Andorra: an attractive tax system

It is worth noting that in Andorra there is no inheritance tax or wealth tax, and that bank interest is only taxed from €3,000/year. The different taxes that exist in Andorra bring many advantages, both for individuals, residents or not in the Principality, and for Andorran companies.

Advantages of the Andorran tax system for Andorran companies

In Andorra, companies are subject to 2 main taxes: Corporate Tax (IS) and General Indirect Tax (IGI), and, indirectly to affect the owners of the company, to a third: Personal Income Tax.

Corporate Tax (IS)

Introduced in 2012 and with a maximum rate of 10%, Corporate Income Tax (IS) taxes the profits made by companies. In Andorra, the tax system provides for particular advantages during the first three years of activity. This tax does not apply to holding companies that have shares in other companies registered outside the country.
It should be noted that Spain and Andorra have reached a bilateral agreement to prevent double taxation in relation to Andorran corporate taxation.

Indirect General Tax (IGI)

Introduced in 2013, it is the equivalent of the Spanish VAT, but its general rate is much lower: 4.5%. This tax is applied to the amount of the provision of services or the amount of the merchandise. The IGI does not tax the export of goods or services.

Personal Income Tax (IRPF)

Introduced in 2015, this tax is levied on the income of individuals and, therefore, from a legal point of view, it does not directly tax Andorran companies. What this tax does tax is the professional activity of individuals who own a company or who reside in Andorra for more than 183 days a year.

Advantages of Andorran taxation for individuals

Personal income tax: who and what is taxed?

Taxpayers:

• Any person who resides in Andorran territory for more than 183 days per calendar year
• Any person who carries out an economic activity in Andorran territory, or who has economic interests that generate direct or indirect benefits in the Principality of Andorra.

Personal income tax is levied on the following income:

• Income from a profession or activity: remuneration, wages, bonuses;
• The income that comes from the exploitation of real estate, especially rental property;
• Income from economic activities, such as commercial, professional and administrative activities
• Income from property or movable rights, such as bank interest
• The income that comes from the change in the composition of active gains or capital losses

Personal income tax has a maximum rate of 10%. It is non-existent when income does not exceed €24,000 per year, and is 5% for incomes between €24,000 and €40,000 per year. Free acquisitions (inheritances and donations) are not subject to Income Tax.

Non-Resident Income Tax (IRNR)

Andorra is an attractive country and the Andorran authorities have had to take into account non-residents who want to benefit from the advantages offered by the country. Non-residents are, for example, cross-border workers who live in Spain or France and who carry out their professional activity in Andorra, or people who work occasionally in Andorra for a short period of time. These people, as they enjoy the advantages of the Pyrenean country, are subject to Andorran taxation via the IRNR and are, for example:

• Service provider companies (repair, real estate rental, etc.)
• Teachers, training professionals, technical assistants
• Artists
• Cross-border workers affiliated with CASS

According to Andorran taxation, the tax rate is 10% of the income received.