The signature of the Double Taxation agreement between Andorra and Spain was absolutely necessary in order to make the business relationship between the two countries official. This process, which has also been signed with France, will facilitate and give more legal security to the economic relations between Andorra and France and with their citizens, companies and investors and, obviously, it will reinforce the economic bond and the fiscal information exchange.

On the other hand, the economic liberalization law approved by the OECD opens to both economic and commercial opportunities for Andorra to the world. Andorra is also suffering (a lot) this crisis and this has also made Andorran entrepreneurs become aware that it is better for them not to be alone.

In fact, all the changes that have happened lately in the Principality started in March of 2009 when the French Prime Minister, Nicolas Sarkozy, threatened to renounce to his Coprince of Andorra title if the G20 didn’t take measures to put an end to tax havens. This made Andorra eliminate the banking secrecy. Spain stopped considering Andorra a tax haven in 2011 thanks to an agreement in information exchange that forces the Principality to make their costumers information available in criminal and tax proceedings opened in Spain. In 2012 the corporate tax base was introduced. In 2013 the IGI (equivalent to VAT) and in 2015 the PIT has been created, which allows Andorra to close its tax framework from the point of view of the acquisition of a standardization with the standards of its neighbor countries, with what the OECD establishes.

Which are the tax advantages a company can find in Andorra?

A low indirect taxation (general IGI of 4,5%) and a really competitive direct taxation, where the key points are the following:

  • In Andorra companies pay a nominal tax rate of the 10% of business profits, with reductions for specific activities which allow companies to pay a real rate of the 2%
  • There are also other reductions and discounts for the creation of work, investment in tangible goods and other factors.
  • There are asset management instruments like SICAV that allow to pay a real rate between 0,5% and 1% for companies.

Which are the tax advantages for individuals?

  • PIT payment: a fixed nominal rate of the 10%, except for the first 24.000€ for labor income and 3.000€ for investment income. From 24.001€ to 40.000€ 5% and from 40.001€ 10%.
  • The dividends received of Andorran companies are completely exempt of paying.
  • There is no deposit for estate, nor donation or inheritances