Taxation in Andorra, is it really advantageous?
Andorra undertook a reform program in order to encourage the establishment of foreign capital companies and the creation of a tax system comparable with the member states of the European Community.
In a dynamic country like few others, Andorran taxation has had to catch up with the other countries of the European Community, implementing various measures.
VAT, called IGI in Andorra, is the lowest in Europe. Its general rate is 4.5% but it is reduced to a scant 1% for health, education, culture, food and rentals. Spain and France, the two countries that share borders with the Principality, have a VAT (TVA in the Gallic country) of 21% and 20% respectively.
The Principality also has an income tax of 10%, while in Spain the personal income tax or personal income tax stands at 52%.
The corporate tax is also 10% in Andorra, with discounts of up to 80% when it comes to strategic investments. In Spain, this same tax amounts to almost 30%.
Another of the strategic points of this series of measures is to prevent Andorran citizens and companies from paying taxes for the same concept in two states. Avoiding double taxation is key and has just been added to this series of measures.
Zoom on the advantageous tax measures in Andorra
- VAT (IGI) of 4.5% for general goods and 1% for health, education, culture, food and rentals
- IRPF of 10%
- Corporation tax of between 2% and 10%
- Elimination of double taxation
- Non-taxable bank interest up to € 3,000 per year
- Non-existent wealth tax
- There is no inheritance tax
As we have mentioned previously, personal income tax in Andorra is much lower than in most European countries. In the form, it is the same tax as the other OECD countries, since it is calculated based on the income of individuals.
Some details about Andorran taxation: Get to know the IRPF ceiling in Andorra
Personal income tax in Andorra is not paid in salaries lower than € 24,000.
Income between € 24,000 and € 40,000 only pay 50% of IRPF, that is 5%. The total income tax, which is 10%, is paid only by income over € 40,000.
Who is subject to personal income tax in Andorra?
- Any person who resides in Andorran territory for more than 90 days per calendar year
- Anyone who exercises at least one economic activity in the Andorran territory or who has economic interests in the Principality that generate direct or indirect benefits
The income to which the IRPF applies
- Income from a trade or activity: remuneration, salaries, bonuses
- Income from the operation of real estate, including rent
- Income from commercial, professional and administrative activities
- Income from bank interest
- Income from change in asset composition: capital gains or losses
They are not liable to pay personal income tax
- Donations and inheritances
- Income from the transfer of real estate
Non-residents are those cross-border workers from Spain or France, who do not own a home in Andorra or live for a long time during the year, but who nevertheless carry out their professional activity in the Pyrenean country. These people are subject to a type of tax called IRNR or income tax of non-residents. This tax is of the order of 10% according to Andorran taxation.
In Andorra, who is required to pay the IRNR?
- Companies that provide services
- Professors, teachers and technical assistants
- The artists
- Employees affiliated with CASS, the Andorran Social Security
If you still have questions about the taxation in Andorra and the tax advantages for companies that intend to settle in the country, the team of experts at GESTIM Immobiliària is ready to help you with this purpose. Our team is aware of taxation and legality, we can help you in your strategic decisions in Andorra la Vella and other parishes of the Principality.