Taxes and taxation in Andorra: understanding the Andorran tax system and legally optimizing your tax position
Taxation is often one of the first topics considered when looking to live, do business, or invest in Andorra. The Principality is known for its relatively moderate tax rates, generally set at 10% for both individuals and companies. However, the actual amount of tax due depends on many factors: your tax residence, the nature of your income, your professional activity, your company structure, your real estate assets, and whether a tax treaty exists between Andorra and your country of origin.
Moving to Andorra is not enough to automatically benefit from the Andorran tax system. Your legal, tax, and economic situation must genuinely meet the conditions established by the applicable regulations. Here are the main taxes and levies you need to know about to understand how the Andorran system works and avoid the most common mistakes.
What are the main taxes in Andorra?
The Andorran tax system is based on both direct and indirect taxes. For individuals, the best-known tax is the IRPF, or Impost sobre la Renda de les Persones Físiques. This is the equivalent of personal income tax. For companies, the Impost sobre Societats is the equivalent of corporate income tax. There is also the IGI, or Impost General Indirecte. Its operation is comparable to French VAT or Spanish IVA. The IGI is included in the price of many goods and services consumed in Andorra.
The system also includes the tax on income earned by non-tax residents, known as IRNR, as well as several levies relating in particular to real estate transfers, capital gains, certain vacant properties, insurance, and foreign investment in real estate. The Andorran Government’s tax portal presents these different categories and the regulations applicable to them.
This distinction is important. Two people with the same level of income may have very different tax obligations depending on their residence, the source of their income, and their overall wealth situation.
How does personal income tax work in Andorra?
IRPF applies to individuals who are tax residents in Andorra.
The general IRPF rate is currently set at 10%. However, this does not mean that every euro earned is automatically taxed at 10%. The system takes into account the level and nature of income, as well as reductions, allowances, and deductions provided for by the regulations.
The Andorran Government notably indicates that a mechanism results in an effective rate of 5% for certain income brackets between €24,000 and €40,000. Mechanisms also exist for certain situations involving double taxation or certain economic activities.
The income concerned is not limited to salary. Depending on the rules applicable to each category, IRPF may include professional income, real estate income, certain investment income, as well as capital gains or losses.
Who is considered a tax resident in Andorra?
Tax residence is one of the most important issues to understand before moving.
The best-known criterion is the 183-day rule. A person who remains in Andorra for more than 183 days during the calendar year may be considered a tax resident. The regulations also take into account where the person’s main center or basis of activities and economic interests is located.
This distinction is essential: administrative residence and tax residence are two different concepts. Holding an Andorran residence permit is not, by itself, sufficient to resolve all international tax residence issues.
A person who maintains significant business activities, a company, a household, or major economic interests in another country may be subject to the tax rules of several jurisdictions. In such cases, double taxation treaties may help determine which country has the right to tax certain categories of income. Andorra has entered into such treaties with several countries, notably France and Spain. Their application nevertheless depends on the nature of the income and the taxpayer’s specific circumstances.
What is the tax treatment for non-residents?
A person who is not a tax resident in Andorra may nevertheless be subject to tax there when they receive certain types of income considered to originate in Andorra. This is the purpose of the IRNR, or tax on income earned by non-tax residents.
The general rate applicable to several categories of income is 10%, but the actual treatment depends on the type of income and, where applicable, the existence of a double taxation treaty. The Government gives, for example, the case of a service provided by a non-resident consultant to an Andorran company, with a 10% withholding tax applying in the situation described.
It should not be assumed that not being a tax resident in Andorra automatically means having no tax liability in the Principality. For a cross-border worker, company director, property owner, or foreign service provider, the rules may differ. An analysis of the exact source of the income is therefore necessary.
What is the IGI rate in Andorra?
The IGI is the Andorran indirect tax most comparable to VAT. Its standard rate is 4.5%, which partly explains why some prices may appear lower in Andorra than in countries where the standard VAT rate is significantly higher.
However, several rates apply. The Andorran tax authorities currently indicate a standard rate of 4.5%, a special rate of 2.5% (passenger transport), a reduced rate of 1% (essential goods), a super-reduced rate of 0% (public healthcare and education), and an increased rate of 9.5% applicable to certain banking and financial services. The applicable rate depends on the goods or services concerned.
For a company or self-employed individual, IGI should not simply be viewed as a tax added to invoices. Depending on the activity, invoicing and reporting obligations, as well as the possibility of deducting input IGI, may also apply.
A company invoicing customers in France, Spain, or another country must also examine the applicable place-of-supply rules for its services. The customer’s location is not always sufficient to determine the tax treatment of a transaction.
How are companies taxed in Andorra?
Andorra levies corporate income tax on company profits. The general nominal corporate income tax rate is 10%. However, specific rules may affect the amount actually paid depending on the company’s circumstances, deductible expenses, applicable deductions, or the nature of certain transactions. The Government itself points out that the nominal rate and the effective rate actually borne by a company should not be confused.
Setting up an Andorran company is not, by itself, a mechanism for artificially shifting profits to Andorra. For a structure to be coherent and defensible, the business conducted from the Principality must reflect genuine economic activity. The location of management, the company’s day-to-day organization, the individuals making decisions, and the nature of the services provided are among the important factors to consider.
This issue becomes particularly sensitive when an entrepreneur leaves France, Spain, or another country while retaining a substantial part of their business activity in their former country of residence. In such a situation, simply comparing the French or Spanish tax rate with Andorra’s 10% rate does not reveal the actual tax savings. The entire structure must be analyzed.
Do you have to pay taxes when buying property in Andorra?
Andorran real estate taxation deserves particular attention today, as it has evolved in recent years.
Real estate acquisitions may fall within the scope of property transfer tax, while disposals may raise issues relating to capital gains taxation. The applicable regime depends on the nature of the transaction and the profile of the buyer or seller. It would therefore be misleading to state that a property purchase is systematically taxed at a single rate of 4%.
The situation is even more specific for certain foreign investments. A tax on foreign investment in real estate was introduced in 2024, and its regime has since evolved. Since the amendments that came into force on February 13, 2026, the Government notably indicates that the rate applicable to certain acquisitions falling within the scope of foreign investment increased to 6% for a first property and to 10% for the acquisition of a second home in the situations covered by these regulations.
Before making a purchase, it is advisable to determine the buyer’s status, the exact nature of the investment, the taxes applicable to the transaction, and any conditions relating to foreign investment.
How do you declare your income in Andorra?
For IRPF purposes, the Andorran tax authorities provide for a filing period from April 1 to September 30 of the year following the year to which the declared income relates. However, not all residents are subject to exactly the same filing requirements.
The Government specifies, in particular, the circumstances in which a tax return must be filed, depending on the nature and amount of the income received. Specific requirements may apply, for example, where there is income from economic activities, certain real estate income, investment income not subject to withholding, or capital gains and losses. The return must be prepared based on the taxpayer’s actual circumstances rather than a generic template.
Keeping income records, bank documents, contracts, investment documentation, and evidence establishing tax residence considerably facilitates the preparation of the return and the response to any potential request from the tax authorities.
For a straightforward situation, the information and forms provided by the Government may be sufficient. Where several countries, companies, investments, or categories of income are involved, however, assistance from a professional familiar with Andorran and international taxation generally becomes much more relevant.
Can you really optimize your taxes in Andorra?
Yes, provided you understand what “tax optimization” actually means. Legal tax optimization consists of structuring your affairs by using the rules provided by law, applicable deductions, international treaties, and a structure suited to your business activity. It does not mean artificially claiming residence or establishing a company in Andorra when most of your personal life or economic activity remains located in another country.
This distinction is particularly important for entrepreneurs. The corporate tax rate may be attractive, but a company must correspond to genuine business activity. Similarly, an individual seeking to become an Andorran tax resident must examine all of their personal and economic ties, rather than simply obtaining a residence permit.
Serious tax planning should generally begin before moving or setting up a company. It is much easier to assess the consequences of a transaction beforehand than to try to correct a poorly designed structure several years later.
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Do tax treaties always prevent double taxation?
The tax treaties entered into by Andorra are specifically designed to limit situations in which the same income could be taxed twice. However, this does not mean that a taxpayer can automatically choose the country in which they want to pay tax. A treaty generally determines the respective taxing rights of each country based on specific criteria, such as tax residence, the nature of the income, where an activity is carried out, or the location of an asset.
Andorra currently has a network of tax treaties with several countries. The Government publishes the list of relevant agreements and their status, making it possible to verify the treaty applicable to the country with which a taxpayer maintains connections.
For someone coming from France or Spain, the relevant treaty should therefore form part of the analysis before moving abroad, particularly where rental income, dividends, a company, director’s remuneration, or assets retained in the country of origin are involved.
What should you do in case of doubt or a tax dispute?
A tax error is not always the result of an attempt to conceal information. It may simply arise from a misunderstanding of the rules, an incomplete tax return, or an international situation that is more complex than initially expected.
Andorra has an administrative framework for managing and reviewing tax assessments. The Government also publishes regulations, forms, frequently asked questions, and numerous tax rulings that help explain how certain provisions are interpreted.
When a difficulty arises, it is better to verify its source promptly and gather the documents needed to explain the situation. For an important matter involving tax residence, a company, a real estate transaction, or several jurisdictions, personalized professional advice remains preferable to a generic answer found online.
Key takeaways on taxation in Andorra
Andorran taxation remains attractive in several respects. The general IRPF rate is 10%, as is the general nominal corporate income tax rate, while the general IGI rate is 4.5%. However, these figures tell only part of the story.
The actual amount of tax paid depends on the nature of the income, the individual’s tax status, any applicable deductions, and their relationships with other countries. In some cases, specific rules must also be taken into account, such as those concerning foreign investment in real estate.
Before moving, setting up a company, or purchasing property, it is advisable to check the regulations in force and, where the stakes are significant, have the proposed structure reviewed by a qualified professional. This precaution not only helps identify an appropriate tax framework, but above all makes it possible to build a coherent, well-documented, and sustainable situation.
