Taxes in Andorra vs. Spain: which is the best option?

Andorra is a country with one of the most attractive tax systems in Europe. However, some people do not know how it works. Below, we show you the taxes in Andorra vs. Spain so that you can clearly understand how they work.

Taxes in Andorra vs. Spain: everything you need to know

In this tax comparison between Andorra and Spain, we evaluate key differences in three tax areas. The IRPF, the IS and the IGI/VAT. The specifics of these fields are crucial when considering residency and we explain them below.

Personal income tax (IRPF)

The tax landscape in Andorra vs. Spain, specifically in relation to personal income tax, is notable for the considerably lower tax rates in Andorra compared to Spain.

Andorran rates range from 0% to 10%, which is particularly attractive for individuals seeking to optimize their net income.

In contrast, Spain operates a progressive personal income tax system, with rates ranging from 19% to over 47%. In addition, the tax burden may differ depending on the autonomous community of residence, as there are additional taxes. Below is a list of these so that you can make your own comparison.

Personal income tax (IRPF) in Andorra is structured in three brackets:

●       Income up to 24,000 € per year. They are exempt from payment, which means that those with incomes equal to or less than this figure will not pay income tax.

●       Income between €24,000 and €40,000. A rate of 5% is applied.

●       Profits from 40,000 €. Subject to a 10% tax rate.

In Spain, personal income tax (IRPF) is structured in income brackets as follows:

●       Income up to 12,450 € per year. Subject to a tax rate of 19%.

●       Income between €12,450 and €20,200 per year. Subject to a rate of 24%.

●       Income between €20,200 and €35,200 per year. Subject to a rate of 30%.

●       Income between €35,200 and €60,000 per year. Subject to a rate of 37%.

●       Income from €60,000 per year. Subject to a rate of 45%.

Corporate income tax (IS)

Within the corporate income tax (IS) framework, Andorra implements a competitive flat rate of 10%. This feature can be particularly attractive for companies seeking to minimize their tax burden.

In contrast, Spain maintains a constant rate of 25% for corporate income tax, regardless of the company’s income, which can have a significant impact on the strategic decisions of corporations.

Value-added tax (VAT) and general indirect tax (IGI)

One of the most salient aspects of taxation in Andorra vs. Spain is in the comparison of VAT and IGI.

IGI in Andorra, similar to VAT in Spain, has a general rate of 4.5%, with a super-reduced rate of 0% and a reduced rate of 1%.

In contrast, Spanish VAT is generally 21 %, with a reduced rate of 10 % and a super-reduced rate of 4 %. It is relevant to highlight that the Andorran IGI rate is the lowest in Europe, establishing a marked difference with Spanish rates.

Self-employed in Andorra vs. Spain: which is the better option?

Sometimes, being self-employed can be a source of stress and financial burden. In Andorra, the self-employment fee is calculated taking into account several factors. In addition, it is related to the income generated, with a minimum fee of 502.63 € per month.

It should also be noted that the average Andorran wage is €2,284.67 per month, so the tax is not levied in the same way as in other countries.

In the case of Spain, the minimum fee is €80 for all those earning less than €600 per month. If the figure is higher, the fee increases progressively up to 500 euros.

What are the advantages of paying taxes in Andorra vs. Spain?

Andorra stands out for having a very attractive tax regime, with low taxes, such as personal income tax (IRPF) ranging from 0% to 10%. In addition, it has double taxation agreements and companies benefit from a competitive flat corporate tax rate of 10% together with a tax exemption on dividends.

On the other hand, Spain offers quality of life with very solid public services, developed infrastructure, great cultural diversity and a large labor market.

As you can see, both destinations have different advantages. Andorra is attractive for its promising tax system, while Spain stands out for its quality of life.

However, it should be noted that Andorra, with an average wage of €2,284.67 per month, enjoys a high quality of life. This is due to the fact that Andorran residents have a fluid economy with which they can acquire all kinds of quality services.

In conclusion, the comparison between taxes in Andorra vs. Spain reveals important differences. Andorra stands out for its attractive tax system, with low rates, such as personal income tax from 0% to 10% and a competitive corporate tax rate of 10%. Spain offers quality of life and solid public services. At MCA Assessors we help you make the right choice for your personal situation with our team of expert advisors.