What is the best place to pay taxes? Dubai, Andorra or Portugal:

Dubai has lately become one of the most sought-after destinations for businessmen and entrepreneurs looking for tax optimization for their companies.

Dubai offers a very competitive tax system for its residents, even compared to its neighboring emirate Abu Dhabi.

Personal income tax – Personal Income Tax Dubai

In Dubai a person cannot have an income tax and therefore is not taxed on the income he earned. There is no legal definition of tax residency, so the emirate government has not issued a tax residency permit until recently.

It also implies that a person living in the country cannot prove tax residency because the only certificate granted is of national origin.

Fortunately, the Ministry of Finance already provides tax residency certificates to individuals who have demonstrated that they have lived in Dubai for at least 180 days in a given tax year.

What is a «free trade zone»?

This is well known, in practice most of the UAE has restrictions on foreign investment. Non-native investors cannot own more than 49% of the shares of companies.

However, it can increase to 100% for companies registered within the Free Trade Zone within the UAE.

This area has a special tax regime, the main purpose of which is to promote foreign investments. ADBGH and Dubai DMCC are known worldwide as markets in the UAE. These two were among the first in the country.

Who is Dubai recommended for?

Digital nomads have moved to the United Arab Emirates to pay less taxes while enjoying a relaxed international lifestyle.

Dubai offers young people attractions in an international profile because unlike Andorra or Switzerland there is a wide variety of attractions and an international airport. Typically, these entrepreneurial newcomers settle in Dubai’s so-called «free trade zones».

Dubai has a 0% rate for profits made from cryptocurrencies, therefore it can be considered crypto-friendly.

However, one of the negative points of this Arab emirate, is precisely the remoteness from the main European capitals and the climate of the same that makes its residents migrate to other countries in the months of April to October trying to escape the very high temperatures.

Corporate Tax

The corporate tax in Dubai is 0. What can make it a highly attractive place to develop a professional activity, however despite this part is so interesting, always keep in mind that if in any case you want to send the money obtained in Dubai to another jurisdiction, it will ask you in any case the tax returns and in some cases, declarations are not accepted at 0%.

Although the UAE legislation does not contain provisions relating to the tax residency of companies, the Ministry of Finance issues tax residency certificates.

How to take the first step?

Resetting and saving has helped many cryptocurrency entrepreneurs with tax residencies to Dubai.

It is important to know what kind of partnership you want or need to create and secondly you should know that the minimum share capital is 1USD.

The minimum number of partners to form a limited company is 2 and the deadline to create a company in the UAE is from 1 to 3 weeks. In the latter case, as in Spain.

The only tax that will affect you will be the VAT (VAT) at a rate of 5%.

Economic substance requirements for companies

Some persons consider establishing offshore companies without human resources in Dubai for tax purposes. The Company must meet the economic substance requirement for the Company to carry on any activity considered relevant.

Generally, the company must have a management and a duly appointed director.

There are incentives for companies to hire local staff and electronic signatures are currently not permitted on government forms.

More tax advantages in Dubai

Dubai is free of all inheritance, gift, property and estate taxes. Dubai is a major financial center that can coordinate the business operations of the United Arab Emirates.

Several digital nomads and HNWI are relocating their residence in Dubai due to the attractive tax system.

Other taxes: real estate and VAT

In Dubai, residential property taxes have increased to 55% across the municipality. From January 2018, a new indirect tax of 5% will be applied on some consumable products.

How to obtain residency in Dubai?

You can obtain the golden visa in Dubai for 5 and 10 years in different ways.

To obtain the golden visa for 5 years, you can do it through:

• An investment through the purchase of a property valued at least AED 5 Million.
• Incorporating a company with a share capital of at least AED 500,000.
• Being a student.

To obtain the golden visa for 10 years you can do it by investing in a public project in Dubai an amount of 10 Million AED.

Andorra and Dubai: relations and IDC with UAE

Both countries have been coordinating the so-called Expo Dubai 2020, which was scheduled to start on December 21, 2020, but was postponed due to the COVID-19 pandemic. It was a registered exhibition of universal scale chosen in September 2018 by BIE from October 21 to March 2022.

In addition, Andorra has a double taxation agreement with the UAE since 2017.

Relations between the United Arab Emirates and Andorra.

The Andorran head of state believes that the Middle East is the area where many business opportunities are possible. Since 2017 Andorra and the United Arab Emirates have signed agreements to avoid double taxation, so «our diplomatic relations started in 2008 have prospered and we will certainly work to improve relations between the two countries.» Xavier Espot discussed the promotion of tourism relations with the Middle East and its communication with the public.

Why live in Andorra?

Andorra is one of the safest countries in Europe. In addition to security, the Principality of Andorra provides a very attractive tax framework, because unlike Dubai where taxes are 0%, in Andorra there is a maximum of 10%, which makes it very easy to change jurisdiction later.

Setting up a company in Andorra

Anyone can set up a company in Andorra without the need for a local partner, as is the case in Dubai in some cases.

Setting up a company in Andorra takes approximately three months and the minimum share capital required for the company is €3,000.

What taxes are paid in Andorra?

The tax framework in Andorra is very attractive since the maximum rates are set at 10%. It is also a tax framework approved by the European Union.

Personal Income Tax

The personal income tax in Andorra has a maximum rate of 10%. However, the first 24K€ are exempt from taxation and the rest up to 40K€ are taxed at 5%. The surplus from earned income would be taxed at 10%.

However, those traders who obtain their profits as income from movable capital, will have to pay tax from a profit of 3K at a direct rate of 10%.

In any case, dividends distributed by Andorran companies to Andorran residents are completely tax exempt.

Corporate Tax

The corporate tax in Andorra has a fixed rate of 10% after deduction of all the company’s expenses.

VAT

VAT in Andorra (IGI) has a fixed rate of 4.5% in general. There are different IGIs to be applied for the different services rendered in Andorra, however the general rate is applied at a maximum of 4.5%.

Double Taxation Agreements in Andorra

Andorra currently has 10 agreements to avoid double taxation with other countries.

Specifically, it has agreements with:

• United Arab Emirates.
• Spain.
• France.
• Portugal.
• Hungary.
• Cyprus.
• Malta.
• Luxembourg.
• Republic of San Marino.
• Liechtenstein.

How to obtain the residence in Andorra?

To obtain the fiscal residence in Andorra it is necessary to reside either at least 90 days a year (through passive residence) or 183 days a year (through active residence or self-employed residence).

Passive residence is obtained by making an investment in the country of at least 400,000 Euros, of which 50,000 Euros will remain frozen as a deposit in the accounts of the Andorran Financial Authority (AFA).

The active residence or self-employed residence can be obtained through the creation of a company in Andorra and through the investment of €15,000 in the AFA as a deposit.

Other options: Portugal

Portugal has become one of the most interesting solutions for those freelancers who have not resided in the European Union in the last 5 years.

Why? Basically because of the regime for non-habitual residents that Portugal approved last 2009. This put Portugal on the radar of many entrepreneurs looking for a solution to the high taxes in many countries.

Who is Portugal recommended for?

For those entrepreneurs and for those people who can create an online company, Portugal is a good option.

Those who have not been considered tax residents in Portugal in the last 5 years can apply.

Requirements to create a company in Portugal.

To create a company in Portugal, the first step is to reserve a company name with the Registro Nacional de Pessoas Colectivas.

This procedure takes a maximum of 2 days and once the company name is obtained, the company deed is signed before a Notary Public together with the company’s articles of association.

The incorporation experience can be done through the web as long as all the data of the project in question is collected. Once the company is registered in the Companies Registry and in the Chamber of Commerce, the declaration of the beginning of the activity and the registration with the social security is made.

In a single trip, as long as you have the necessary information and documentation, you can open your company in Portugal, even if you have already done everything online.

What taxes are paid in Portugal?

The famous non-habitual resident regime in Portugal has a flat rate for income from employment of 20%.

In addition, certain profits obtained abroad, such as dividends and income from real estate sales are completely exempt from tax as long as they do not come from tax havens.

Personal Income Tax

The non-habitual resident regime in Portugal can be kept for at least 10 years.

This regime will therefore allow you to tax your earned income at a flat rate of 20%.

Corporate Income Tax

The corporate tax in Portugal (mainland) varies between 17% and 21%.

This is still attractive compared to Spain.

VAT

The general VAT rate in Portugal is 23% (compared to 21% in Spain and 4.5% in Andorra).

However, the reduced VAT rate in Portugal is 6% and the intermediate rate is 13%.

More information

Sometimes it is complicated to decide which jurisdiction is more adapted to the personal situation of each client and that is why we offer to help you in this process.

If you need more information about which jurisdiction best suits your tax needs, do not hesitate to contact us without any obligation. We will listen to your case and we will try to advise you initially towards the jurisdiction that best suits your needs.

Contact us through our email or through our whatsapp.

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:

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.