What are the implications of the Income Tax Return system that came into force in 2016 in Andorra?
Albert Barroso Enrich, a senior tax consultant of Augé Grup, answers:
On April 1st 2017, the Andorran Tax Agency formalized the personal income tax return, which corresponds to income received in 2016. Taxpayers have a period of 6 months, until October 2, to send the forms required by the Law (Llei 5/2014, del 24 d’abril, de l’impost sobre la renda de les persones físiques).
The Government has received 24 million euros from the Income Tax Return of 2015, and the gains expected for the 2016 campaign are similar, with a total of 13,700 Tax Return forms to be managed by the Tax Agency.
The Andorran Income Tax Law provides for a nominal rate of 10% on the basis of the collected revenue, exclusive of the most appealing tax reliefs and exemptions to potential tax residents of the country. The most important ones are the following:
• Exemption on the first range of 24,000€ of the income coming from labor and activities on a self-employed basis (salary, administrators’ remuneration, self-employment).
• Additional 50% deduction on the next 16,000€ of labor income and self-employment.
• Exemption on 3,000-€ of income from savings (foreign dividends, interests, capital gains).
• Exemption on dividends distributed by Andorran companies.
• Exemption on capital gains from the sale of shares in corporations where the taxpayer had less than 25% of shares in the previous 12 months.
• Deductions for dependent descendants or ascendants.
In addition to all these advantages, it must also be considered that the Law provides for an exemption from the obligation to present the tax report for a large number of cases, in particular for persons who have exclusively a net earned income of less than 24.000€ per year, which explains why the number of tax reports is perceptibly low in regards to the total number of Andorran tax residents (more than 70,000 inhabitants in 2016).
