December 26, 2024
NAVIGATING THE TAX LANDSCAPE IN ANDORRA
INTRODUCTION
Andorra, a tiny landlocked country in Europe, is well-known for its beautiful mountain ranges, ski resorts, and banking sector. Despite being a small nation, Andorra has a strong economy, which attracts foreign investment. Andorra’s reasonable tax rates and highly educated workforce may attract to businesses looking to develop in the region. Andorra is a member of the United Nation (“UN”) and has signed a number of international agreements, including the Double Taxation Treaty with France and Spain, which benefits regional businesses.
TAX CLIMATE IN ANDORRA
In addition to its beautiful scenery and excellent quality of life, Andorra is also recognized for its tax-friendly environment. This little European principality has changed over the past ten years from a classic tax haven to a transparent, compliant tax jurisdiction that yet enjoys the benefits of low taxes. Here is a thorough examination of Andorra’s tax environment and the reasons it continues to be one of the most alluring locations for companies, investors, and foreigners.
Reasons are-
- Low tax Environment
- Transparent tax system
- No Wealth, Inheritance, or Gift Taxes
- Low property and transfer tax
- Outstanding tax incentives
CORPORATE TAX
The Impost de Societats (“IS”), which has a set general rate of 10%, is the tax on corporations that Andorra considers to be more pertinent.
There are in addition some bonuses for new corporations:
- In the first year, any taxpayer has a 50% reduction in the settlement fee. The appropriate tax rate for the first three years of activity is: for taxpayers of this tax who are constituted as new entrepreneurs of a new company or professional activity and who have an income of fewer than 100,000 euros.
- 5% for the part of the tax base between 0 and 50,000 euros.
- 10% based on remaining taxation.
TAXES AND DUTIES FOR TAX RESIDENT AND NON-RESIDENT IN ANDORRA
The tax system, taxes and duties in Andorra with regard to tax resident mainly concern the IRPF. This is the main tax in Andorra. Personal Income Tax (“IRPF”) in Andorra is imposed at a general rate of 10% of income. There is 0% under the threshold of 24,000 euros of annual income and 5% for the range between 24,000 and 40,000 euros of annual income.
It should be noted that the IRPF integrates the income received by entrepreneurs or the result of economic activities. These were up to a few years ago levied by the IAE (Taxes on Profits from Economic Activities). If you do not live in Andorra (you have not obtained tax resident status), you will probably have to pay the IRNR (Non-Resident Income Tax). Its general rate is 10%. It mainly concerns border workers from Spain or France who work in the Principality daily.
PEAK FOR INVESTMENT IN ANDORRA
The tax structure of Andorra is intended to draw in retirees, business people, and professionals. It provides the perfect balance of lifestyle and economic benefits because to its low tax rates, cutting-edge infrastructure, and stunning natural beauty.
HOW WE CAN HELP?
- Our team can provide expert guidance on federal, Regional and Local tax obligations to ensure compliance with Andorra tax regulations.
- Our team can help in making the best use of the tax exemptions offered by the Andorra Government.
- Our team can keep you informed about the latest tax amendments and compliances requirements to align with the changing tax structure.
For more information or queries, please email us at
[email protected]
Key Contact
Surendra Singh Chandrawat
Managing Partner
