Andorra it is a country with a low tax burden due to its low rates, but it has a strict and clearly defined tax system. From the opening of the country and the consequent homologationAndorran taxation is very similar to that existing in European countries, but with much softer nominal and effective rates. Main taxes in Andorra are IGI (the general indirect tax on consumption), IRPF (income tax) and Impost de societies (corporate tax).
IGI: the indirect or consumption tax
The General Indirect Tax, equivalent to the tax known as VAT (Value Added Tax) in the countries of the European Union, is one of the main collection channels of the Andorran tax system and the main indirect tax. As with its European counterpart, the IGI has different types depending on the taxed product or service. You can read more about the IGI in our article dedicated to it.
The general tax rate is 4.5%. Equivalent to 21% in Spain, 20% in France, 19% in Germany or 23% in Ireland.
In addition, there is a 0% super-reduced rate for:
- Health or hospital care provided by public entities.
- The provision of assistance to individuals reimbursable by the CASS. (Andorran Social Security)
- Education, teaching, childcare services, etc.
- Private classes taught by individuals (school or university syllabus)
- Services related to sports or physical education provided by public or non-profit organizations.
- Services related to the cultural field provided by public or non-profit organizations.
- Transport by ambulance.
- Rents of houses.
- Medicines reimbursed by the CASS.
- Transmissions of homes exempt from the tax on real estate transfers, due to the acquisition of the first home.
- Deliveries of stamps and stamp effects of legal tender, for an amount not exceeding their facial value.
- Investment Gold.
The type reduced by 1% it is applicable to:
- Food for human consumption (except alcoholic beverages) or animals, live animals, seeds, plants.
- Water suitable for human, animal or irrigation.
- Books, newspapers and magazines that do not contain only and fundamentally advertising.
He too 2.5% special rate on:
- The transport of people and their commercialization, except cable transport.
- The provision of services related below when they are not carried out by public or para public administrations, public law entities or cultural or social entities of a non-profit nature:
- Those of libraries, archives and documentation centers.
- Visits to fairs, museums, art galleries, art galleries, monuments, historical places, botanical gardens, zoos and natural parks and other protected natural spaces of similar characteristics.
- Theatrical, musical, choreographic, audiovisual and cinematographic representations.
- The organization of exhibitions and similar manifestations of educational, cultural or social field.
- The goods of art objects, of collection or of antiquity, according to the General Nomenclature of products and in accordance with the regulations.
Finally, there is also a tax rate increased by 9.5% applicable only to banking and financial services.
The quintessential tribute to corporation taxes from Andorra is the IS or impost of societats, and corresponds to a fixed general rate of 10%. However, as we commented in the article we did about corporation tax there are some interesting bonuses to take into account for future residents, among others:
- The first year any taxpayer has a 50% reduction in the settlement fee.
- For taxpayers of this tax that are constituted as new entrepreneurs of a new business or professional activity and have an income below 100,000 euros, the tax rate applicable during the first 3 years of activity is:
- 5% for the part of the tax base between 0 and 50,000 euros.
- 10% on the remaining tax base.
We recommend reading the tax law or consult with professionals such as the associates of Andorra Insiders, since there are different nuances to go to said discounts as well as to correctly present the tax. We also suggest finding out about municipal taxes, as well as the procedure to follow for creating a company in Andorra.
Well known to all, the Andorran personal income tax it is one of the lowest taxes in all of Europe. It is a tax composed of tranches that are applied on the tax base, similar to that of neighboring countries.
Without going into the many details of the tax and in a simplified way:
- From 0 to €24,000 of the annual personal income is taxed at 0%
- From €24.000 to €40.000 the rate is 5%
- Any amount over € 40,000 has the obligation to pay the 10%, which is the general rate
On the other hand, an interesting fact is that any dividend received from an Andorran company is taxed at 0% in Andorra, thus avoiding double taxation. You can read much more about this tax at our article dedicated exclusively to the personal income tax of Andorra.
Other state assessments
In addition to the main three, there are other minor taxes in Andorra. However, these are only a tiny part of the general tax system applied in the Principality. For example:
- Tax on capital gains on real estate transfers: applies during real estate transfers when there is an increase in value and the rate is between 8 and 15%
- Capita income taxl: A fixed percentage of 10% is applied to the financial capital gains.
- Tax applied to the registration of holders of economic activities: it is an Andorran corporate tax that, according to the legal form of the company (SA, LLC, liberal professions, etc.), ranges between 20 and 800 euros per year.
Parish taxes and fees
In addition to these taxes, parishes (territorial subdivision of Andorra) also charge some taxes, depending on the parish in question since each has its own regulation. In any case, these taxes are usually one pretty low amount. Let us remember that there are seven parishes that make up the territory of the Principality: Sant Julià de Lòria, Andorra la Vella, Escaldes-Engordany, La Massana, Encamp, Ordino, Canillo. These rates include:
- Business, Industrial and professional activities filing tax: the amount depends on the location of the company and the nature of the activity;
- Fees for the provision of communal services (use of the service)
- Fees and fees for carrying out administrative acts
- Traditional tributes of for i bloc (Home): it is applied to people between 18 and 65 years old and its quantity varies according to the parish.
- And finally taxes on real estate built, not built, yields, tenants ...
Summary of Andorran taxation
Since reforms initiated to open internationallyAndorra has more tributes than ever. However, the most relevant are the main three (Corporation tax, personal income tax and IGI) that are comparable to those of other European countries but with much lower rates and many more advantages.
At the end, anyone, get your income from where you get it, pay a maximum of 10% in state taxes (If you pay corporate tax your dividends are not taxed, the personal income tax has bonuses and its maximum is 10%, capital taxes are also 10%), and fixed taxes that depending on whether you have a company and premises, etc. or not They will be between € 100 and € 1,500 per year. As we see is a very advantageous tax framework, especially compared to the other European countries and specifically France and Spain, which make Andorra an option to seriously consider.
At Andorra Insiders we have among others with the collaboration of the best experts both at the national Andorran and international level, professionals in tax, legal and accounting services of all kinds. They are also very experienced with transfer of clients to Andorra, whether it's opening a business, obtain the residence permit necessary for live in the principality, carry out the corresponding international tax and legal planning or any other necessary procedure with all the guarantees.
In addition, we offer comprehensive support, from the first moment of contact solving all your doubts and your particular case to the search for premises / housing and day-to-day guide of the country. Can contact us here and tell us about your case so that we can send you our individualized service proposal, and you can also read our main services here.