Taxation in Andorra
The tax system of Andorra has evolved according to the country’s economic activities and structure. There has been an extension in the tax base that helps distribute the burden effectively over the tax. According to mandate established in the 1993 Constitution the power to determine taxes is split among communites (parroquias) which form town councils and the Government. But despite taxes Andorran disappeared from as a tax haven for other neighbouring countries years ago and is now a part of the European Union and the OECD recently. The country’s fiscal system has evolved to a system with direct taxation which can be approved at the international level and has been expanded in recent years to accommod.
Tax rates in Andorra
Andorra boasts considerably lower taxes vs most European countries. Andorrans enjoy high rates of taxation courtesy of favourable rates for private businesses in their country. This arrangement also benefits firms as the taxation rate is generous. The tax systems might start out as complex but it’s very straightforward and simple to understand. Below we can summarise the tax environment and provide information about some essential facts and figures that you need to learn before changing to the Principality of Andorra. The country draws thousands of people every year based on its favorable tax rate – structure and developed political system.
One of the most interesanting taxes in Andorra are the personal income tax and the corporate tax.
All about taxes in Andorra
Andorra have an extremely interesting tax regime both for company and taxation of the individual. The Principality is world known for its low taxes. If you want to save a considerable amount of money and use these funds it might well help you in this process.
How can I reduce taxes in Andorra?
Andorra is not a tax haven but is great value for people planning to relocate to developed country. Quaint villages set in the midst of the towering Pyrenees are the perfect locations to hike, mountain biking, fishing, horseback riding and other outdoor activities. The estimated 70,000 residents have the second-longest life expectancy in the world behind Japan. The Andorran card provides for Visa-free admission into France, Spain, Portugal Monaco immediately. Even if you leave but you are sure to return, whether for the epochal combination Spanish, French Portuguese Catalan and Andorran culture.
Let’s talk about how non residents can become tax residents in Andorra and start living in Andorra.
Capital Gains Tax in Andorra: Everything you need to know
Andorra has one of the best tax rates on capital gains, with an average of 10%. This is significantly lower than in some European countries such as France which ranked at 33%. Before recent changes capital gains tax in Andorran actually doesn’t exist. If you are a shareholder of any company or international property investor you may be curious regarding what the changes are to property rights.
Andorra Capital Gains Tax
Andorra’s capital gains taxes are considerably lower than other European countries, averaging around 10%. Learn all about the Andorran Taxes in the below guide. The capital gain tax encourages foreign investors in stock and real estate deals to sell or transfer assets.
All those persons who obtain benefits considered as capital gains and are tax residents in Andorra, must pay their personal income tax.
This taxation is based on establishing within the general savings base the amount of profit obtained worldwide on an annual basis.
However, in this amount we must deduct the first €3,000, since these are completely exempt from taxation.
The rest, must be taxed at a fixed rate of 10%, which makes Andorra one of the most attractive countries in the world fiscally speaking.
Residency programs in Andorra
In an average year Andorra accepts about 500 new residents to its small population. The programs are determined by your active or passive resident status in the nation. Active residents need a work permit while passive residents don’t. There were varying requirements depending on whether you intend to invest, establish an international business or if you’re internationally recognized someone. The country has many of the most attractive and desirable residency programs in the European region especially in the EU region and hosts around 500 residents year-round. The program is open to those who want to invest or incorporate their business in Andorran. The most attractive residence programmes are available in Europe and Canada.
A: Passive Residence Investment
Category A – residents don’t pay personal income tax.
Residents of Andorra must remain in Andorra for up to 90 days a year. The Category A resident status is applicable to all people wanting to be located outside Turkey without work or own business. Applicants shall provide documentation of a minimum capital investment of EUR 600,000 within seven months of the deadline for applications. It’s refundable if we give up our residency and our visa. The andorran National Institute of financial management (INAF) has been created to pay any debt of the applicant during your tenure. If you are not currently investing you must make this investment.
Category B: Passive Residence – International Business
Category B visa is created for international businessmen who can establish and run an Andorran business operating largely besides Andorra. This residency combines perfectly with the 2% corporate tax on foreign trade businesses that are not regulated by andorra. The biggest difference is, the B Category Residence does not require an investment of up to €400,000 and instead requires you to submit a business plan and confirm the creation of your business before a specified deadline. The residency also requires at least a stay of 90 days each year and offers many of the same requirements as a Category A residence including individual income tax exemption.
Category C: Active Residence – Local Business
Class – C residentship for firms or corporations established in Andorra planning to stay in the region permanently are allowed. The longer you stay the better and the more legitimate and ‘local’ your business activity is the more likely you are to pass the irregular inspections by The Andorran Police. The only program that demands that you pay taxes or provide for social security. It will be your only tax residence but with the low tax rates this shouldn’t be a big surprise. You don’t have to deposit €50,000 of government bonds for residency as with other residency programs.
Tax System in the Principality of Andorra
Resident Income Tax Rates – Income Tax in Andorra
Salaries of under €24,000 are paid without tax. From then on taxes increase gradually and remain around 10%. Dividend income from Andorran companies is exempt for residents only. Income tax here includes some major deductible taxes and provisions for your dependents and mortgage payments each of which impact your individual income and personal income tax rates. For married couples the brackets vary slightly: For married residents the rates are as follows: For married couples the brackets differ slightly: If married residents in Andorra the rates can vary.
About the capital gains tax rate, they are taxed at 10%, but the first 3.000€ are exempt from taxes.
Corporate tax
Corporate tax rates on those who choose to incorporate their business in Andorra range from zero to a maximum 10%. Holding firms with interests in foreign companies will not be taxable and their profits will not be paid. If you start a firm that purchases or sells products actively outside the European EU you can receive a 2% tax charge. This rate carries onto all the goods sold as merchandise for Andorra, if these goods are unable to be sold or incorporated within its borders. All the other companies in the United States operating locally, participating in the common business of business activities and implementing services are subject to that 10% tax rate.
Value Added Tax
Andorra has the lowest EU VAT rate of only 45%. VAT decreased from 1 percentage point to 1 percentage point for goods and services such as education food, culture and healthcare.
Real estate taxes in Andorra
Property transfer tax totals 4% divided between the state and the parish. Real estate capital gains can decrease from 15 – 1 % and is applied to real estate revenues the sale of all real estate varies by how many years the owner lived in the house. The Government is avoiding real. Realty. Speculation for instance a way of deterring property speculation.
Property tax
Properties are taxed at the Principality of Andorra at an average of Euro 100 for an Andorran property. Property owners are responsible for paying this tax.
