Taxing in Andorra has countless benefits. Those who reside at least 183 days a year in the Principality, can benefit from this tax framework, very favorable compared to other countries and one of the lowest in the world.
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.
How Income tax works in Andorra
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/she will have to pay Income tax. However, the amount to be paid for Income tax is much more affordable in the Principality than in Spain 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, €3,800, as opposed to the approximately €22,000 you would pay in Spain.
To calculate precisely how much you would pay in Andorra, use our free calculator.
What is the IRNR?
The IRNR is the Income Tax for Non Resident Taxpayers. This tax applies to border workers, i.e., who reside outside Andorran territory but relocate for work or business activities, and is 10%, just like Income tax.
Other taxes in Andorra
There are, of course, other types of taxes in the Principality. But these are, equally, much lower than the equivalents in other countries.
We can mention the taxes on gambling activities or real estate capital gains, or those on insurance services. But all of them are, we insist, ostensibly lower than their Spanish equivalents.
However, acquisitions through donations or inheritances are not taxed. There is also no wealth tax.
There are small parish taxes, such as the “Foc i lloc”, which must be paid by both tenants and owners between the ages of 18 and 65; the tax on built property; or taxes for location of commercial activity.
Andorran corporate income tax
The corporate tax in Andorra 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.
It should be noted that dividend distributions are tax exempt, unlike in Spain.
Value Added Tax or VAT
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.
Are you interested in moving your residence to Andorra?
We recommend reading the report “The definitive guide to living in Andorra”, with complete information on Andorran taxation, residence and society.
And, of course, if you have any questions, please contact us. Andorra Inc. can help you.