Taxation – Heritage / Inheritance
For many profiles, the Principality of Andorra remains the ideal country for expatriation. A particularly low tax rate is one of the reasons, compared to France and other European countries. The tax rate for companies is effectively only 10% at most. The same applies to personal income tax.
Those who have set up a property company in "Andorra" are no doubt wondering about inheritance and transfer taxes. You will be delighted to know that there is no inheritance tax or property tax. Inheritance, gift and estate taxes remain attractive in this country.
Taxation on wealth and assets in Andorra
The Andorran law is precise and clear on the subject: for all the persons having an Andorran fiscal residence, they are exempted from wealth tax, and this, whatever the nature of this one. It is therefore not surprising to see French or other foreigners transfer their residence to this country in order to better protect their assets and take advantage of the flexible taxation offered in the Principality.
In the Andorran tax system, there is no wealth tax or "ISF". This is one of the reasons that motivate people with substantial assets to transfer their tax residence there. The low tax pressure in Andorra is undoubtedly one of the elements that interest foreign investors.
The Andorran Tax Convention
In order to meet the regulations and requirements imposed by the OECD in terms of taxation, the Andorran authorities have undertaken significant efforts. In order for the country to no longer be considered a tax haven in the eyes of the OECD, the Andorran government has aligned itself with certain international tax standards.
However, it offers one of the lowest tax rates in Europe. As a small country located between Spain and France, it is efficient in managing its economy. In addition, it has other advantages, such as its climate, geographic location, health care system, lush nature, security and technology.
This European country has one of the highest incomes in the world for its inhabitants. The average income of an Andorran employee is around 1,686 euros.
Moreover, in the next few years, the Principality of Andorra plans to expand the list of countries with which it will sign a double taxation agreement. As for the tax applied on assets, it is zero in Andorra. If you are an Andorran resident, you are not taxed on your wealth or real estate.
Some details to pay attention to
When you plan to set up a business in Andorra, to transfer your tax domicile there or to expatriate there in order to take advantage of its advantageous tax situation, you must have an Andorran tax resident status. Otherwise, you will be taxed in France or your country of origin on all your worldwide income.
It would be more advisable to proceed with a wealth assessment, an excellent alternative for a better optimization of your taxes. This approach also offers you the possibility to prevent possible tax risks and to identify the tax impacts on your assets in order to reduce the amount of taxation as much as possible.
Taxes on donations in Andorra
If a person wishes to pass on their wealth during their lifetime, they will not have to pay any taxes. An interesting option for those who do not wish to make a will. All they have to do is draw up a document through a notary. This expert will take into account all the legal obligations related to it. In the Principality of Andorra, this procedure is called inter vivos exchange.
A law that recently came into force
The tax law in force in the Principality regarding donations is recent. It dates from 2016. In Andorra, there is no taxation on donations. Gifts between individuals are not taxable in Andorra.
You will be able to get rid of all the tasks related to rates, deadlines or other calculations required. It is important to note that this alternative is only available to Andorran residents and locals. It is also advisable to take into account certain rules and laws in force on this subject.
Our Gestoria will be of great help in this case. We offer you many services, such as the accompaniment with the tax specialists, the choice of the adapted type of residence, the deposit of file with the Andorran administrations, the setting in relation with real estate partners and others.
The main points to remember about inheritance law in Andorra
Having an Andorran residence is one of the mandatory conditions to benefit from the tax exemption linked to the succession. In Andorra, there is effectively no inheritance tax, just like the case of donations.
In this country, in case of death, the spouse has priority in the line of succession. He or she takes precedence over the other relatives, but after the children. If the deceased had no children or grandchildren, the spouse will be the heir.
The most important point to remember about inheritance tax in Andorra is that all inheritances, regardless of their nature, are tax exempt. The only condition we will insist on is the possession of an Andorran residence. According to Andorran law, you should also draw up your will according to the provisions and regulations in force.
Wills: types, cases of absence of this document and legitimate share
In the Principality of Andorra, residents can draw up different types of wills. There is the open notarial will, written and validated directly by a notary. It would be the most advisable. The other type is the closed notarial will. It will be written by the testator, but it will be ratified by the notary without him opening it. In the case of the holographic will (written and signed by the testator only, without going through the notary), it will be more complex for the heirs at the time of succession.
If the deceased leaves no will, the law of reserved property can be deployed. The property will go to the direct heirs. As for the case of the legitimate share, it protects the direct descendants and allows them to benefit from a share of the property, regardless of what is stipulated in the will. Its figure mentions, among other things, that at least one quarter of the value of the inheritance must go to the descendants.
The different stages of a succession in the Principality of Andorra
The succession process goes through several stages in Andorra. The team of our Gestoria is able to accompany you to optimize the steps. However, in order to give you an overview of the phases to follow, here is a brief summary:
- To initiate the succession process, you must declare the death of the person concerned to the registry office by following the procedures related to this effect. In the event of death, the deceased person will no longer be the effective owner of his or her property.
- Once the estate has been opened, the persons concerned will be summoned. This is the designation of the estate.
- In order to accept or refuse the inheritance, the heirs will have time to think about it for a certain period.
- Once the descendants and parties involved in the estate have agreed, a deed of succession will be granted.
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Case of an heir of a property in Andorra, but residing abroad
If the person has a residence in a country other than Andorra, but inherits property in Andorra, he or she can also benefit from this tax exemption. However, there may be cases where the law of succession applied will be that of the country of residence. Therefore, the procedures may not be the same and the estate may be subject to taxation.
As each situation is different, the expertise and services of an Andorran tax specialist will be required. This professional will be able to guide his clients towards the form of taxation compatible with his case. Apart from inheritance and wealth, the tax exemption in Andorra also applies to dividends from the net profits of companies.
What is the tax treatment in case of inheritance?
To the question what taxation will be attributed to a case of succession in Andorra, the answer is none. There is no tax levy in Andorran inheritance tax. The succession law that applies in the Principality is the personal law relating to the nationality of the deceased.
If you are originally from another country, but wish to take advantage of the Principality’s attractive tax situation, make investments and move to Andorra, you must first apply for Andorran residency. Furthermore, in order for this Andorran inheritance tax law to apply, the property must also be located in Andorra.
In order for your investment to bear fruit and for you to be able to take full advantage of the tax benefits linked to the creation of companies and the transfer of assets, be accompanied by an Andorran tax expert. He will be able to give you the ideal advice concerning the taxation of your assets resident in Andorra according to the legislation in force.
A fundamental difference between the Andorran and French inheritance tax systems
In France, the Penal Code of Taxes provides for inheritance taxes for all French residents domiciled in the Hexagon and for all assets transmitted located on the territory. This is the notable difference compared to the Andorran tax standards. Note that companies can also take advantage of the double taxation agreement with France. Andorra has also signed with other countries.
Whatever your activity, the Principality allows you to benefit from important tax advantages.