Andorra is an attractive investment destination with a low tax burden, an outstanding quality of life and an unbeatable strategic location. However, when reviewing all the particularities of Andorran taxation it is important to have a guide. That is why from MCA Assessors we show you in detail the most relevant information about taxation and property tax in Andorra.
Andorra is distinguished for having an internationally approved tax system, which provides benefits to both individuals and resident companies. Andorra has direct and indirect taxes and one of the key points of its administration is that it has implemented measures such as the digitalization of declarations, in order to modernize and streamline the tax process.
However, although Andorra has established bureaucratic improvements, at MCA Assessors we help you to delegate all the tax management to our professional team and thus avoid headaches.
Andorra’s tax regulations concerning real estate contemplate several aspects that owners and potential investors must take into account. Below, we will explain each one of them.
The transfer tax (ITP) in Andorra is levied on the transfer, constitution and assignment of real rights over real estate. This tax is compulsory for those who acquire property and transfer rights. The tax rate is 4%, distributed between 1% (which goes to the government) and 3% (collected by the municipality), calculated on the real value of the corresponding real estate.
This tax is intended to regulate the rental market in Andorra. Owners are obliged to pay it if their property remains unoccupied without justification for a period of 2 years. Exemptions apply to properties used as a second family residence, for commercial purposes or unoccupied for health reasons.
Capital gains tax in Andorra is levied on the lucrative transfer of real estate. The taxable base varies between 1% and 15% and is calculated by taking the positive difference between the real value of the property transferred and its acquisition value. This percentage fluctuates according to the length of time the owner has retained the property. Thus, it is 15% if sold in the first year, 13% in the second year, 10% in the third year and decreases to 1% per year from the third year onwards.
The taxation of personal income in Andorra is governed by the personal income tax (IRPF), a direct tax levied on the income of tax residents.
This tax covers various sources of income, such as economic activities, investments, leases and pensions. Moreover, the application brackets follow a progressive rate: up to 24,000 euros, the tax is 0 %; between 24,000 and 40,000 euros, 5 % is applied; and from 40,000 euros, the tax is 10 %.
Corporate taxation in Andorra stands out for its competitiveness compared to other neighboring countries, presenting an attractive option for the creation of companies. It is regulated by the Andorran corporate tax law, which establishes a general rate that does not exceed 10% on the profits generated.
This tax is applied uniformly to all companies, regardless of their legal form, size or sector of activity. This is what consolidates Andorra as a favorable tax environment for business investment.
In Andorra, in addition to national taxes, there are local taxes managed by each parish, influencing the specific tax burden of each parish. These include the tax on permanent residence, the tax on hygiene and public light, the tax on commercial activities, the tax on tenants’ income and the tax on built-up real estate.
In conclusion, Andorra represents an attractive investment destination, backed by a low tax burden, an outstanding quality of life and a strategic location. In addition, its internationally approved tax system benefits both individuals and resident companies and the property tax in Andorra has specific regulations for ITP, empty homes and capital gains. At MCA Assessors we offer you specialized guidance so that you can delegate the bureaucracy and avoid the worries.