All about andorra business tax: A Comprehensive Guide
Andorra is known for its transparent and simple tax system, which is regarded as one of the most profitable in Europe for individuals and businesses. In this guide, we will review the main aspects of the Andorran business tax, including the taxes and duties imposed on both employers and employees.
Overview of the Andorran Tax System
Here are the main points to keep in mind about the Andorran tax system:
- The main Andorran tax is the personal income tax (IRPF), which can be up to 10% of declared annual resources.
- The corporation tax (IS), which is the main tax levied on businesses, can be up to 10% of annual profits.
- The value-added tax (IGI), or indirect general tax, is set at 4.5%, making it the lowest in Europe.
- Andorra does not have a wealth tax (ISF) or an inheritance tax.
- Social security contributions (CASS) are relatively low compared to other European countries, with Andorra’s protection system considered the best in the world.
Taxes and Duties for Residents and Non-Residents
The IRPF for Residents
The personal income tax (IRPF) is the primary tax that residents of Andorra need to be aware of. It is imposed at a general rate of 10% of income. There is 0% tax on income below €24,000 per year, and a 5% tax rate applies to the income between €24,000 and €40,000 per year.
It’s worth noting that the IRPF includes income received by entrepreneurs or from economic activities. Until a few years ago, these types of income were subject to the Taxes on Profits from Economic Activities (IAE).
The IRNR for Non-Residents
Non-residents who have not obtained tax resident status in Andorra may need to pay the Non-Resident Income Tax (IRNR). This tax has a general rate of 10% and mainly affects border workers from Spain or France who work in Andorra on a daily basis.
Corporations and Business Leaders
In Andorra, the corporation tax (IS) is the main levy applied to companies based on their profits. The maximum tax rate is 10%. The IS has been in force since 2012, and it is subject to certain adjustments provided by law.
The IS is divided into two ranges:
- The first €50,000 in profits are taxed at a rate of 5% if the company’s turnover is less than €100,000 during the first three years.
- For profits over €50,000, the maximum tax rate is 10%, regardless of the company’s turnover.
Double Taxation Agreements between France and Andorra
Since 2016, France and Andorra have been bound by a bilateral non-double taxation agreement with regard to corporate taxation. This agreement also applies to households.
Other Taxes and Duties in Andorra
In addition to the main taxes discussed above, there are several other taxes and duties levied in Andorra:
- Taxation of capital gains: a fixed percentage of 10% is applied to financial capital gains.
- Tax on capital gains in real estate transfers: this tax is levied in the event of an increase in the value of real estate during transmissions, with rates varying from 8 to 15%.
- Tax on the register of holders of economic activities: this tax ranges from €20 to €800 per year, depending on the legal form of the company (SA, LLC, liberal professions, etc.).
- Local tax system: Taxes levied in Andorra by the parishes.
Local andorra business tax system
Some taxes and duties are levied in Andorra by the parishes that make up the territory of the Principality: Canillo, Encamp, Ordino, La Massana, Andorra la Vella, Sant Julia de Loria, and Escaldes-Engordany. These include taxes on the location of commercial, entrepreneurial, and professional activities, rental income, built property, and a tax called “foc i lloc,” which is due by people aged between 18 and 65, and the amount varies according to the parishes.
