Taxation in Andorra
Andorra is a country located in the Pyrenees Mountains with the lowest tax rate in Europe. It is located between France and Spain. Expatriating to the Principality allows you to enjoy many advantages such as an affordable cost of living. It is one of the few countries that do not seem to be affected by inflation in the OECD area.
Taxation in Andorra is considered to be the most advantageous in Europe. The Andorran tax rate applied to individuals is a maximum of 10% on income. A new convention has just been adopted by the State and the Andorran government to better protect residents. This tax income is zero with a threshold of 24 000 euros of annual income.
Let's discover what is the income tax and the Andorran taxation as well as the measures taken by the government of the Principality.
Fiscal framework:
taxes in Andorra
Income tax and tax are not applied in the same way in Andorra for tax residents and non tax residents.
- IRPF
The tax that applies to the income of households when they are resident in the Principality is the IRPF. This is the personal income tax. It is therefore intended for individuals. If you have a tax resident status in Andorra, this tax regime is for you.
The IRPF embeds all Andorran taxable income. It will be deducted from the taxpayer’s global income (economic or commercial activity).
- IRNR
In the Andorran tax system, there is the IRNR which is applied to the income of non-residents. These are individuals or employees, legal entities or natural persons, who receive income in the Principality without having a residence in Andorra. They offer services in Andorra.
The IRNR will be paid by companies or individuals (artists, athletes, experts of an international company, etc.). These are those who obtain profits on Andorran territory without being resident. It can also concern the rental of real estate in Andorra.
New measures undertaken in 2021 to strengthen its tax treaty
The Principality of Andorra, together with Spain, proceeded in 2021 to deposit instruments of approval of their Convention. This was done with the main objective of preventing the abuse of tax treaties. Also, this initiative had the role of avoiding the erosion of the tax base. This Convention came into force on January 1, 2022.
It is one of the conventions negotiated and adopted by more than 100 countries under the mandate of the Ministers of Finance and the heads of the central banks of the G20 member states. It is one of the concrete results of the BEPS project of the OECD and the G20.
More flexible taxation for companies and entrepreneurs
If you move to Andorra to start your company, the Principality offers a particularly flexible tax system. The corporate tax is among the lowest in Europe (2 to 10%), regardless of your sector. No tax will be applied to dividends. Also, you will not have to pay any tax on your company cars. Social security contributions (CASS) remain low.
The capital required to set up a company in Andorra varies according to the status. According to the law, if you wish to create a Limited Company (SL), you will need a minimum of 3,000 euros of statutory capital. In the case of a Limited Company (SA), it should be at least 60,000 euros.
Get help from an experienced accountant to manage your financial statements. They will be able to take care of the various taxes (annual state taxes, flat rate tax, etc.) and you will be able to take full advantage of your profits.
Andorran banks are among the healthiest in the world
The banking sector is one of the pillars of the Andorran economic activity. If you want to start a business or invest in Andorra, the question of the bank is to be taken into account. Andorra’s banks are among the healthiest in the world. Why is that? Simply because it benefits from an economy built on solid foundations. The law defines the rules rigorously but is also flexible.
Local and national banks in Andorra are accessible to all residents, whether they are individuals, investors or businessmen:
- National Bank: it is intended for investments of a larger scale. This includes the creation of companies.
- Local Bank: it deals with procedures related to the protection and management of wealth.
Although the law and the agreements with Andorran banks are particularly rigorous, they offer flexible services.
More flexible taxation in the areas of real estate and inheritance
The tax advantages in Andorra also extend to real estate and inheritance. The absence of inheritance tax is one of the reasons that interest more and more expatriates. No taxes are imposed on real estate.
Anyone wishing to buy a property in Andorra will only have to pay 4% of the price of the property purchased. Notary fees (0.1%) and real estate agency fees (at a rate of about 5 to 10% of the sale price) will also be at your expense.
As for the inheritance tax for expatriates, Andorran law does not impose any inheritance tax, although it does not lack vigor. There is also no tax on gifts between individuals. As an expatriate, you will have two types of wills to choose from: notarial and holographic. During your lifetime, Andorran law allows the transmission of property in the form of sale, donation or exchange.
The key to a successful expatriation: call on tax professionals
Taxation is a particularly delicate subject. It can sometimes be difficult to master, especially for an expatriation project. For this to be successful, it is recommended to hire tax experts to assist you.
In Andorra’s case, all procedures are done in Catalan, its official language. By following the proper procedures, you will be able to take full advantage of the tax benefits offered by the Principality.
La Gestoria: key partner in your installation in Andorra
Whether you are a company or a private individual, using our Gestoria will make all the steps related to your expatriation in Andorra easier. We can put you in contact with experts in Andorran taxation. You can thus take full advantage of your rights and be in agreement with the tax law imposed in the Principality, as well as the taxation in your country of origin.
Whether it is questions related to dividend payments, the share of profits for your shareholders, the establishment of a tax file adapted to the services you offer or simply to know your rights as a company director, we are here to accompany you. In addition to guiding you through the tax process, we can also help you fill out your residency files and put you in contact with our partners or companies.
From the choice of your residence to your move from France or other countries, we are available to help you. The creation of a company in Andorra through a lawyer, the tax procedures, your residency status, the choice of education system for your children, we can assist you in every detail.
Les avantages de la fiscalité en Andorre
Découvrez toutes les spécificités de la fiscalité andorrane, l’une des plus basse d’Europe ! Toutes les informations les plus importantes à savoir avant de s’expatrier en Andorre se trouvent ici :
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