Delve into the financial appeal of Andorra, a captivating destination nestled in the Pyrenees region, driven by its advantageous Andorra personal income tax brackets. Explore the intricacies of this tax-friendly haven and discover why it stands out among tax systems.
While there is a perception that Andorra doesn’t impose taxes, the reality is that it does, with its Andorra personal income tax brackets being a prime example. These tax rates are on par with those of other European countries, but they maintain significantly lower and more attractive levels, both nominally and effectively. Importantly, even as we look ahead to 2023, Andorra has no plans to increase taxes within its personal income tax brackets, recognizing the potential to deter investors.
The overarching goal is to strike a harmonious balance with the European Union while simultaneously keeping tax rates low, particularly within the Andorra personal income tax brackets, to entice foreign investments that align with the preservation of the country’s economic model.
When it comes to understanding the tax burden in Andorra, it is essential to know the three main taxes in force in the country, as detailed by the Government on its official website.
In addition to these key taxes, there are other more specific taxes such as the real estate transfer tax (ITP) and the municipal taxes of the Comuns, which can be applied to individuals as well as to particular businesses and activities.
In the context of the international economic opening that Andorra is carrying out, its personal income tax (IRPF) follows a progressive system by brackets.
All this with the aim of adjusting to European standards, although with lower rates. In 2023 and in the years to come, the IRPF table on work in Andorra consists of the following three brackets.
In addition, allowances of various types are applied and the option of joint returns for couples and married couples is allowed. However, with certain restrictions compared to other regulations.
Conversely, Andorra stands out for its flat tax on savings, which is consistently applied at a rate of 10%. Nonetheless, it provides an exemption for the initial €3,000 of income within the Andorra personal income tax brackets. The structure of the savings tax in Andorra takes shape as follows:
This approach aims to strike a balance with the European Union while simultaneously maintaining low taxes within the Andorra personal income tax brackets, all in an effort to attract foreign investments that support the preservation of the country’s economic model.
Although at first sight this structure might seem less advantageous than other tax systems, Andorra has some particularities that make it attractive.
In the tax system, the income tax exemption for dividends and other income generated by companies of Andorran origin stands out. This means that residents are not taxed on local income, encouraging investment in domestic companies and promoting the growth of the domestic market.
In addition, capital gains derived from the sale of shares in the stock market and investment in financial instruments that replicate these transactions are not subject to taxation.
In short, this country has become an attractive destination for those seeking a favorable tax system. Andorra’s personal income tax brackets are comfortable, collecting taxes at rates comparable to European rates, but noticeably lower. With a 10% cap on personal income tax, it remains attractive to investors and residents. In addition, its 10% corporate tax and exemption of certain income make it a fiscally competitive destination. At MCA Assessors we have a team of expert advisors that will allow you to reside in Andorra without facing bureaucratic processes and with total agility.