General information about Andorra
Andorra has become a favorite country of residence for large fortunes, mainly Spanish and French. This is due to its attractive tax system, i.e. taxes in Andorra.
Is Andorra considered a tax haven?
The Principality of Andorra, for many years has been considered a tax haven, since at that time no taxes were paid. Now, after the entry into the country of the current tax system, Andorra disappeared from all OECD blacklists (specifically since 2018), so there is no institution in Europe that can consider Andorra a tax haven, far from what many people mistakenly think. A tax system was established in Andorra.
Who can be taxed in Andorra?
All individuals and legal entities that are fully established in the Principality of Andorra must pay their taxes in Andorra.
In order for an individual to be able to pay his income tax (IRPF) in Andorra, the following circumstances must be met for his tax residence to be considered fully established in Andorra:
- Residing more than 183 days in the Principality of Andorra.
- To have a valid residence card in the country.
- That all his or her core economic and vital interests are based in Andorra.
Once these requirements are fulfilled, it will be considered that the change of tax residence to Andorra has been effectively made (as el Rubius recently did) and the person will be able to pay taxes in Andorra.
The IRPF (Personal Income Tax)
This is one of the most interesting taxes in Andorra together with the corporate tax. This is the tax that most favors the Andorran taxpayer. Here, Andorran residents must pay tax on all income obtained worldwide. That is to say, all the income obtained by the taxpayer in different countries must be declared in this tax and pay the corresponding tax.
When does one start paying Personal Income Tax (IRPF)?
It is important to mention that not all residents in Andorra must pay this tax, since the law establishes that in order for individuals (IRPF) to pay this tax, their income must be higher than 24.000€ per year, since this first amount is completely exempted.
Therefore, the income tax in Andorra only has to be paid by people who receive more than 24.000€ per year of income from work or those who obtain more than 3.000€ of income from movable capital.
IRPF Andorra vs Spain
When we compare both taxes, we see that clearly the IRPF in Andorra is much more attractive than the IRPF in Spain, this is mainly due to the tax rates to which both taxes are subject. Let’s see in a concrete case below, the difference in payment between both countries:
IRPF brackets in Spain
The final amount that has to be paid in this tax in Spain, depends on two quotas: the autonomic quota and the state quota. The sum of these two quotas will be the amount that the person in question will have to pay to the Tax Agency.
On the one hand, the state quota has the sections that appear in the table below:
And on the other, we find the different brackets applied by the autonomous communities. In this case, let’s take as an example the table of the brackets of Catalonia.
So, for example, if a person with an income from work of 100,000€ per year, if we take into account the state table, he/she will be taxed as follows:
The first 12.450€ – 9,5% = 1.182,75€.
7.750€ – 12% = 930€
15.000€ – 15% = 2.250€
24.800€ – 18,5% = 4.588€
40.000 – 22,5% = 9.000€
To be paid for the state quota = 17.950,75€.
But in this case, it will be necessary to add also the autonomic quota, which will be applied in the following way:
The first 17.707’20€ – 12% = 2.124,86€.
15.300€ – 14% = 2.142€
20.400€ – 18,5% = 3.774€
46.592,8€ – 21,5% = 10.017,45€
To be paid for the regional tax = 18.058,31€.
Therefore, this person will have to pay a total of 36.009,7€ and will be taxed at a maximum rate of 44%.
Income tax brackets in Andorra
Now, in the Principality of Andorra, these taxes have different brackets. Let us see concretely with the same example how this person will be taxed:
Therefore, the practical example would be as follows:
| NET BASE | APPLICABLE TYPE |
| First 24.000,00€ | 0% |
| Next 16.000€ | 5% |
| Hereafter | 10% |
The first €24,000 are not taxed, they are exempt. This first tranche is very important.
16.000€ – 5% = 800€
60.000€ – 10% = 6.000€
Therefore, this person would pay a total of 6.800€ in his income.
The brackets of the savings base in Andorra (which in that case would not apply, I would do it for example with the income obtained from profits from cryptocurrencies or poker) are as follows:
| NET BASE | APPLICABLE TYPE |
| First 3.000,00€ | 0% |
| Hereafter | 10% |
Comparing both taxes, in Andorra we have a saving of €29,209.7.
VAT in Andorra : the lowest in Europe
Andorra currently has the lowest VAT in Europe. The Andorran IGI, which is the name given to this tax, is currently 4.5%.
This can be extremely attractive for many businessmen, but it is also attractive for individuals residing in Andorra. Why? Because of tax free.
Tax free is the process by which many Andorran residents apply for a VAT refund on all those products (not services) that they buy in Spain or France (or in any other country of the European Union or the world) and import directly to Andorra. The law establishes that the VAT of the country of residence must be paid in this case and as the difference is so great, it is really very beneficial to make use of this right.
It consists then, in requesting the refund of the 21% of the Spanish VAT and in paying (in the products that exceed 300€) the Andorran Tax which is 4.5%.
However, the subtraction of both amounts is not the total amount that is returned and it is normal, to do this, you need help from companies like GlobalBlue to perform this process and they keep a percentage of the refund. Therefore, the percentage that ends up remaining to the resident in practice is approximately 16%.
Indirect General Tax (IGI)
Finally, the Andorran VAT also consists of different rates:
- IGI Superreduced: set at 0% and applies to those goods and services related to health, education and investment gold.
- IGI Reduced: Set at 1% and applicable to food for human consumption, water, books, newspapers and magazines.
- General IGI: 4.5%. Applicable to all other products and services not included in the other groups.
- Special IGI: 2.5%: Applicable to the transportation of persons, public administration services and to goods and objects of the world of art.
- Increased: 9.5% Applied to financial and banking services.
Setting up a company in Andorra
Setting up a company in Andorra no longer requires Andorran investors. Nowadays any person, once he/she has processed his/her foreign investment process, can apply for the incorporation of a company in Andorra.
The process of creating a company in Andorra is complex and it takes approximately 3 months to obtain a fully operational company in Andorra. However, the taxation that this company will receive is very interesting, so much to have patience for 3 months.
Another important point is the economic cost of creating a company in Andorra. This type of company requires a minimum capital (if the partner intends to reside in Andorra) of about 25.000€ – 26.000€.
However, of this amount, it must be taken into account that 15.000€ will be destined as a deposit to the immigration department, not as a fee, since in case of requesting the cancellation of the residence in Andorra, all this content is returned to the person in question if he/she does not have any sanction or outstanding debt to be paid in the country.
Another 3.000€ will be qualified as share capital of the company, amount that will be available to the investors once the company is constituted. And the rest should be understood as fees and taxes to be paid for the creation of this type of companies in Andorra. These data, in any case, are approximate.
Corporate Income Tax (IS)
This is one of the most interesting taxes in the country, since, together with personal income, it is very attractive.
The taxable base of this tax, i.e. the income after deducting expenses, will be a fixed rate of 10%. So the tax pressure to which many companies are subjected in other countries find that in Andorra, there is no tax pressure at all.
In this place, therefore, it will be taxed at a fixed rate of 10%.
Taxes in the real estate market
The real estate market in Andorra is absolutely booming. If you visit the country, you will find new constructions everywhere. Many buildings are being constructed, even towers (skyscrapers), to provide housing for hundreds of people who are interested in residing in Andorra.
However, the taxes applied to the sale of such properties are also interesting, since the capital gains tax applied to a property is set at a rate ranging from 1% to 15%.
On the other hand, the property transfer tax (ITP) in Andorra is 4%. This tax is divided into two taxes: ITP of the Government (1%) and ITP of the Comú (City Council) of 3%.
Why do youtubers go to live in Andorra?
To be taxed in Andorra. Mainly that is the reason. An absolutely licit reason, totally legal.
As we have seen in the taxes explained above, thanks to having the fiscal residence in Andorra and not in Spain, they can save large amounts of money paid in taxes. This is called Fiscal Optimization, that is, they use all their resources to legally pay less taxes. Be careful, from tax optimization to fraud there is only one step and this is what many people are confused about. Information is crucial and in many cases, this information is insufficient.
Taxation is therefore a very important factor, taxing in Andorra is very beneficial. Taxation.
Now then, these cases have been the most talked-about cases because they «make more noise» as they are famous people and people who reach many people with their content. However, Andorra is not mainly the country of youtubers, far from it.
The exodus of entrepreneurs has been constant during the last years due to the high tax pressure in Spain. Big businessmen with companies in Spain have decided to change their tax residence to Andorra, precisely because they are tired of paying so many taxes in Spain. It is something simple, change the tax residence and enjoy the taxation of neighboring countries.
In short, Andorra has attracted those professionals and digital businesses that do not depend on a specific physical location to carry out their economic activities.
