AndorraTax Obligations Detailed

In Andorra, employers face several tax obligations, including social security contributions, corporate income tax, and value-added tax (VAT).

Employer Tax Contributions

• Social Security: Employers contribute 15.5% of the employee's gross salary towards social security. This covers areas such as illness, disability, and retirement.
• Corporate Income Tax: The general corporate income tax rate is 10%. However, specific rates apply to certain businesses. For example, holding companies are taxed at 2%, and royalties are taxed at 5%. New companies with a turnover under €100,000 for their first three years might have reduced rates: 5% on the first €50,000 of profit and the standard 10% on any amount above this threshold.

Employee Tax Contributions

• Social Security: Employees contribute 6.5% of their gross salary to social security.
• Personal Income Tax: Andorra has a progressive personal income tax system. For residents, the tax rates are as follows:
  • 0% for income up to €24,000
  • 5% for income between €24,001 and €40,000
  • 10% for income exceeding €40,000
• For married couples, the rates are:
  • 0% for income up to €40,000
  • 10% for income exceeding €40,000
• Non-residents are taxed at 10% on income sourced within Andorra. Residents are taxed on worldwide income.

Value Added Tax (VAT/IGI)

• The standard VAT (IGI - Impost General Indirecte) rate in Andorra is 4.5%.

Other Taxes and Considerations

• Capital Gains Tax: The capital gains tax rate for both individuals and companies is generally 10%.
• Payroll Cycle: Salaries are typically paid monthly on the last working day of the month. The 13th-month salary is not mandatory and is at the employer's discretion.
• Minimum Wage: As of today, the minimum wage is €1,286.13 per month or €7.42 per hour.
• Tax Year: The tax year in Andorra aligns with the calendar year.
• Tax Filing: The personal income tax return must be filed and paid between April 1st and September 30th of the year following the tax year. Corporate income tax returns are due within six months and 30 days of the tax year's end. An advance corporate tax payment is generally required in September.

This information is current as of February 5, 2025, and might change in the future. Consult with a local tax advisor for the latest regulations.

In Andorra, employee tax deductions primarily consist of income tax and social security contributions.

Income Tax

• Tax Rates and Brackets: Andorra's income tax system is progressive. As of 2025, the first €24,000 of annual income is tax-exempt. Income between €24,001 and €40,000 is taxed at 5%, and any income above €40,000 is taxed at 10%. This information is valid as of today, February 5, 2025, and might change in the future.
• Withholding Tax: Employers are responsible for deducting income tax directly from employee salaries and remitting it to the government. The withholding rate is based on the employee's income from the previous tax year and can range from 1% (for incomes between €30,000 and €40,000) up to 7% (for incomes above €150,000).
• Deductions and Allowances: Several deductions can reduce taxable income, including allowances for rent/accommodation, dependent family members, child support, and pension fund contributions. Employees can also deduct their social security contributions and up to €400 (3% of their income) for general expenses.
• Filing and Payment: The personal income tax declaration must be filed and paid between April 1st and September 30th of the year following the reporting period. Individual tax returns are required, and joint filing is not permitted.

Social Security Contributions (CASS)

• Employee Contributions: Employees contribute 6.5% of their gross salary to the CASS.
• Deductibility: The employee's CASS contributions are deductible from their taxable income.

General Tax Information

• Tax Year: Andorra's tax year aligns with the calendar year, running from January 1st to December 31st.
• Double Taxation: Andorra has double taxation treaties with several countries, allowing residents to deduct taxes paid abroad from their Andorran tax liability.
• Tax Residency: Individuals are generally considered tax residents if they spend more than 183 days in Andorra during a calendar year.

It is important to note that tax laws and regulations are subject to change. For the most up-to-date information, consulting with a tax advisor or referring to official government sources is recommended.

In Andorra, the General Indirect Tax (IGI) is equivalent to VAT/GST.

IGI Rates and Categories

• Standard Rate: 4.5% (lowest in Europe).
• Reduced Rates: 1% (food, books, magazines, newspapers), 2.5% (public transport, and specific artistic and cultural services).
• Super Reduced Rate (0%): Healthcare, CASS (social security), educational services, gold investments, and certain NGO services.
• Increased Rate: 9.5% for banking and financial services.

Registration and Filing

• IGI registration is mandatory for businesses conducting B2B and B2C transactions in Andorra.
• Filing frequency depends on annual turnover and can be monthly, quarterly, or semi-annually (July and January).
• Specific forms (900 for general regime, 910 for simplified) are used for IGI filing.
• A threshold of €40,000 taxable sales per annum applies for digital services provided by non-residents.

Invoicing Requirements

Invoices must include: date of issue, unique identification number, supplier's tax identification number, customer's full name and address, description of goods/services, transaction date, and IGI amount payable. While e-invoicing is accepted, no standardized regulations are yet in place.

Other Taxes in Andorra

• Corporate Income Tax (CIT): 10% (with potential reduction to 8%).
• Personal Income Tax (PIT): 0-10%.
• Tax on Real Estate Capital Gains
• No wealth, inheritance, or gift taxes.

Digital Services

Digital service providers to Andorran consumers are subject to IGI since January 1, 2013, with the registration threshold. B2B transactions typically use the reverse charge mechanism.

Tax Return Deadlines

Tax return deadlines have seen extensions approved by the Council of Ministers. It is best to check the latest official information on the Government of Andorra website for the most up-to-date filing deadlines.

Additional Information:

• Andorra utilizes the reverse charge mechanism for B2B transactions within the EU. IGI is not mandatory on B2G invoices but is accounted for if charged.
• While not part of the EU VAT area, Andorra maintains a customs union agreement.
• Andorra is not considered a tax haven and prioritizes tax compliance and transparency.

Please note that this information is current as of February 5, 2025, and might be subject to change. It is always recommended to consult official government sources or a tax advisor for personalized guidance.

Andorra offers a competitive tax system designed to attract businesses and individuals.

Corporate Tax Incentives

• General Corporate Tax Rate: A flat rate of 10% applies to corporate profits.
• Reduced Rate for New Businesses: Startups and small enterprises with annual income below €100,000 benefit from a reduced rate during their first three years: 5% on income up to €50,000 and 10% on the remaining income.
• Sector-Specific Incentives: Further exemptions and deductions are available for companies in innovative industries such as research and intellectual property.
• Dividend Distribution: Dividends distributed by Andorran companies are exempt from local taxation, regardless of whether the recipient is a resident or non-resident.
• Holding Company Regime: A favorable holding company regime exists, providing tax benefits for holding companies established in Andorra.

Personal Income Tax Incentives

• Tax-Free Threshold: The first €24,000 of annual income is exempt from personal income tax. Income between €24,000 and €40,000 is taxed at 5%, and income above €40,000 is taxed at 10%.
• Savings Income Exemption: The first €3,000 of annual savings income (e.g. interest from bank accounts) is tax-exempt. Additional savings income is taxed at 10%.
• Capital Gains Exemption: Capital gains from the sale of listed shares and investment fund units are generally exempt. Capital gains on real estate held for more than ten years are also tax-exempt.
• No Wealth Tax: Andorra does not levy a wealth tax, making it an attractive location for wealth management.
• No Inheritance Tax: Inheritance tax is not applicable in Andorra.

Value Added Tax (VAT)

• Low VAT Rate: Andorra's VAT, known as IGI (Impost General Indirecte), is among the lowest in Europe, with a standard rate of 4.5%. Reduced rates apply to certain goods and services, such as 1% for food and books and 2.5% for public transport and cultural services. A 9.5% rate is levied on financial services.

Double Taxation Treaties

• Andorra has established double taxation treaties with several countries to avoid double taxation of income. These treaties can provide significant tax advantages for businesses operating internationally.

Application Procedures

Specific application procedures will vary depending on the specific incentive. Consulting with a tax advisor or contacting the Andorran tax authorities is recommended for detailed guidance on eligibility and application requirements for specific incentives. It's important to note that tax laws and regulations can change, and this information is current as of February 5, 2025. Always seek up-to-date information from official sources when making financial decisions.