Taxation in Andorra

In 2013, Andorra announced plans to impose an income tax in response to pressure from the European Union.^[1] The tax was introduced in 2015, at a flat rate of 10%.^[2]

Income tax

In 2013, Andorra announced plans to impose an income tax in response to pressure from the European Union.^[3] The tax was introduced in 2015, at a flat rate of 10%.^[4] Andorra introduced a new personal income tax regime on the first of January 2015. Those who earn less than 24,000€ are still tax exempt. If income is not more than 40,000€ the tax income is 5% and if you earn more than 40,000€ tax is 10%. However, the 10% income tax was one of the lowest tax rates in Europe.

The tax on savings follow the same regime as the income tax, but the difference in this case is that the first 3,000€ of investment income is tax exempt.

Corporate tax

The range of this kind tax goes from zero to ten percentage (as maximum). Foreign companies won´t have to pay this tax though the dividends are paid directly to the Andorran company.

Value added tax

Andorra introduced the first of January 2013 the Value Added Tax system (replaces the old Sales Tax regime). It has Europe’s lowest VAT of just 4.5%^[5] in compare of the surrounding countries (Spain and France) that have considerably high VAT rates. It is reduced to a nominal rate of 1% for goods and services such as health, culture, education and food.

Employees pay social security taxes at rates of 5-9% on their salaries; employers pay social security taxes of 13% on their employees' salaries. In October 1991, a form of value-added tax was introduced at a general rate of 4% on most goods and at higher rates of 8% and 12%, respectively, for special goods and for deemed luxury goods. There are also taxes on the import of certain goods. The 1992 budget law introduced a registration tax on certain activities, to provide 8.6% of government revenues, as well as a tax on electricity consumption and telephone services at a rate of 10%, to contribute 1.6% of government revenues.

Real estate tax

When someone want to sell Andorran property to obtain some profit, a capital gains tax will be applied on the real asset. The nominal rate is 15% if you sell the property before one year, 13% if you sell it in the second year of possession, 10% in the third year of possession and decreases by 1% each year after the third year (so the rate can be 0% in the 12th year). However, you can avoid the capital gains tax buying another property before six months of the sale.^[6]

Other taxes

No wealth tax, no inheritance tax, no gift tax. There are no more taxes on capital gains, except real estate tax. People who want to set up a business have to pay social insurance are 8,5% of gross earnings for old age and 6% for maternity, disability and sickness.

References