Tasas impositivas en Andorra

Once known for its tax haven status, the Principality of Andorra boasts significantly low taxes in comparison to most European countries. The country draws thousands of people each year thanks to its favourable tax structure and evolved political system.

Andorrans enjoy a low VAT rate, close to zero capital gains taxes and very low personal income taxes. The situation here is especially favourable for businesses too, thanks to a rather generous corporate tax rate.

A primera vista, el sistema fiscal en Andorra might come across as complex. In reality though, it’s pretty straightforward and easy to understand. Below, we’ll summarise the tax environment in Andorra and throw light on some important facts and figures that you must know before making the move.

Tasa de impuesto sobre la renta en Andorra

Up until January 2014, Andorra didn’t tax individual income. Even though its previously long-standing reputation as a tax haven is no longer valid (legally at least), the tax rates here are still significantly more favourable when compared to most other European countries.

Despite the quick modernisation of Andorra’s political system and its progressive fiscal policies, the country has managed to retain a shockingly low income tax rate—one that never exceeds 10%—making it one of the lowest in Europe.

Known locally as “Impost sobre la renda de les persones físiques”, o IRPF, income tax in Andorra is calculated on annual basis: 1 January to 31 December.

Rates vary based on whether you are a resident or a non-resident and specifications for both scenarios are explained below.

Tasas de impuesto sobre la renta para residentes

The basic income tax rate for residentes de Andorra is 10% and is, of course, subject to credits and deductions. Salaries below €24,000 are not charged any income tax whatsoever. From there on, the tax gradually increases and is capped at 10%.

Dividends issued by Andorran companies are tax-exempt for residents. If you, as a resident, make money through investments, you pay zero tax on the first €3000.

Para los residentes individuales, los tramos de tasa impositiva son los siguientes:

  • 0€ a 24.000€: 0%
  • €24,001-€40,000: 5%
  • 40.000€ o más: 10%

Para las parejas casadas, los tramos difieren ligeramente:

  • de 0 a 40.000 €: 0%
  • €40,001 or higher: 10%

Unlike most countries, the income tax rate here is applicable to all salaries, pension income and foreign investments. This means that if you are a resident in Andorra making over €24,000, no matter the source of your income, you will be charged a nominal tax.

El impuesto sobre la renta también incluye algunas deducciones y provisiones importantes para dependientes y pagos de hipotecas; cada una de estas disposiciones afectará su tasa impositiva personal general.

Impuesto sobre la renta de no residentes

If you are not a tax resident (i.e. if you do not stay in Andorra), but your income is generated in the principality, you will have to pay IRNR. Levied at a rate of 10%, IRNR is payable on all economic activity that occurs within the country’s jurisdiction.

Once you formally become a resident, you will be eligible for the tiered tax brackets and income adjusted rates mentioned further up. Although the 10% rate is still a very low for income tax, it’s important to note that Andorra currently has taxation treaties with only 24 countries. Depending on where you live, you may be taxed twice.

Until a few years ago, this was a real concern for French and Spanish cross-border workers, however Andorra now has tax agreements in place with both countries. 

 

Impuestos sobre las ventas

Técnicamente, Andorra no recauda impuesto sobre las ventas. Esta es la razón por la que muchos españoles y franceses cruzan gustosamente la frontera para realizar compras libres de impuestos.

The most notable benefit of not having to pay any sales tax is that you’ll always know how much you’re paying when you buy products—the price tag will include taxes.

Value-Added Tax (VAT)

Unlike sales tax, VAT is applicable for all goods and especially services. Here in Andorra, it is locally known as Impost General Indirecte o IGI .

This might raise the question of whether or not VAT rates are inflated to compensate for the absence of sales tax—you’ll be happy to know that’s not the case. At an average rate of 4.5%, Andorra actually boasts some of the lowest VAT rates in Europe.

There are a few exceptions that are worth noting. VAT is levied differently on the following goods and services:

  • 1% on certain media
  • 1% on all food and drink (except alcohol)
  • 2.5% on tourism operators and art
  • 9.5% on banking and financial services charges

Healthcare, medicine and education are all exempt from value-added taxes.

Downtown night scene - Andorra tax rates & VAT

Tasa de impuesto sobre las sociedades

Corporate tax in Andorra is primarily levied on the profits obtained by companies or other legal entities operating within the borders of the principality. As of today, the Andorran corporate tax rate is a reasonable and meagre 10%.

However, this can potentially be reduced to 5% depending on the business's profit margin within the first three years of operating. Holding companies that invest outside of Andorra pay only 2% on their profits, although this may change in the future.

Despite the recent changes to Andorra’s tax system, the corporate tax rates are still regarded as some of the most competitive in the world—much lower when compared to France (33.33%) and Spain (25%). Companies in France making under €38,000 can pay as little as 15%, which is still a lot more than what you’d end up paying in Andorra.

It is also worth noting that companies based in Andorra are not responsible for withholding tax from dividends, nor are they responsible for income paid to non-residents. With benefits like these, it's little wonder more and more people are looking to form a company in Andorra.

Impuesto sobre las plusvalías

Ya que estamos hablando de las tasas de impuestos sobre las sociedades, hablemos del impuesto sobre las plusvalías. En Andorra, las ganancias de capital de particulares y empresas se tratan como cualquier otra forma de renta.

Recuerde que no pagará impuesto sobre las plusvalías realizadas en la venta de acciones si su participación en la empresa en cuestión es inferior al 25% del total de acciones.

What does this mean for buying and selling stocks? Well, the system works in your favour. You can buy and sell stocks without having to pay tax on the profits (provided you keep within the 25% margin mentioned above). This is a lucrative proposition for day traders.

In addition, shares that have been held for more than 10 years incur no capital gains tax whatsoever.

Impuesto sobre bienes inmuebles

In many countries, the sale of real estate can be subject to heavy taxation. That’s not the case in Andorra. Apart from the 4% property transfer tax, profits earned from the sale of real estate are taxed on a very fair sliding scale.

The real estate tax is subject to change based on the duration of property ownership. To summarise:

  • 15% if your property is sold in less than 1 year of ownership
  • 14% if you sell it in less than 2 years
  • 13% if you sell it in less than 3 years
  • 12% if sold in less than 4 years
  • A partir de ahí, disminuye un 2% cada año hasta llegar al 0%.

El sistema está diseñado para disuadir a las personas de comprar y vender propiedades without any intention of actually living in it. The government’s main focus is to attract people who want to actively contribute to the economy, so that the place can thrive.

Comprensión de las tasas impositivas andorranas

As you can see from this brief guide, Andorran tax rates aren’t that complicated. While there are some small details and stipulations, you’ll find that the system is fair and straightforward. Essentially, it boils down to a maximum rate of 10% on income for residents and companies, no sales tax and a very reasonable 4.5% value-added tax (VAT). There are also no inheritance, estate, or transfer taxes.

Have you got more questions about how this might affect your plans of vivir? Reach out and give us a call! We’re here to help.