All about taxes in Andorra
Andorra is not that tropical island state where people run away from taxes, but it still has a much lower rate than the countries it borders with. It is the most profitable country in Europe from this point of view. At the same time, the tax policy here is very firm — the state has repeatedly stated that it does not plan to raise rates in the coming years, thus preserving the investment attractiveness of the principality.
Benefits of Andorran taxes
Personal income tax
Income tax in Andorra is practically the lowest in Europe and amounts to a maximum of 10%. In addition, if a person earns less than 24 thousand euros per year, which is less than the minimum wage, then it is exempt from taxes. And under certain circumstances, you can get a very significant discount on rental housing and pay only half of its cost.
A particularly relevant rate of only 10% is for young companies. Add to this the absence of double taxation when working in neighboring countries and we have a rather profitable thing. In addition, there are various discounts and benefits for young and small businesses, which should be reviewed separately. In some cases, it can be 5%, 1%, or even absent at all.
Let's compare these figures with other European countries: For example in Portugal, the minimum income tax is 31.5%, in Germany — almost 30%, in Spain — 25%, in the UK - 20%, but it can go up to 45%!
VAT in Andorra is also one of the lowest in Europe. Unlike other countries, where it fluctuates around 20%, this type of tax here is only 4.5% at its highest rate.
Reduced rates apply to:
Financial and banking services (9.5%) — the only industry where there is an increased rate;
Tax on rental housing, purchase of some investments, education, medicine can be reduced up to 0%;
On public transport, visits to cultural institutions, cinemas, concerts, and so on, there is a tax of 2.5%;
The tax reduced by another 1-2% applies to basic foodstuffs, as well as printing materials.
Interesting data about corporate tax
You are probably interested in the 10% rate on income. But that's not all, there are several interesting additional details. Among them:
The ability to pay only half of the total tax rate for any enterprise in the first year of operation;
If the income of the new company is less than 50 thousand euros per year, then the first three years the rate will be reduced by half — to 5%
There are also some other nuances here. We recommend you to clarify all of them directly using the legislation, or by contacting us, because it may turn out that the rate for your business is even lower, or there are various kinds of bonuses.
Income tax on salaries
Many European citizens find it hard to believe that income tax in Andorra is so low. At the same time, if your salary is below the minimum (24 thousand euros), then you are exempt from paying them. Only half of the total tax (5%) is assigned to you if you earn up to 40 thousand euros. Anything higher — 10%.
Among others, there are additional taxes in Andorra, the amount and actual presence of which may differ from the municipality in which the person lives. It also depends on the value of the objects in question.
Tax on movable and immovable property
Tax on income from renting real estate or vehicles
Property Transfer Tax (ITP)
Tax on the provision of services (insurance, medicine, etc.)
Tax on excise goods
Tax on gambling
And some more fees and small taxes that are inherent in any system. It is not possible to dwell on each one, but you can always check directly with us. It is worth noting that all these fees are not large, for example, an average resident of a country with a small apartment and a middle-class car pays no more than 1000 € per year.
If you have any questions regarding the taxation of your business, property, and real estate in Andorra, how best to arrange all this, then be sure to write to us and ask all your questions.