What are the advantages for Spanish investors to set up in Andorra?

Andorra and Spain, two European destinations rich in history, culture and natural beauty, are attracting more and more individuals who want to change their place of residence. However, choosing between these two places is not easy and requires a detailed analysis of different aspects of daily life, economic opportunities, tax systems, and much more. Located just a few hours’ drive from Spain, Andorra shares a common language and culture, making it easier for Spanish investors to integrate and do business.

Comparison of tax advantages between Spain and Andorra:

The attractiveness of tax advantages in Andorra goes far beyond the borders of this small country bordering Spain and France. Indeed, for many Spanish investors, taking an interest in this principality offers a unique opportunity to benefit from an advantageous tax regime and other substantial advantages. In this in-depth exploration, we’ll take a close look at the tax benefits offered by Andorra, highlighting key differences compared to Spain.

Income Taxes:

Andorra:

• Progressive tax rate from 0% to 10%.
• Exemption for renenus up to €24,000.
• Once the corporate tax is levied by the state, the profits become dividends that are not taxable by the Andorran government. Therefore, there is no taxation of dividends in Andorra.

Spain:

• Progressive tax rate from 19% to 45%.
• Personal and family allowance.
• Taxes on dividends and capital gains from 19% to 23%.

Corporate Taxes:

Andorra:

• Single tax rate of 0.5% capped at 10% depending on the bracket.
• No taxes on profits.
• A 5% exemption is possible for any taxpayer carrying out a professional or commercial activity in the Principality. Provided that the annual income does not exceed 100,000 euros. The 5% tax rate will thus be legally applicable for the first three years of establishment.

Spain:

• Tax rate of 25% (reduced to 15% for SMEs).
• Possibility of tax deductions for certain investments.

Value Added Tax (VAT):

Andorra:

• General rate of 4.5%.
• Reduced rate of 1% for certain products and services.

Spain:

• Overall rate of 21%.
• Reduced rate of 10% for certain products and services.

Other taxes:

Andorra:

• Wealth tax: there is no wealth tax (ISF) in Andorra’s tax system.
• No inheritance and gift tax.

Spain:

• Wealth tax: 0.2% to 3.5% on net assets above €700,000.
• Inheritance and gift taxes, which vary according to the Autonomous Community.

Comparison Table:

Tax treaties between Spain and Andorra:

On December 17, 2015, the edict was published and added to the Official Gazette of the Principality of Andorra. This agreement between the Principality of Andorra and the Kingdom of Spain avoids double taxation with respect to income taxes and prevents tax evasion.

Quality of life in Andorra

• Safe Environment:
  – Andorra offers a safe environment with a low crime rate, ensuring peace of mind for residents.
• Political and Legal Stability:
  – Political and legal stability ensures an atmosphere conducive to daily life and business.
• Modern Health System:
  – The Andrran Health System offers a full range of services, ensuring access to high-quality medical care.
• Quality of infrastructure and respect for the environment:
  – The quality of surface water is optimal in Andorra. Engolasters, the main hydroelectric hub, contributes 20% of the country’s electricity generation. The signing of a contract with EDF will enable the Principality to multiply its local clean energy production by 2 by 2030. This follows Andorra’s ratification in 2015 on the Paris Agreement on climate change.

The economy and employment in Andorra:

• Economic diversification:
  – Although Andorra’s economy is focused on tourism, trade and financial services, gradual diversification offers increasing opportunities.
• Labor Market Stability:
  – With a low unemployment rate, the labor market remains stable, providing opportunities in various sectors.
• Language Requirements:
  – Fluency in Catalan may be necessary for some professional opportunities, but integration programs are available to facilitate adaptation. Much of Spain speaks Catalan, and Andorrans speak Spanish.

Connectivity & Infrastructure

High-performance road network:

• Andorra has a road network of 270 km, including 96 km of motorways, connecting the different towns and villages of the country.
• The roads are well-maintained and modern, providing a safe and comfortable ride.
• The 5 km long tunnel of the two Valiras provides a quick connection between the capital Andorra la Vella and the town of Escaldes-Engordany.
• The port of Envalira, located at an altitude of 2,408 m, is the highest road pass in the Pyrenees.

Modern and robust constructions:

• Andorra is home to many modern and robust constructions, including office buildings, shopping malls, hotels, and residences.
• The constructions are designed to withstand mountainous weather conditions, with sloping roofs and thick walls.
• The use of sustainable materials, such as stone and wood, is common in Andorran architecture.

Internet, mobile and tourist infrastructure:

• Andorra has a high-speed internet network that can be accessed throughout the country.
• The country also has a high-performance mobile phone network.
• The tourist infrastructure is also modern and well-developed, with ski lifts, ski slopes and hiking trails.

Concrete examples:

• The Margineda Bridge, built in 1934, is a single-arch stone bridge with a length of 30 m.
• The Illa Carlemany Shopping Centre, located in Escaldes-Engordany, is the largest shopping centre in Andorra.
• The MIM Andorra Hotel, located in Escaldes-Engordany, is a 5-star luxury hotel with panoramic views of the mountains.

Andorra offers an attractive set of tax benefits, a remarkable quality of life with a safe environment and modern infrastructure, as well as expanding economic opportunities. International tax treaties and agreements with Spain enhance fiscal stability and provide access to essential services. By weighing these factors and taking into account individual needs, Spanish investors can consider Andorra as an attractive destination to settle and invest.

Are you interested in Andorra and would like to know more about our taxation, do you need advice on how to become a tax resident in Andorra?

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