantages of Andorra so attractive that many businessmen choose Andorra over any other country in the European Union or in the world.
Corporation tax
Corporation taxThe corporate income tax IS in Andorra is another of the most interesting taxes offered by the Principality.
The taxation on the profits of the companies is established at a 10% maximum rate.
The corporate income tax in Andorra is one of the most attractive taxes in Andorra.
In general, taxes in Andorra are very attractive and it should be noted that benefiting from the advantages of this taxation is not easy.
Real estate tax
The tax on the transfer of real estate in Andorra is very simple. The property tax.
In this other article you will find all the information about it. However, it is set at a rate ranging from 1.5% to 4%.
In any case, 1% of the value, will go to the Government of Andorra, while the rest will depend on the Comú in which the property is located. This % is established between 0.5% and 3%.
In addition to the tax on the transfer of real estate, you must take into account that there are capital gains.
The capital gains tax ranges between 0% and 15% depending on the number of years in which you have disposed of your real estate.
Other taxes
In Andorra there are other taxes and fees that must be taken into account. For example:
- The tax called «foc i lloc» which is that tax paid by the residents of each parish for living precisely in each parish. Normally it is about 50€ per person.
- There is no personal wealth tax in Andorra.
- There is no inheritance and gift tax in Andorra.
Contact us
If you have any questions, we can help you. Whether your intention is to pay your taxes in Andorra or to change your residence to Andorra, to look for a house or any other kind of services, please contact us so we can help you.
