Lately this is the question that most of our clients ask us: If we start the procedures now, will I be able to pay my taxes in Andorra?

We cannot assure you 100% that you will, but what we can tell you is that you have to start NOW with the procedures to make the transfer to the neighboring country.

This is because you need to have your residence card in Andorra with a date prior to July 1, 2021. Why? Basically so that you can be considered tax resident in Andorra this 2021.

Where is Andorra?

Andorra is sixth most populous European state with a border with Spain and the French. Andorra lies between South Europe and the Pyrenees. Andorra La Vella is the capital of Andorra with 1,023m of height.

It has a prosperous tourist economy. It hosts 1.2 million tourists per year. Are you looking for a house in Andorra? Our lawyers have over 15 decades of experience. Additionally, Andorra is an economic paradise which also makes the lifestyle of Andorra worthwhile. Andorra has a relatively tiny economy and a very nice life quality.

Cultural background and leisure activities

Andorra is an ideal location if you wish to travel in and around mountains, fish in trout, ride horses, go hiking and observe birds. During winter you can ski in the Grandvalira and Vallnord ski areas and there is almost 3000 kilometres (186 miles) of skiable terrain.

This is where the rich fauna and plants reside. A huge range of woodlands, meadows, flowers, goats and many more.

But if you are not into sports or nature, there are also other activities that you can do in Andorra. For example, Andorra is well know by its spa centers like Caldea or Hermitage Hotel where you can enjoy of a relaxing massages and thermal circuits.

 

You will also can enjoy going to the center of Andorra la Vella and Escaldes-Engordany walking through the main street called Avenida Carlemany and Avenida Meritxell, where you will find a lot of stores.

Becoming resident of Andorra

It’s easy to become an Andorran resident. In this other article you can find more information.

There are 4 residence categories:

• Passive resicence in Andorra.
• Active Residency In Andorra: Residency With A Work Permit.
• Residence In Andorra By Passive Residence For International Athletes, Scientists And Artists.
• Passive Residence For International Business Professionals – International Professional Services

So you can chose which type of residence permit can fit to your personal situation. You need to know before starting all the process that you will need some extra documents like your criminal records and your personal income tax.

What does it mean to be a tax resident in Andorra?

It is simple, if you spend more than 183 days in Andorra (half of the year, plus one day), you are considered tax resident in this country. Being a tax resident in Andorra means that you will be able to pay your taxes on the profits obtained in 2021 in Andorra.

This is highly interesting because of, as we have already discussed in other articles, the low level of taxation that exists in the Principality of Andorra.

In general, here is a tax comparison table between Andorra and Spain:

Type of Tax	Spain	Andorra
Corporate Tax	25-30%	10%
VAT	21%	4,5%
Personal Income Tax	56% (maximum fee)	10% (maximum fee)
Inheritance Tax	34% (maximum fee)	0%
Gift Tax	34% (maximum fee)	0%

However, in order to be resident in Andorra and to be able to develop your business in the country, you need a company with which you can invoice your services. It will be through the company that you will be able to apply for your residence as a self-employed person in Andorra.

But how long will it take to incorporate a company in Andorra?

Normally, the time to incorporate a company in Andorra is 3 months.

But you have to take into account that once the company is incorporated and registered in the Andorran Commercial Register, you can apply for your self-employed residence permit in Andorra (and this residence procedure takes only one week). What you must take into account now, is that in order to apply for your residence permit, the immigration department will ask you for a negative PCR made with a maximum of 48 hours in advance.

 

Therefore, if today April 5th you start with us the procedures to apply for your residence and set up a company in Andorra, you have to take into account that we could arrive before June 30, 2021 to obtain your residence card, as long as there are no delays either by the administration or by the client.

So if you are interested in becoming a tax resident this 2021 in Andorra and pay your taxes this year in Andorra, it is now when you have to activate the whole procedure of transfer to Andorra, because if you don’t do it, this year you will be taxed in your current country of residence.

What if this year I no longer become a tax resident in Andorra?

In this case you will not be able to be taxed on your profits obtained in Andorra this year 2022. However, it is advisable that you organize your move to Andorra well in advance.

You can start the incorporation of your company in Andorra this April for example and leave your company incorporated and then apply for your residence permit either in August or in January for example.

But it is important that you have at least three months before the date you would like to be invoicing with your company in Andorra and residing fiscally in the country.

It’s also important to know that you will need to present your personal income tax for living in Andorra. That’s because the Andorran government and the Andorran banks need to know the origin of your funds.

So, be sure before start everything that you count with your personal income tax.

The Principality of Andorra’s government

Andorra shares two principality countries. Coprince ancestors were Spanish and French designation and were ordained with ceremonial authority.

However, French co-principal is the president of France.

Governing council members of the county elect their president who is the head of its government. Andorra’s administration includes the co-prince, the executive board president, the president of France as well as the bishop of La Seu d’Urgell.

Andorra is home to an independent judiciary governed by government.

How can I reduce taxes in Andorra?

Andorra is not a tax heaven anymore. This is really important because years ago Andorra was considered as a tax heaven and this reputation is affecting the country still nowadays.

Today, Andorra has its own tax system which is very attractive for most of the foreign capital and companies. Why? because of the low taxes of the Andorra tax system.

In this other article you will find the tax information of Andorra. But check before this table:

So, as you can see Andorra has a very «sales tax regime» where living in Andorra makes incredible interesting idea for those who want to save money with their income tax.

Tax system in Andorra

Andorra is a beautiful province located in the Pyrenees mountains and is well recognized for its tax policies and favorable policies. The micro nation had no Income Tax before the EU had pushed the EU to introduce basic income tax in 2015. Tax residency is advantageous to many people and this will help to attract expats to this area. We will examine and explain the tax system of Andorra as a whole and discover different tax forms.

Personal Income Tax in Andorra

Andorra has a low income taxation system in Europe. In this article we will talk about Andorran income taxes. According to Andorran tax laws, one is not allowed to pay income tax over 10% per month. Andorra has been able to become a major player in international business by imposing a lower tax rate and an increase in double-tax treaties that are expected to be signed between the two governments. The reorganization is also an indication of its repositioning.

This tax is one of the most important in Andorra because permits invest in Andorra with a very low taxation.

Living in Andorra means that you will be saving money in taxes. This is because Andorra introduced an interesting tax system where you will pay income tax in a maximum rate of 10%.

But you need to know the following:

• The first 24.000€ the type rate is 0%.
• The following 16.000€ are rated at 5%.
• Hereafter you will be rated at 10%.

Dividends from Andorran companies are totally exempt. Free of any additional charge. You won’t pay in you personal income tax for your dividends. So pay taxes in Andorra is really interesting for lots of people.

Other taxes in Andorra

When thinking about how your personal income tax affects your net income you should also consider tax consequences related to retirement income and everyday activities. Andorra is comparatively less than 4% with shopping an attractive option for those traveling to Andorra. The tax rate on Andorra property changes over time. Capital gains tax for financial investments is only applicable if the amount of the ownership or sale is greater than 25%. Andorra does not have any capital gains tax. The Andorran government does not levy inheritance and wealth taxation.

Andorran government also established that they don’t want to apply any other taxes like Wealth tax.

The other taxes in Andorra that you need to know are:

• Company Tax: Maximum rate of 10%.
• VAT: maximum rate of 4,5%.

So, living in Andorra is perfect to save money from your personal income tax and other income taxes.

Living in Andorra pros and cons

How is Andorra different from other countries?

All mountain areas have beautiful views of our area. Andorra’s tax laws are also favorable to everyone.

Several individuals have considered living in Andorra. The decision to go to Andorra requires great attention and diligence. All nations are different. Andorran isn’t any different. So read through to know about Andorra’s advantages & disadvantages.

Advantages of Living in Andorra

Maybe the most important advantage of living in Andorra is the low tax system that they have.

But in Andorra there are many important advantages like the high number of sports and natural activities that you can do in the country.

Also we need to speak about the nature, the amazing landscapes, modern hotels and restaurants, etc. But one of the most important things in Andorra is the security in the country, the healthcare system and the education system.

Andorra is one of the most secure countries in the world with one of the lowest criminal rates. This makes this amazing country in a perfect place to live and to raise your children.

Andorran healthcare system is also really important in the Principality and it’s been rated like one of the better healthcare system of the European Union territory.

Finally, the education system is also very complete due to in Andorra you can chose between 4 different education systems:

• Andorra system.
• Spanish system.
• French system.
• British system (this is private).

Disadvantages of Living in Andorra

Is well-known that Andorra is a small country between Spain and France. That has been a problem during years because Andorra has no territory for having its own airport.

But this is not a problem anymore because last year Andorra created an airport 30 kms from Andorra in Spain to solve this problem.

Is Andorra right for you?

It is very interesting about Andorra as I said earlier, the beautiful scenery, the variety of outdoor recreations, the duty-free living and the low taxes are all factors that combine to create an extremely appealing package.

If it’s not worth two hours of travel to get to a city airport Andorra (but as we said, now we can count with «La Seu Airport near to Andorra»), Andorra is a very good place to stay.

If you are an internationally based business it could be an excellent fit. Andorra has a lot of interesting and attractive residence opportunities in Europe.

Cost of Living – Andorran Real Estate

When you are comparing residency opportunities to those in Andorra, you must also consider living costs, including property costs. If you look at the category of passive residence investment property after paying a bond deposit you can potentially invest around €355,000 into local properties.

In this budget range you can find different house styles and luxury based on your tastes and location.

Political system

The 1993 Constitution created Andorra as a sovereign parliamentary democracy and two coprinces are joint and independent heads. The co-prince’s powers can be limited, but the veto is not valid for legislation passed by the General Council. Throughout Andorra, the prince represents himself personally. Andorra’s choice of two princes translated into a politically different nation.

Treaties on double taxation

Andorra is currently signing two-thirds double tax treaty with many of its EU neighbours. This treaty is a crucial step towards determining taxation and the way in which a country taxes a trade that crosses its borders. If there were no taxes on international businesses it would have a double impact. It makes good sense if more businesses are interested in Andorra.

These agreements are really important because you can use them for pay les taxes in your income tax because if you pay for example in A country you can be tax exempt in Andorra for your personal income tax.