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Andorra vs. Spain: A Detailed Comparison
In recent years, Andorra It has positioned itself as an attractive destination for those seeking tax advantages without sacrificing European quality of life. Although It is no longer considered a tax haven, his tax system remains one of the most competitive on the continent. In this article, we will explore in depth the taxes in Andorra, comparing them with those of Spain, and we will analyze why this small country is an increasingly popular option for businessmen and individuals.
Table of contents
What taxes are paid in Andorra?
Yes, taxes are paid in Andorra, although many people believe otherwise. However, the tax burden is significantly lower compared to Spain and other European countries. The Andorran tax system is comparable to that of any European nation, but with lower and more attractive tax rates.
Transparency and International Regulations
Andorra has worked to align itself with international standards of fiscal transparency. It is currently negotiating a Association Agreement with the European Union to maintain its current tax rates, except for some special ones such as tobacco. The objective is to move closer to the EU without undermining its economic model based on low taxes.
Main Taxes in Andorra
Individual Income Tax (Personal Income Tax)
One of Andorra's greatest tax attractions is its Income tax. With a maximum type of 10%, is one of the lowest in EuropePersonal income tax in Andorra is structured as follows:
- 0% on the first €24,000 of income.
- 5% between €24,000 and €40,000.
- 10% on any amount exceeding €40,000.
- Exempt DividendDividends received from Andorran companies are not taxed, avoiding double taxation.
This scheme makes live in Andorra be highly attractive to those looking for reduce their tax burden compared to countries like Spain, where the maximum personal income tax rate can reach up to 45%.
Corporate tax
The Corporate Tax in Andorra It also stands out for its low taxation, with a general type of 10%Significantly lower than the general 25% standard in Spain. This makes it ideal for entrepreneurs and business owners.
- Bonuses for New Businesses:
- Reduction of 50% in the settlement fee the first year.
- Type of 5% for the first ones 50.000 € of profit if the turnover is less than 100.000 € during the first three years.
- Special Regimes: Additional exemptions and reductions depending on the sector and activity.
General Indirect Tax (IGI) or VAT
The equivalent of VAT in Andorra is he IGI (General Indirect Tax), which is applied to a general rate of 4.5%, much lower than the 21% in Spain or the 20% in France. In addition, it has other reduced rates:
- Reduced Rates:
- 0%: Medical and educational services, housing rentals, among others.
- 1%: Basic foodstuffs, drinking water and books.
- 2,5%: Cultural services, transportation and sports activities.
- 9,5%: Banking and financial services.
This consumption tax contributes to the cost of living in Andorra is much more affordable than in other European countries.
Tax Comparison: Andorra vs. Spain
Corporate tax
| Country | Tax Rate |
|---|---|
| Andorra 🇦🇩 | 10% |
| Spain 🇪🇸 | 25% |
Maximum Personal Income Tax
| Country | Tax Rate |
|---|---|
| Andorra 🇦🇩 | 10% |
| Spain 🇪🇸 | 45% |
Consumption Tax
| Country | Tax Rate |
|---|---|
| Andorra 🇦🇩 | 4,5% |
| Spain 🇪🇸 | 21% |
Comparison with other countries
| Tax | Andorra 🇦🇩 | Spain 🇪🇸 | France 🇫🇷 | Portugal 🇵🇹 | Germany 🇩🇪 | United Kingdom 🇬🇧 |
|---|---|---|---|---|---|---|
| Corporate tax | 10% | 25% | 33.3% | 31.5% | 29.8% | 20% |
| Personal Income Tax (maximum) | 10% | 45% | 40% | 48% | 45% | 45% |
| consumption tax | 4.5% | 21% | 20% | 23% | 19% | 20% |
Tax Advantages of Andorra
If you are thinking about moving or relocating your business, Andorra offers a very advantageous tax environment compared to other European countries. Taxes are low, bureaucracy is minimal, and there are numerous incentives for both startups as well as for individuals with high purchasing power.
In addition to the low taxes, Andorra has agreements to avoid the double taxation with countries What Spain, which means you won't have to pay duplicate taxes on your income in both countries.
Other taxes and fees in Andorra
Andorra also has a series of municipal taxes Y special rates which are generally low. These include:
Municipal or Parish Taxes
Each parish (municipality) can establish its own taxes:
- Fire and Truck Tax: Traditional, applied to residents between 18 and 65 years old.
- Real Estate Tax: Similar to the IBI in Spain.
- Settlement Tax: For commercial and professional activities.
Indirect Taxes
- Property Transfer Tax (ITP): Applied in the purchase and sale of real estate.
- Tax on the Provision of Insurance Services: Specific tax for the insurance sector.
Special taxes
- Tourist Tax: Recently implemented for stays in tourist accommodations.
- Taxes on Tobacco and Alcohol: Specific types for these products.
Direct Taxes
- Capital Gains Tax on Real Estate Transfers: It varies depending on the length of time the asset is held.
- Non-Resident Income Tax (IRNR): For income earned in Andorra by non-residents.
Public Rates and Prices
- Fee on the Register of Holders of Economic Activities.
- Tax on Vehicle Ownership.
- Immigration Fees.
- Court Fees.
- Public Prices for Administrative Services.
These additional fees do not significantly affect the overall attractiveness of the Andorra's tax system, which remains one of the most competitive in Europe.
Why choose Andorra?
Quality of Life
- Security: One of the safest countries in the world.
- Natural Environment: Mountainous landscapes and outdoor activities.
- Quality Services: High-level education and healthcare.
Economic Environment
- Political and Economic Stability: : Climate conducive to investment.
- Legal Modernization: Adaptation to international regulations.
- Technological Infrastructure: Advanced connectivity and services.
Steps to Move to Andorra
1. Obtain Tax Residency
- Active Residence: For those who work or start a business in Andorra.
- Passive Residence: For those who do not work in the country.
2. Create a Company
- Simplified Procedure: Although it is advisable to seek advice.
- Types of Companies: Mainly Limited Companies (SL) and Public Limited Companies (SA).
3. Professional Advice
- Tax and Legal Consulting: To maximize profits and comply with regulations.
- Immigration Management: Necessary procedures and documentation.
In conclusion
Andorra It is presented as a fiscally attractive alternative in Europe, especially compared to Spain. Their low taxes, combined with a high quality of life and a safe environment, make the Principality an ideal destination for entrepreneurs, investors, and individuals looking to optimize their tax burden without sacrificing the comfort of living in a modern and welcoming country.
Contact for Personalized Advice
If you are considering move to Andorra or investing in the country, it's essential to have professional advice. We can help you throughout the entire process:
Additional resources
- Government information on tax legislation: https://www.impostos.ad/legislacio
- Andorran Personal Income Tax page: https://www.e-tramits.ad/tramits/impostos/irpf
- Personal Income Tax Law: https://www.bopa.ad/bopa/031055/Pagines/GD20190614_13_51_35.aspx
- Corporate Tax Law: https://www.bopa.ad/bopa/031055/Pagines/GD20190617_08_43_02.aspx
- Andorran IGI Law: https://www.bopa.ad/bopa/031055/Pagines/GD20190614_13_50_37.aspx
- Information on Tax Residency in Andorra: https://www.immigracio.ad/ca/
Frequent questions
❓ What are the most important taxes in Andorra?
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.
❓ What percentage of taxes is applied in Andorra?
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.
❓ Does Andorra have a personal income tax for sections?
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%).
❓ Are there other taxes in the Principality?
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.
❓ Is it legal to live in Andorra to pay less taxes?
Yes, as long as you meet the legal requirements to establish your tax residence in Andorra and you do not engage in tax evasion practices in your country of origin.
