Taxation Andorra – Council Tax/Property Tax/Vignette
Changing your life in the heart of Europe is possible. The Principality of Andorra offers a real change of scenery thanks to its highly attractive living environment. The average income of its inhabitants is around 1680 euros. And that's not even mentioning its tax system, which is among the most advantageous in Europe.
Located in the Pyrenees mountains, Andorra is a parliamentary co-principality governed by two heads of state. For those who wish to expatriate there and know the price of the real estate, the m² turns around 3 000 euros to 5 000 euros for an apartment in the city center. It would also be very interesting to buy a property in this small state because of its low tax rate. What is the property tax in the Principality? What is the property tax in Andorra?
Andorra has few taxes for its residents
Although Andorra is not part of the European Union, it tries to align itself as much as possible with the tax standards imposed and is careful to emphasize transparency. Andorra's tax law tends more and more towards the approval of tax treaties between different countries.
In this country, VAT is assimilated to the IGI. It is applicable to economic and professional activities. Its general rate is 4.5%. For certain services (health care, social or educational services, sports or cultural services, etc.), the rate is reduced to 0%.
Taxes imposed on Andorran residents
Before going into the details regarding property tax, it is only fair to briefly review the taxation applicable in the Principality. It can be said that this country imposes very few taxes on its residents. Compared to France, Spain, Portugal and other countries, the income tax in Andorra is among the lowest.
Andorran residents do not pay taxes related to health and education. There are no inheritance or gift taxes either. Dividends paid from the net profits of companies are not taxable. The withholding tax rate on dividends is effectively 0%.
The equivalent of the French value added tax or VAT is only 4.5%. It is only applied on goods and services purchased in the Principality. As for the tax on the income of individuals, its rate does not exceed 10%. The capital gains tax is only applied to real estate and insurance services.
As for the corporate tax or IS, the maximum rate applicable is 10%. However, during the first three years of business, Andorran companies can benefit from a tax break.
The housing tax called Foc i Lloc
Like any state, Andorra also applies a housing tax, although it is lower than in other countries such as France, Portugal or Spain. This is a tax collected by the parishes (community of communes or "region") to finance various services in the commune where the properties concerned are located.
All citizens residing in Andorra must pay taxes, including the housing tax called "foc i lloc". This tax is intended for the occupants of the property.
To be concerned by this tax, it is essential to have a residence in Andorra, to rent a property all year round and to reside there more than 3 months a year.
Recently, hotels have been required to collect a tourist tax, which will soon be applied to all accommodation dedicated to seasonal tourism (including seasonal apartment rentals). Each municipality decides on the percentages and scales.
The rental fee
At the same time, landlords who rent a property must pay a rental tax which is a percentage of the amount of rent collected annually. This tax is called: the tax on the yield of rented property. Each municipality decides on the percentages and scales.
The property tax is the tax applicable only to property owners. It taxes each property per square meter. In the case of the Principality of Andorra, it will be calculated according to the size of the property (in square meters) and the area where the property is located.
This tax is also part of the parish and municipal taxes of the Principality. It should be noted that in Andorra, the municipalities have the right to draw up their own local tax laws. Each parish can therefore apply its own property tax and its correction according to the location of the property. The property tax or real estate tax is to be paid every year.
The tax on private vehicles
The vehicle ownership tax is one of the taxes and other charges applicable to an individual in Andorra. However, the majority of taxes to be paid in Andorra are for a fixed annual amount.
The amount of the road tax is, among others, 200 euros per year in the Principality of Andorra. It should be noted that vehicles registered in Andorra are allowed to circulate in the whole European territory. This is due to the fact that this country is included in the Schengen area.
As for tolls, Andorra has a toll tunnel, the only one of its kind, which is located near the French border.
Company car tax
In Andorra, there is no tax on company cars. Besides, to take advantage of this benefit, the tax system of the country encourages companies to register their cars on the territory of Andorra. This allows them to benefit from an exemption from regional tax and road tax. There is also no ecological malus or carbon tax.
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Andorran taxation and legal environment
To get a general overview of the taxation and taxes applicable to Andorran residents, we will give a brief summary.
With regard to personal income tax, here is what you need to remember each year:
- Andorran residents pay no more than 10% of their income (income above 40,000 euros per year),
- No inheritance tax or wealth tax,
- No capital gains tax, except for real estate,
- No bonus-malus on the acquisition of vehicles.
On the other hand, there may be a withholding tax on income from a source outside the Principality for a foreign resident.
For legal entities resident in Andorra, i.e. companies, the following is applicable
- The tax rate on corporate profits is a maximum of 10%,
- No tax on dividends or interest from a company,
- No business transfer tax,
- No tax on company vehicles.
Andorra is ranked among the countries with a longer life expectancy. There are many reasons for this. Every resident can have the health care he or she needs, enjoy a particularly low crime rate, a highly preserved environment, etc. To take full advantage of your rights and advantageous taxation, whether for individuals or legal entities, do not hesitate to contact us to discuss your project!