If you’ve ever visited an Andorra ski resort and enjoyed your stay so much that you’ve considered moving to the microstate, you’re not alone. So many visitors to Andorra fall in love with the country and wonder what it’d be like to live there. But, one of the main questions to consider is what are the Andorra tax rates?
While most people understand and know that tax in Andorra works a bit differently to the rest of Europe, and that the microstate is one of the low-tax countries, few are up to date on the specifics. So, in this post, we’ll break down some of the key questions about Andorra taxes.
The different types of taxes in Andorra
As is the case in any country, there are a few different types of Andorra taxes. The main Andorra tax rates to keep in mind are: the Andorra income tax, corporate tax, VAT, capital gains tax and real estate tax.
There are a few other Andorra tax situations to keep in mind too, but these are the main ones and we’ll break a few of them down further below.
Before continuing, it’s also worth making clear that the currency in Andorra is the euro, which has the currency code EUR and the currency symbol €. This is despite the fact that Andorra is not a member of the European Union (EU). Despite not being a member state, Andorra has a great relationship with its EU neighbours France and Spain, which surround the microstate on either side. Plus, it shares a lot of culture and history with both these EU countries.
What are the tax advantages of Andorra?
There are many benefits from the Andorra tax structure, with rates and fees relatively low compared to most of the other countries in Europe. So, is Andorra a tax haven? Well, no. It’s important to note that both the European Union and the Organization for Economic Cooperation and Development reject the Andorra tax haven label. There view on the ‘Is Andorra a tax haven?’ question is that it doesn’t meet the criteria, despite there being a good few Andorra tax advantages.
So, what are these advantages? Well, the main one is that Andorra has the lowest Value Added Tax (VAT) rate in Europe, at a general rate of 4.5%. Some goods and services have even lower VAT rates, like food and non-alcoholic drinks having just 1.0% VAT, which is called Impost General Indirecte (IGI) locally. This is why the principality has a reputation for its excellent shopping, as it has a wonderful range of luxury items and at relatively low and competitive prices.
Exploring the personal income tax rates in Andorra for residents and non-residents
As for Andorra income tax, this is also relatively low. Looking at the 2023 Andorra tax rate for income tax, it was 0.0% for annual personal income between €0 and €24,000, then 5.0% for annual personal income between €24,000 and €40,000 and then any amount over €40,000 was 10.0%. That’s according to ABAST, who point out that: “With a maximum rate of 10.0%, the Andorran personal income tax is one of the lowest in Europe.”
Looking at the neighbouring countries of Spain and France, it’s striking how low the Andorra income tax is. In France, the maximum personal income tax rate is 40.0% and in Spain it’s 45.0%. That certainly makes Andorra stand out when looking at taxes in western Europe.
As for who pays the Andorra income tax, all residents must file their tax payments with the microstate’s authorities. Meanwhile, non-residents, which is anyone who spends less than 183 days of the year in the microstate, may also have to pay some tax on income if they meet a few other criteria for non-resident pay. This Andorra tax for non-residents is called “Impost sobre la renda dels no-residents fiscals”, or “Tax on the income of fiscal non-residents” in English. The general rate for this tax, called the IRNR, is 10.0%, paid on income earned from economic activity within Andorra. This is a tax rate that mainly affects people who live just over the border and who regularly commute for work purposes.
Tips for optimising your taxes while living or doing business in Andorra
When it comes to the Andorra tax rates for corporate taxes, the general rate of 10.0% is also very competitive. If we again compare with the neighbouring countries, Spain’s equivalent is 25.0% and France’s equivalent is 33.3%. That’s why many companies decide to move to Andorra to set up their line of work.
By looking online, you can find an Andorra tax rates calculator to give you an idea of some of the corporate tax rates in the country and even rates for other sectors, such as Andorra tax rates on property. But, do keep in mind that the values given by any Andorra tax rates calculator will only be an estimate.
A highly recommended tip if you’re serious about setting up business affairs in Andorra is to work with local accountants who understand all the nuances of tax in Andorra. Remember, this is a very small country, with a population of under 80,000, so the Andorra accounting community is quite small too. That said, it can be worth taking the time to find the right accountant, to make your move to work and live in Andorra as smooth as possible. Then, you can focus on enjoying all the advantages of living in one of the most beautiful countries in the world.