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The security, the pure air and the beautiful landscapes have influenced more and more people to decide to move to live in Andorra. However, the main attraction of this small country located in the Pyrenees is its friendly tax framework.

Andorra tax system

Despite the widespread belief that Andorra is a tax haven, it has been a few years now that this country is off all the blacklists of tax havens, especially since it implemented a tax system. In other words: yes, taxes are paid in Andorra, but few. Below we will review the most significant ones.

In Andorra there are mainly two taxes that tax income directly, the Personal Income Tax (hereinafter, IRPF) and the Corporate Income Tax (hereinafter, IS), which, as in many countries, make up the tax system.
However, what are the characteristics of these taxes, how much do you really pay for them, and is it worth it?

IRPF

In the Andorran IRPF there are only three brackets:

These are its main features:

• A maximum tax rate of 10%, one of the lowest in the Euro zone. Not subject to a progressive tax rate.
• Taxation on worldwide income. Possibility of deduction of taxes borne abroad.
• The Andorran Personal Income Tax Law provides for exemptions of €24,000 for obtaining real estate income, salaries and economic income and another €3,000 for obtaining passive income.
• There are many other tax advantages:
  • Exemption for the sale of traded shares
  • Exemption for dividends from Andorran sources.
  • Very low taxation of real estate income.
  • Ideal tax for traders.

IS

In Andorra companies are taxed by Corporate Income Tax, a direct tax whose tax rate is 10% applied to net income. It is still one of the lowest tax rates in Europe (below Ireland and Luxembourg, major technology hubs and financial centers) and with many tax advantages.

Thus, we could summarize attractive features of the Andorran IS as these:

• Possible reduction of taxation up to 2% by application of the Patent Box regime.
• Of the few countries in the Euro zone with no limit to the compensation of Negative Taxable Bases (BINs) or to the deduction of financial expenses.
• No withholding taxes on dividends or interest paid from Andorra to its foreign partners.
• Possibility of planning very interesting international tax structures through the Double Taxation Avoidance Agreements signed by Andorra (E.A.U., Malta, Cyprus, Luxembourg, etc.).
• Tax inspections are less frequent than the average of the European Union.
• Non-application of the European Union Directive on prior notification of cross-border arrangements (DAC 6).

In addition to this very attractive IS and IRPF, in Andorra there is no inheritance and gift tax or wealth tax.

The Thyssen, the Espargaró, Maverick Viñales, TheGrefg, Patry Jordán, Natalia Cebrián and a long list of celebrities have already done it… And we have no doubt that more and more will choose to do the same, because living a few hours away from Spain and escape its excessive taxes is a real opportunity.

Of course, you need to make sure you have a local lawyer to help you with all the entry formalities, and depending on your assets and personal situation you may also need assistance in leaving your home country.

At AndorraInc we believe that Andorra is an ideal option for high net worth individuals who want to reside in a quiet and safe place, or for people with short careers or dependent on external agents who want to take advantage of their best professional years to save.

How to take the first step?

If you are considering moving to Andorra, we recommend reading the report “The definitive guide to living in Andorra”, with the most complete information on Andorran taxation, residence and society.

For any other matter, please do not hesitate to contact us.