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Taxes in Andorra

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Everyone talks about taxes in Andorra, but what do you really know about the Andorran tax system?

Taxes in Andorra compared to its neighbors

Andorra enjoys a very competitive tax system compared to its neighbors, which is one of the country's most prominent attractions. To benefit from this tax system, it is necessary to be fiscally resident in Andorra.

Taxes in Andorra, like in most countries, are divided into two main groups: Direct taxes and indirect taxes.

Therefore, in the following table, we show a comparison of the taxation that activities carried out by an entity would be subject to, both from a direct and indirect tax perspective.

  Corporate Taxes Capital Gains Indirect Taxes
ANDORRA 10% 0-15% 4.5%
CYPRUS 12.5% 20% 19%
SPAIN 25% 20% 19%
FRANCE 33.33% 33.33% 20%
NETHERLANDS 25% 0-25% 21%
IRLAND 12.5% 0-30% 23%
MALTA 35% 35% 18%
MALTA 35% 35% 18%
MONACO 33.33% 33.33% 20%
PORTUGAL 21% 21% 23%
SWITZERLAND 24.4% 24.4% 8%

Information about Taxes in Andorra

The Andorran tax system is one of the most advantageous tax systems in the world, with very few costly and complex administrative procedures, and internationally recognized legal security. This is supported by having signed more than 10 agreements on non-double taxation with the main countries in our geographical area.

The advantages of these agreements are to avoid that the incomes earned by companies, entrepreneurs, or residents in Andorra are taxed twice, both in the country where they are earned and in the country where one is a resident. Currently, Andorra has treaties to avoid this double taxation with Spain, France, Portugal, Luxembourg, Liechtenstein, the United Arab Emirates, Malta, Cyprus, San Marino, and Hungary.

These international agreements to avoid double taxation establish mechanisms to prevent the same income earned by a taxpayer from being taxed in two or more countries for the same taxable event or identical tax periods.

Direct Taxes

Currently, the general tax rate in Andorra is 10%, both for companies, non-residents, and individuals. In the corporate tax, this general tax rate of 10% can include a series of deductions to avoid international or national double taxation, deductions for job creation, or for investments or R&D. There is also a tax system that includes certain deductions or bonuses for entrepreneurs starting their activity.

Additionally, similar to many other countries in our environment, in the personal income tax (IRPF), the tax rate is progressive, with an exemption in the tax for incomes below 24,000 euros per year, or a deduction in the form of a 5% bonus for incomes obtained between the range of 24,000 euros per year to 40,000 euros per year.

These bonuses, deductions, and exemptions in Andorran taxes aim to attract talent from other parts of the world to make Andorra an innovative and entrepreneurial country that attracts foreign investment

Indirect Taxes:

Indirect taxes affect all countries, but their tax rates vary depending on each country. In this sense, Spain has a general rate in its indirect taxes (VAT) of 21%, France of 20%, Luxembourg of 17%, Portugal of 23%, or Germany of 19%, among others (see attached table).

Andorra offers a general rate of 4.5%, lower than many of the tax rates offered by countries in our European environment; mainly due to its strong commercial and historical tradition based on trade and to be able to offer a complementary offer to its extensive tourist offer.

The liquidation and operation of the tax is similar to that used in the European Union, following its same European directives; internationally approved and with a very similar but simpler operation than the countries in our environment. For example, the system of indirect taxes in Andorra does not use the "famous pro-rata rule" of some European countries, making its application and development much easier.

As the main conclusion and differential aspect of the Andorran tax system is that it is a system recognized internationally, based on regulations similar to those of countries in our environment, but with a much simpler implementation and application, due to the characteristics of Andorra as a European microstate, which makes us a country with fewer bureaucratic procedures.