Taxes in Andorra vs Spain

Are taxes paid in Andorra?

Although Andorra it is no longer a tax haven, has much lower taxes than the surrounding countries and the European average: it is one of the lowest tax rates in the world. Yes, taxes are paid in AndorraAlthough many people think not. Your tributes are homologated with those of any European country, but with substantially lower and attractive nominal and effective rates applicable.

By 2024, the Principality has pending the implementation of a tax on foreign investment in housing and real estate. However, the general tax framework remains the same, since otherwise this would harm its investment attractiveness. Currently negotiating a Association Agreement with the European Union in which they maintain the current rates (perhaps except for some special ones such as tobacco). The idea is to bring closer positions with the European Union and at the same time keep taxes low to avoid undermining the Andorran economic model.

Let's see then now: what taxes are paid in Andorra and what are their percentages?

Advantages of Andorran taxes

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Personal income tax

With a maximum rate of 10%, The Andorran personal income tax is one of the lowest in Europe. Applied on labor income, there is also a € 24,000 exempt minimum and a 50% rebate for rents between € 24,000 and € 40,000.

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Corporate tax

Attractiveness general rate of 10% of Corporation Tax in Andorra is much more when taking into account reductions for new businesses, special regimes on the basis of taxation and exemptions to avoid double imposition.

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consumption tax

Famous and named as IGI, the Andorran indirect tax stands out especially for its simplicity and ease in settlement by the bidders. The general rate is 4.5%although it also has 0%, 1%, 2.5% and 9.5% rates.

Comparison with other countries

Corporation Tax

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Andorra
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Spain
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France
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Portugal
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Germany
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United Kingdom

Maximum personal income taxes

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Andorra
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Spain
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France
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Portugal
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Germany
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United Kingdom

Consumption taxes

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Andorra
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Spain
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France
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Portugal
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Germany
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United Kingdom

The three main taxes

The General Indirect Tax (IGI) or VAT in Andorra

The General Indirect Impost (IGI) that is paid in Andorra is equivalent to the tax known as VAT (Value Added Tax) in the countries of the European Union, it is the main indirect tax. As with its European counterpart, the IGI has different types depending on the product or service taxed:

  • The general tax rate is 4.5%. Equivalent to 21% in Spain, 20% in France, 19% in Germany or 23% in Ireland.
  • There is 0% super-reduced rate for certain medical and educational services, housing rentals, stamps and investment gold.
  • The type reduced by 1% It is applicable to food for human consumption, water for human and animal consumption and irrigation, and books, magazines and newspapers.
  • He too 2.5% special rate It applies to transport (except cable), libraries and archives, and finally art and cultural institutions such as museums, monuments and historical places, music, cinema and theater, objects of art, collection or antiquity. , etc.
  • Tax rate increased from 9.5% applicable only to banking and financial services.

Corporate tax

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, there are some interesting bonuses to take into account for future residents, among others:

  1. The first year any taxpayer has a 50% reduction of the settlement fee.
  2. For the taxpayers of this tax that are constituted as new entrepreneurs of a new business or professional activity and who have income less than 100,000 euros, the tax rate applicable during the First 3 years of activity it is:
    1. The 5% for the part of the tax base comprised between 0 and 50,000 euros
    2. The 10% on the basis of taxation remaining

We recommend reading the tax law o consult with professionals such as those of our office, Abast Global, since there are different nuances to go to these discounts as well as to correctly present the tax. We also suggest finding out about municipal rates, as well as the procedure to follow for creating a company in Andorra.

Personal income tax (IRPF)

Well known to all, the Andorran personal income tax it is one of the lowest taxes in all of Europe. It is a tax made up of sections 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. Here they can leer the tax law.

Other taxes and fees

Municipal or parochial taxes (Common)

  • The traditional tax of "foc i lloc" (fire and place). 
  • The property tax.
  • The tax on rental income.
  • The filing or location tax of commercial, business and professional activities.
  • The construction tax.
It should be noted that the municipalities or Comuns have the power to create their regulation and their local taxation, with which the taxes and their load vary according to the municipality taken into consideration. That is why in Andorra municipal taxes are paid annually also for having a company

Indirect taxes

Direct taxes

  • Capital gains tax on property transfers (PLV)
  • Non-resident tax income tax (IRNR)
  • Taxation of savings income
  • Gambling tax

Fees

  • Fee on the Register of Holders of Economic Activities
  • Vehicle Ownership Tax
  • Immigration fees
  • Court fees
  • Trademark Office Fees Public Prices
  • Rate job applications
  • Animal health and food security rate
  • Consumption tax (customs)
  • Common external tariff (customs)

Finally, it should be noted that despite the existence of these taxes and fees, most of the taxes paid in Andorra are of a fixed annual or effective amount or replace the three large ones mentioned above. In the end taking all the tributes and as a summary, in Andorra a direct cash rate is paid on any income less than 10%, taxation on consumption is usually low (and therefore so is the cost of living) and the fixed municipal and state maintenance taxes represent an amount of only about €500-1,000 per year for a company.

As we see it 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.

Taxes in Andorra: Types and Tax Rates

Do you want to know more?

Frequent questions

The IGI as indirect consumption tax (similar to VAT), the Personal Income Tax (IRPF) on personal income, and the Corporate Tax that taxes the profits of companies and corporations.

Income Tax and Corporation Tax have a general rate of 10% and IGI (VAT) on goods and services is 4.5% of the product price, although there are different exemptions, reductions and bonuses.

Despite the general rate of 10%, there is a personal minimum of €24,000 of income exempt from personal income tax and a further €16,000 with a 50% bonus (effective rate of 5%).

Yes, there are other state taxes and municipal taxes that depend on each parish, although they are usually of a fixed and affordable amount that never usually exceed € 1,000 per year.