The definitive guide to all existing taxes in Andorra

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

Nestled in the heart of the Pyrenees between Spain and France, Andorra has long been celebrated for its remarkable natural beauty, high quality of life, and security.

However, one of the most compelling reasons individuals and businesses alike consider moving to Andorra is its highly attractive tax regime. With low personal and corporate tax rates, no wealth or inheritance taxes, and a modest value-added tax (called IGI), the Principality is an appealing destination for entrepreneurs, high-net-worth individuals and retirees.

In today’s article we explore the main taxes that exist in the Principality.

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1. Personal income tax (IRPF)

Andorra’s personal income tax, known locally as IRPF (“Impost sobre la Renda de les Persones Físiques”), is known for its simplicity and low rates compared to most European countries. The structure is refreshingly straightforward, with three main brackets:

Income up to €24,000: 0% tax
Between €24,000 and €40,000: 5% tax
Above €40,000: 10% tax

This tiered system implies that an individual’s effective tax rate always remains well below 10%. For instance, someone earning €70,000 per year would pay approximately €3,800 in total income tax.

This is a significantly lower burden than in Andorra’s neighboring countries.

2. Corporate tax

For businesses, Andorra’s corporate tax is a major draw. The headline corporate tax rate in the Principality is 10%, levied on company profits (income minus expenses). This rate is among the lowest in Europe. By comparison, Spain imposes a standard 25% on corporate profits, while France’s rate has historically hovered around 30% or more.

Additionally, Andorra allows negative tax bases to be carried forward and applied against future profits for up to 10 years, reducing future corporate tax bills when a company experiences losses.

If you also serve as a shareholder and reside in Andorra, you may find further advantages when it comes to how dividends are taxed, an aspect we delve into later in this guide.

3. Capital gains from the sale of shares

Capital gains on company shares in Andorra depend on both the percentage of ownership and the holding period. The general rule is:

If you own 25% or less of a company: the gains from selling those shares are completely exempt from tax. This exemption can be appealing to small-scale investors, minority shareholders, or those actively diversifying their portfolios.
If you own more than 25% of the company: any gain realized upon the sale is subject to a 10% tax rate.
Exemption after 10 years: if you have held those shares for at least 10 years, the capital gain becomes tax-free, regardless of your ownership percentage.

This tiered system rewards long-term shareholding and encourages stable investment. For example, a business founder who has held more than 25% of a company’s equity for over a decade can sell all or part of that position completely tax-free. Meanwhile, an investor who invests in minority stakes (≤25%) can generally sell at any time without incurring capital gains tax.

Given these rules, Andorra is particularly appealing to founders, startup employees receiving equity, or those building diversified portfolios where each holding is kept below 25%. These regulations are in line with Andorra’s broader goal: encouraging foreign investment while rewarding stable, non-speculative participation in the local economy.

4. Capital gains from the sale of real estate

While Andorra’s approach to real estate transactions remains competitive, there is a specific capital gains tax scheme for property sales that scales down over time. If you sell an Andorran property:

Within the first year of ownership: you pay up to 15% on the net capital gain.
Holding period up to 2 years: 13%.
Holding period up to 3 years: 10%.
After 3 years: this tax rate decreases by 1% every additional year of ownership.
After 12 years: the rate is fully reduced to 0%.

Effectively, this means that a property held for more than 12 years can be sold tax-free. Despite this de-escalation, short-term flips or quick resales face an initial 15% rate.

5. Dividend taxes

For individuals who are tax residents in Andorra, the taxation of dividends follows a clear distinction between local and foreign-sourced dividends:

Dividends from an Andorran company paid to an Andorran tax resident: taxed at 0%. This effectively eliminates the double taxation of profits often seen in other countries. If you run your own Andorran company and pay yourself dividends, you do not incur additional tax on top of the 10% corporate rate.
Dividends from non-Andorran companies: these are taxed at 10%, although certain double-taxation treaties or foreign withholding taxes could impact the net rate you pay.

For many entrepreneurs, digital nomads, or international investors who choose to relocate to Andorra, the 0% rate on local dividends is particularly powerful. Not only can you limit your business’s corporate tax to 10%, but also you can extract post-tax profits without further local taxes.

However, the absence of double taxation treaties with some countries could increase this tax bill. For more information, we recommend reading our guide on dividend taxes in Andorra.

6. IGI (Andorran VAT)

The Principality’s indirect tax on goods and services is called IGI (short for “Impost General Indirect”). It is essentially a Value-Added Tax but is lower than in most EU countries. The general IGI rate is 4.5%, which is markedly less than the 21% in Spain or 20% in France.

Some goods and services qualify for a reduced rate, or are exempt. The key categories include:

Medical and educational services: typically exempt from IGI.
Certain basic goods: may benefit from a very reduced rate (1%).

For businesses with cross-border operations, the relatively low IGI can be an advantage when selling to consumers within Andorra. However, it is important to remember that, because Andorra is outside the EU, separate rules and treaties may govern the import and export of goods into or out of the EU single market.

7. Inheritance, gifts, and wealth

Perhaps one of the most distinctive features of Andorra’s tax regime is the absence of wealth, inheritance, or gift taxes. Unlike many European jurisdictions that impose significant levies on large estates, net worth, or intergenerational transfers, Andorra does not burden taxpayers in these areas.

No inheritance tax: heirs in Andorra receive assets, real estate, or financial instruments without paying additional taxes. This is a major advantage for those planning their estates or looking to create multigenerational wealth.
No gift tax: gifts made to children, spouses, or other parties are not subject to any local gift tax. This policy again makes Andorra an appealing domicile for high-net-worth families seeking simpler ways to transfer assets.
No wealth tax: residents do not pay annual taxes on the total value of their assets, whether in Andorra or abroad. Countries like Spain and France, by contrast, apply wealth taxes above certain thresholds.

This trio of “no inheritance, no gift, no wealth tax” sets Andorra apart as one of the most favorable environments in Europe for preserving and passing on wealth.

8. Foreign investment tax

A specific tax on foreign investment in real estate was recently introduced to help moderate rising housing prices and ease local affordability issues. The law applies to individuals or entities that have not been residents of Andorra for at least three years, as well as foreign legal entities or Andorran companies with 50% or more foreign ownership.

The tax rates climb based on the number of properties acquired:

3% on the purchase of a first property (home or apartment, plus up to two storage rooms and two parking spots).
5% on the purchase of a second property.
8% when purchasing at least six properties.
10% from the tenth and subsequent properties, or for larger urban or real-estate developments.

This new foreign investment tax does not represent an annual levy but rather a one-time charge applied at the moment of purchase. It effectively adds an extra cost for early-stage investors and larger real estate players, encouraging them to become longer-term residents if they plan to acquire multiple properties.

Difference between administrative and tax residence

Once the country’s main taxes have been discussed, it is relevant to clarify the difference between simply holding an Andorran residence permit (administrative residence) and being recognized as a tax resident in the country.

While obtaining a residence card is indeed the first step, true tax residence in Andorra typically hinges on several key factors:

Physical presence: spending at least 183 days per year in the Principality is the standard benchmark (although less may be accepted in some specific cases)
Center of vital interests: often, your primary economic interests, family, or personal ties must also be located in Andorra. If your main family home, bank accounts, and most valuable assets remain elsewhere, or if you spend more days in another jurisdiction, you may struggle to claim Andorran tax residence if challenged by a foreign tax authority.
Consistent documentation: being able to show flight records, local utility bills, and financial statements that corroborate your actual presence in Andorra is often critical in any dispute regarding tax status.

Holding the administrative residence card alone does not guarantee that another country cannot assert taxation rights over you. Therefore, for individuals truly seeking Andorra’s lower taxes, the best practice is to both acquire the residence permit and meet the traditional 183-days-per-year threshold.

This dual approach leaves little ambiguity, both with local authorities and in the eyes of foreign tax administrations.

Getting the residence permit

While Andorra is not a member of the European Union, it offers several pathways to legal residence. Broadly speaking, these include:

Active residence
Passive residence
Digital nomad visa
Family reunification permits
Residency for health reasons

However, the two most sought-after options are active and passive residence.

Active residence (self-employed or employed) allows you to work in Andorra, whether under contract or through your own company. For example, if you choose the self-employed route, you will typically create an Andorran limited liability company, own at least 20% of it, and act as the administrator.

This status requires a non-interest-bearing deposit of €50,000 at the Andorran Financial Authority (AFA), although regulated professionals (like doctors and engineers) may be exempt. You also need to spend 183 days a year in the country.

Passive residence, meanwhile, is designed for retirees, investors, or anyone who can demonstrate sufficient income from outside Andorra. This option only requires you to spend 90 days a year in the Principality, but you must invest roughly €600,000 in approved Andorran assets (such as real estate or local financial products) and place a deposit of €47,500 at the AFA.

Both permit types involve a criminal-record check, medical certificate, and proof of suitable accommodation. After approval, you will receive an Andorran residence card, renewable periodically, that grants multiple advantages, including the possibility of achieving full tax residence if you meet the 183-day rule.

Andorran citizenship (the nationality), on the other hand, is very difficult to obtain, since, except for family ties, it requires having resided in the country for at least 20 years.

Thinking of moving to Andorra?

If you are considering a move to Andorra for its favorable tax system, we recommend reading the free report “The definitive guide to living in Andorra”, where you will find the most comprehensive information on taxes, residence permits, and daily life in the Principality.

For any other questions or specialized advice, don’t hesitate to get in touch with us.

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