Advantages and tax information of Andorra
The andorra advantages they make it a unique and praiseworthy country are many and diverse. This micro state has qualities that can make it the best for your situation, culture and context. For Europeans, especially French, Spanish and Portuguese, both the jurisdiction itself and the style and andorra lifestyle together they can make this the preferred option when looking to change your country of residence.
We remind you that you can start your transfer and establishment in Andorra by the best experts and safely contacting us, as well as finding out about the services we offer you at Andorra Insiders.
The most famous and recognized advantage of Andorra is its taxation framework. Since the Principality's international opening, taxation stands out for homologated taxes similar to those of its European neighbors but with substantially lower rates. This is why we will first address this question: principality tax system.
To get a first basic idea, it is quite useful to comparer the general types of the most relevant taxes applied to Andorra and Spain. That is to say: to contrast broadly what taxes or fiscal burden would be borne by a given legal entity by acting in an equivalent way in both countries.
Simple taxation comparison
As we see the difference is very remarkable. Then we will go on to list the details and most important advantages of each Andorran tax and its fiscal situation. We go into more detail in the article published on taxes in Andorra in 2020.
Summary of the most important taxes
Impost de Societies (corporate tax)
- The general rate is 10%
- In certain conditions it can be 2%
- During the first three years and if the turnover is less than €100,000:
- First €50.000 are taxed at 5%
- The rest is taxed at 10%
- Some holdings exempt from tax obligation on corporate tax
Impost General Indirect (Consumption)
- The general rate is 4.5%
- There are reduced and super-reduced rates of 0% and 1% for necessity products
- A special rate of 2.5% applies to certain services, essentially cultural
- Tax rate increased by 9.5% for banking and financial services
Impost sober persons physiques (income)
- The maximum rate is 10%
- It is a tax with brackets, resulting:
- From €0 to €24.000 it applies 0%
- From €24.000 to €40.000 the rate is 5%
- The income from the first €40,000 is taxed at 10%
- The dividends from Andorran companies are not taxed never (0%)
Social contributions CASS (Social security)
- Working for others, 22% of the salary is paid:
- 15.5% in charge of the company
- 6.5% in charge of the worker
- Working on your own, 22% is also applied based on the contribution, BUT:
- The minimum contribution base is €2,041, resulting in a minimum contribution of €450
- There are CASS reductions under certain requirements
As regards parish and municipal taxes in Andorra, they are usually applied to natural and legal persons, and do not usually exceed € 800-1000 per year for companies and €75 for individuals.
Physical and legal security, stability
Andorra is a country with great security and this is accredited by international organizations. Among its causes we can highlight its demography with multiple nationalities and languages spoken and its peculiar biography. For example, one of the advantages is the low incidence of crime in the Principality.
The United Nations Office on Drugs and Crime publishes annually The United Nations Crime Trend Survey, a statistic on world crime and places Andorra in 153.9 people convicted of crimes per 100,000 inhabitants, one of the lowest in the world. It is also low compared to neighboring countries, which are usually between 500-1,000 crimes or another micro state, Monaco, which is close to 2,000.
This also makes sense with World Bank data, in which the Principality of Andorra occupies the 5th place in the world ranking as one of the safest countries according to the political stability and low crime. To give us an idea, Spain is ranked 31st, with Barcelona considered one of the most insecure cities in Europe. This is even more relevant if we consider that this country passes 8 million tourists a year.
As regards legal certainty, it is guaranteed by its legal system and its institutions. Legal certainty is a principle recognized and protected by the Andorran Constitution (1993), being an essential advantage of its democratic structure. This has allowed the great development of the Principality from the year 1950 until today, and has facilitated the investment in Andorra both Andorran and international ones.
With new reforms, legal certainty has been reinforced for international investments in the Principality of Andorra with the adoption of a new fiscal framework, the liberalization of foreign investment and the negotiation of non-double taxation agreements.
Stability and location
Finally it is worth mentioning the stability of the country, which has historically maintained its neutrality in the face of the various armed conflicts that neighboring countries have suffered. Being a recognized international state as such, it has headquarters at the UN and representation in numerous international organizations.
Health and Environment
If we talk about health in Andorra, the first of the advantages that we should mention is the andorran health system, which implied the first place in the world ranking of a report from the medical journal The Lancet, as the best system in the world. But how does this system work?
The Andorran system is formed by China Andorran de la Seguretat Social (CASS). All professionals who offer services subsidized by CASS can join this system as agreed, in a a kind of check system in which the State is obliged to finance health services, but it is the user who chooses who, where and how he obtains them.
This obviously gives freedom for CHOOSING to doctor to the citizen and allows there to be competition in services, promoting quality and merit.
The second principle is that of co payment. The operation of this co payment is as follows:
- First, the registered user pays the full cost of the services agreed by the CASS
- After a period (hours or days) the CASS returns the corresponding co-payment percentage to the citizen
- There are private compensation insurance to cover the percentage of co payment supported
The subsidized amounts (which the CASS returns) are the following:
- 75% of the expenses derived from consultations to specialists or medications.
- 90% when expenses correspond to hospital admissions or surgeries.
One way to assess the health of a country is to take a look at its indicators for this purpose. In life expectancy, for example, Andorra has been in the top ten for many years, down and up positions according to rankings, years and methodology. So we have, for example, that in 2017 according to the WHO occupied the fifth place, above Spain, that according to the United States Census Bureau is the best in the world or the cessation of support by WHO for having less than 250,000 inhabitants. Anyway, the life expectancy in Andorra it has always far exceeded 80 years, reaching almost 84 sometimes.
Another interesting identifier is the Human Development Index (HDI), prepared by UNDP (United Nations Development Program). According to the UN itself, in 2016 Andorra obtained a rating of 0.858, one of the highest in the world.
Environment in Andorra
About the environment we could highlight many things, as we have in our article dedicated to the environment in Andorra. From the Green School project, international agreements and green ways to waste management, wildlife recovery or the co generation plant. But Let's keep some data from the Environment Indicators of 2018 that the Ministry of Environment and Sustainability prepares each year:
- More than 84% of surface water is of excellent or good quality
- 20% of the electricity demanded by Andorra is generated only at the Engolasters hydroelectric plant
- The air quality was excellent or good 91% of the time of the year
- The acoustic quality was excellent or good 84% of the time
- Recycling results obtained from 50.4% thanks to selective collection
- More than 90% of Andorra area is forest land
- In addition, it is always in the top ten in the WHO ranking on air pollution in Europe
To describe the economy of Andorra we will rely on a publication of the Chamber of Commerce called Andorra en Xifres (Andorra with numbers) published by the Chamber of Commerce and the Department of Statistics of the country. Specifically that of 2018 (last).
Being fast in the basics, Andorra has a population of about 75.000-80.000 people and a population density of 160 inhabitants / km2. There are 9.000 companies and establishments registered and more than 200 tourist accommodation.
The country has a per capital income of about €36,000 per year and 36,000 employees with an average salary of €2,100-2,200 per month. One of the clearest economic advantages is that unemployment is only 1.5-2.5% of the active population. The public debt is less than 40% with respect to GDP and is reduced and improved in rating every year. What does this mean?
Well, as before, an easy way to understand this data is to compare with Spain, the neighboring country. Spain has a per capital income of about €26,000 per year, an average salary also of about €2,200 per month, a 15-20% unemployment and a public debt of 100% of GDP, worsening progressively every year.
Andorra, a services country
75% of the Andorran economy are services
The rest are 0.6% agriculture, 9.8% industry and 9.6% net taxes. Also, the vast majority of employees and companies are from the service sector.
The characteristics of the Andorran climate and geography, together with the fact that it does not have raw materials or energy sources, have driven Andorra specialization towards tertiary activities, concretely the service sector. Within this, it is worth mentioning the trade (27.4% of the workers in the sector and i 28.6% of the businesses), and the hotel industry with 14.7% and 12.4%, respectively. Others are Public Administration (13.5%) and real estate, rental and business services (14.3%).
This is clearly in line with the data of the tourism of the country, which is its main source of income. Andorra usually receives around 8 million people every year. Of them about three million or 35% are tourists (spend at least one night in the country and about five or 65% are visitors (do not stay in the country). The vast majority of them are Spanish or French.
The biggest tourist activity in the country is obviously ski. Andorra has three companies dedicated to snow sports: Grandvalira, Vallnord i Naturlandia, which cover all activities, with 318 km of slopes and more than 3,075 hectares of ski able areas, holding the record for the most mechanical chair lifts by square meter of the world, with a capacity of 160,000 people per hour.
Outside of winter sports, Andorra has many more service offers:
- Caldea with its unique spas, gym, etc
- The Paley de Gel for ice skating
- Ecotematic park in Naturlandia
- Three natural parks, of which one being UNESCO world heritage
- Lots of sporting events (La Delta, world MTB, etc), artistic events (Cirque Du Solar) and much more
Commerce and shopping in Andorra
The commercial tradition of Andorra is well known throughout the world. Trade is the largest activity, and is mainly concentrated in the capitals (Andorra la Villa and Escapes). It's nearly 1,400 stores and shops, the quality of its products and competitive prices do not leave anyone indifferent.
This is due to not carrying so much extra cost for indirect taxes (VAT and special). Nor does it miss the hourly flexibility of the establishments and the very wide range of products and services sold. And what does this imply? Well, what the cost of living in Andorra is lower than in its neighboring countries. Although in some products it is quite similar, in others (especially the most expensive) the difference is very clear. This is the case of tobacco, gasoline, appliances and technology, perfumes and jewelry, furniture, sports equipment, etc.
A connected country
The Principality of Andorra is located in the south-west of Europe, in the Pyrenees between Spain and France. It is relatively close to the international airports of Prat (Barcelona, about 200km), Blanca (Toulouse, about 200km) and Lleida-Alguaire (about 160km).
In addition, the La Set de Urged airfield (Spain) located 7 km from the border of Andorra with Spain, which can accommodate private jets, will soon be the destination of a regular line connected with Barcelona and Tools. There is also a project for the realization of a heliport in Andorra with an international vocation, which will connect the Principality of Andorra with Barcelona and Tools.
But the highlight of this country, the best of its advantages over connectivity, is undoubtedly the total fiber optic coverage for all homes.
Andorra has always been an advanced country in telecommunications systems, both in terms of telephony and Internet services. Since 2007, the entire Principality has had digital terrestrial television, since the country was a pioneer in the analog blackout. Parallel, from 2006 to 2013 Andorra decided strongly on connectivity with the national development of the fiber optic with 100 Maps access speed to all homes in the territory. This deployment of fiber optics has led to subsequent milestones: in 2014 the disconnection of ADSL was carried out and in December 2016 all copper telephony services were completely eliminated.
Continuous service improvement: Andorra Telecom renewed the active network in 2017 so that all households and companies in the Principated they had Internet access of up to 300 Mbps, and finally in 2018 at 700 Mbps. Currently you can have up to 1GB symmetrical and at a fairly affordable price, which is a great advantage for those who need fast and advanced internet to work or sell their services.
Do you need more reasons? Do not miss this article with 15 summary reasons why investing in Andorra is a very good decision.