Although many people will not know it, the Principality of Andorra has been carrying out an ambitious process of international economic opening for more than a decade, started in 2010 with the tax information exchange agreement with Spain and deepened with the new 2012 foreign investment law, thus initiating legal and fiscal changes to bring the country into line with international standards, becoming homologated and able to enter into negotiations.
One of the consequences of this transformation was the signing of the Monetary Agreement for which Andorra acquired the euro as its official currency and also represented a great advance in the possibility of signing Double Taxation Agreements (CDI)Since to ensure the proper functioning of a CDI signed by any two states, it is necessary that the tax system, the legislation on transparency, and the accounting laws be compatible.
What is a double taxation agreement (CDI)?
A convention to avoid double taxation (CDI) is an international convention or treaty that establishes mechanisms to prevent the same income obtained by a taxpayer from being taxed by two or more states (double international taxation), for the same tax event and for identical periods.
Globalization in modern societies is implying that economic relations are internalized and that their subsistence depends largely on foreign markets, thus collapsing state borders in the face of the dynamism of the economy. As each State is sovereign to develop its tax legislation, there is an overlap of fiscal sovereignties that may not be compatible with each other.. This situation can cause:
- A single person (natural or legal) is taxed in two different countries for the same income
- The same income is taxed on two different people from two different countries
- a single asset is taxed in two different countries.
A first solution to this are unilateral measures taken by the tax administrations of each state, which usually consist of deductions for such double taxation cases. Pero cuando estas son insuficientes, se requiere entonces de disposiciones bilaterales como los convenios para evitar la doble imposición o CDI. Su objetivo es clarificar, unificar y garantizar la situación fiscal de los contribuyentes que ejercen actividades económicas en otros países.
These conventions suelen estar basados en modelos propuestos por organizaciones supranacionales como la OCDE y la ONU y cabe destacar que have primacy over the internal law of the country as they are framed in the field of international law. Its structure usually includes, among other things, the scope of application, legal definitions and taxation rules, methods to eliminate double taxation, the protocol and some other special provisions.
¿Why CDIs are important?
Los CDI facilitate the promotion of foreign investments and favor the competitiveness of national companies abroad. Its measures apply to natural and legal persons residing in any of the signatory states and affect taxes on income, on wealth or on business profits. These taxes are required by each of the contracting states and / or their political and administrative subdivisions, and in these treaties it is established which two states have the competence to tax income.
Specifically for the Principality of Andorra, its relevant importance lies, for example, in the end of the tax on withholdings at source that certain administrations, like the French or the Spanish, applied to Andorran companies that wanted to export their services to these countries. It therefore represents a great advance for the international economic opening of the country.
The Double Taxation Agreements of Andorra
Como hemos indicado, para considerar de forma integral la fiscalidad de los no residentes es necesario tener en cuenta, además de la legislación interna en materia del Impuesto sobre la renta de no residentes, los diferentes tratados y convenios internacionales que tiene suscritos un país en vigor. El Principado de Andorra has signed in recent years, a series of agreements with other countries to avoid tax evasion and double taxation (CDI) of all taxes of a direct nature on income:
- corporate income tax
- the income tax of natural persons
- the income tax of non-tax residents
- capital gains tax on property transfers
The provisions of the CDI are incorporated into the legal system from their publication in the Official Gazette of the Principality of Andorra (BOPA), and cannot be modified or repealed by law. According to the Constitution, Andorran tax law recognizes the normative priority of international tax treaties or conventions as in this case the agreements to avoid double taxation. The laws of each specific tax also recognize the primacy of these agreements over the internal order.
Andorra cuenta a día de hoy con 9 CDI firmados y en vigor con Francia, España, Luxemburgo, los Emiratos Árabes Unidos, Portugal, Liechtenstein, Malta, Chipre y la última incorporación de San Marino, con perspectivas de seguir con este tipo de acuerdos para seguir con su proceso de apertura internacional.
Convenio de San Marino
El 25 de Mayo de este año, el ministro de Finanzas andorrano, Eric Jover, y su homologo de la República de San Marino, Marco Gatti, firmaron un convenio de doble imposición (CDI) en materia de impuestos sobre la renta y el patrimonio con el objetivo de solucionar la doble tributación y prevenir la evasión fiscal. Enmarcado en una visita oficial de Andorra en San Marino, también se ha rubricado un Memorando de amistad y cooperación general y un protocolo específico de salud.
Andorra tenía ya un acuerdo de intercambio de información fiscal con San Marino, pero este nuevo acuerdo sentó las bases de las relaciones comerciales entre los dos países para el futuro. Los CDI son instrumentos vitales para la diversificación económica del Principado de Andorra, la atracción de capitales extranjeros y la internacionalización de las empresas andorranas.
Además, ambas delegaciones mantuvieron varias reuniones bilaterales de trabajo para abordar especialmente el proceso de negociación para el Acuerdo de asociación con la UE, que ambos países trabajan de manera conjunta con Mónaco. Espot explicó la reunión que mantuvo la semana pasada con el presidente del Consejo Europeo, Charles Michel, y donde abordaron la agenda para los próximos meses. Un calendario que continuó con la visita a Andorra del embajador de la Unión Europea, Didier Lenoir, en el mes de junio.
International tax planning
Notwithstanding the foregoing, to carry out a transfer and subsequent establishment in the Principality of Andorra, as well as to operate internationally, strict compliance with all national and supranational regulations is essential. One last point we can give is that the fact that there is no CDI between Andorra and the country of origin does not necessarily mean full and effective double taxation of the income to be received. It will depend in any case on the internal legislation of each state regarding non-residents.
With a international tax planning by the best experts lawyers, prosecutors and economists such as the associates of Andorra Insiders, you will not only have guaranteed correct execution respecting all applicable legislation, but also an optimal tax strategy that will avoid excessive impositions always outside the law.
Whether it is to open a company, live in Andorra or establish the headquarters of your business in the country, you can contact us here and tell us your particular case. We will make you a proposal with what you need in your situation and budget, as well as the steps to follow. In addition, we offer a wide variety of professional services, which you can see here. And last but not least, we provide you with comprehensive support, accompanying you throughout the process from solving your personal doubts to guiding you through the Principality without obligation once installed, so that it is in the safest, easiest and most carefree way.