Complete guide to income tax in Andorra

Written by Marc Cantavella, AndorraInc Co-Founder & Andorran Tax Expert

Living in Andorra has countless benefits and among them is that whoever is considered a tax resident in the Principality can benefit from its advantageous tax system.

And the comparison is especially glaring if you look at the Income Tax and use as a reference its southern neighbor, Spain, as we will see below.

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Who pays Income Tax in Andorra?

First of all, it is worth clarifying that only those people who are tax residents pay Income Tax in Andorra.

And to be considered an Andorran tax resident, you must first obtain administrative residency. These are the most common ways to obtain an Andorran residence permit:

Active residency: ideal for those intending to work in Andorra, whether as an employee or a self-employed professional. A minimum stay of 183 days per year is required, along with meeting certain economic or business criteria.
Passive residency: often referred to as a “Golden Visa,” this option targets retirees, investors, and individuals with external income streams. It mandates a shorter stay (approximately 90 days annually) but requires an investment and a financial deposit as security.
Digital nomad visa: created for remote workers who serve clients or employers outside Andorra. This permit allows residency without the need to engage directly in the local job market.
Family reunification: if a relative is already an Andorran resident, spouses, children, or dependent family members can apply under this category, simplifying the process of joining them.
Residency for health reasons: Intended for individuals who need to relocate to access Andorra’s healthcare services. This special permit supports those requiring ongoing medical attention or specialized treatment.

Once you have a residence permit, you will also be considered a tax resident if you stay in the country for sufficient days and do not have your economic or family centre of interests in another country.

You can read our articles on active and passive residence in Andorra, the two ways of entering the country in which we specialize.

What does the income tax cover?

This tax includes income from work, commercial activities, income from rental of real estate, and in general any activity that involves an income for individuals.

This tax is very young, since it was implemented in 2015, although previously this type of income was already subject to the Tax on Profit from Economic Activities or IAE.

As in any other country, the higher the income of an individual, the more he will have to pay Income Tax. However, the amount to be paid for Income tax is much more affordable in the Principality than in most of European countries in each and every one of the brackets, as we will see below.

How much income tax is payable in Andorra?

In the Andorran Income Tax there are only three brackets:

Income up to €24,000 per year is exempt. That is, someone who has an amount of income equal to or less than that figure, will not pay any Income Tax.
Between €24,000 and €40,000 you pay only 5%
Earnings from €40,000 pay 10%.

This means that if someone collects €70,000:

Pays 0% for the first €24,000
Pays 5% for the tranche from 24.000€ to 40.000€ (800€)
Pays 10% for the tranche from €40,000 to €70,000 (€3,000)

In total, his tax bill would be just €3,800, a very reasonable amount compared to the approximately €22,000 he would pay in Spain.

To calculate precisely how much income tax you would pay in Andorra, use our free calculator.

But now we will explain the specific cases of income tax for:

The sale of shares, both for local and foreign companies
The sale of a real estate property
The collection of dividends, both from local and foreign companies

These three cases are also regulated by the Income Tax law, but their taxation is different from that of the income from work that we have just seen.

Capital Gains on the sale of shares

Individuals in Andorra normally face a 10% tax on capital gains, with an exemption on the first €3,000. There are additional rules that can lower or eliminate this tax:

If you own 25% or less of a company, any profit from selling those shares is fully exempt.
If you own more than 25%, the gain is taxed at up to 10% unless you have held those shares for more than 10 years, after which the gain becomes tax-free.

In simple terms, you owe nothing if you sell shares where your stake does not exceed 25%. If it is higher, you generally pay up to 10%, unless you have owned them for at least a decade—at which point the capital gain is 0%.

Examples

If you are an Andorran tax resident holding a small fraction of shares in a foreign firm (e.g., Apple or Tesla) and sell at a profit, your stake is likely under 25%, so no capital gains tax applies in Andorra.
If you sell a large stake (more than 25%) in your Andorran company, you may pay up to 10% on the profit unless you have held it for over 10 years, in which case you owe nothing.

Capital Gains on Real Estate

Previously, Andorra taxed real estate capital gains under a distinct law known as the “Impost sobre les Plusvàlues en les Transmissions Patrimonials Immobiliàries”. Over time, these rules were incorporated into the Personal Income Tax system, yet the principle of time-based tax rates remains:

Up to 1 year: 15%
More than 1 year up to 2 years: 13%
More than 2 years up to 3 years: 10%
After 3 years, the rate decreases by 1% for each additional year of ownership.
After 12 years: 0%

These brackets encourage longer-term investments and discourage short-term property flipping by progressively reducing the tax burden over time.

Dividends

Andorra distinguishes between dividends sourced from companies based within the country and those originating from abroad:

Dividends from Andorran companies:
- If you are an Andorran tax resident receiving dividends from a locally incorporated business, you benefit from a 0% personal income tax rate on those dividends.
- If you are not a resident, Andorra also does not withhold taxes on these dividends, effectively making the withholding rate 0%.
Dividends from foreign companies:
- For Andorran tax residents, dividends from non-Andorran companies are generally subject to a 10% tax.

From a comparative standpoint, this is extremely favorable. While dividends from local sources can be entirely tax-free, those from abroad are taxed at only 10%, contrasting starkly with rates of 30% or more in neighboring countries. However, Andorra’s limited network of double taxation treaties can lead to withholding taxes (ranging from 15% to 35%) in jurisdictions that do not have a treaty with the Principality.

If an Andorran company pays dividends to a non-resident, there is no withholding tax on those payments within Andorra. However, the recipient may need to declare such income in their home jurisdiction, subject to the rules of that country.

Other taxes

There are, of course, other types of taxes in the Principality. But these are, equally, much lower than the equivalents in other countries.

There are small parish taxes:

“Foc i lloc”, which must be paid by both tenants and owners between the ages of 18 and 65
The tax on built property
Taxes for location of commercial activity.

And lnow let’s see whether or not other important taxes exist in the Principality.

Corporate Income Tax

The corporate tax in Andorra exists, but it is one of the lowest in the European Union, which is a great benefit for both SMEs and large companies.

This tax is set at a maximum of 10% of the profits of the fiscal year. In countries such as Spain, for example, it is 25%, with some variations in the case of newly established companies.

Remember, as we mentioned, that dividend distributions from your own local company are tax exempt.

Inheritance Tax

In 2016, Andorra introduced the Inheritance and Donations Law, which clarified various succession rules. Under this law, when a person passes away, the surviving spouse inherits immediately after any direct descendants, taking precedence over other relatives. Consequently, if there are no children or grandchildren, the spouse is next in line.

Crucially, inheritances in Andorra are entirely free of tax, provided the deceased was an Andorran tax resident and the will was drawn up according to Andorran legislation. If the individual was a foreign national, they would first need Andorran residency for this benefit. Additionally, any assets bequeathed must be located in Andorra to fall under this law.

Beneficiaries living outside Andorra may also qualify for this exemption, but the process can vary depending on their country of residence. It is advisable to seek professional guidance to handle specific circumstances.

Value Added Tax (IGI)

This is a tax that is added to any product or service and paid by the end consumer. In Andorra, it is called Impuesto General Indirecto or IGI, and it only corresponds to 4.5%, while in countries like France or Spain it is 20% and 21% respectively.

Tax on Foreign Investment

In an attempt to curb the rise in housing prices by discouraging extenral demand, the government has recently introduced a new levy specifically targeted at non-resident buyers.

The tax rates are structured based on the number of properties acquired:

3%: Applicable to the purchase of a first property, which may include a single-family home, apartment, or studio, along with up to two storage rooms and two parking spaces.
5%: Levied on the acquisition of a second property, under similar conditions as the first.
8%: Imposed when purchasing at least six properties.
10%: Applied to the tenth and subsequent properties or for urban or property developments.

The law also broadens the definition of foreign investors to include:

Individuals residing in Andorra for less than three years.
Foreign legal entities.
Andorran legal entities with foreign ownership of 50% or more.

Interested in moving your residence to Andorra?

If you are in the initial stages of researching Andorra as potential destination, we recommend reading the report “The definitive guide to living in Andorra”, with complete information on Andorran taxation, residence and society.

And if you need help with something specific or want to start the procedures for your move to Andorra, do not hesitate to contact us.

You can contact us without obligation in the following ways: