Low tax system: Andorra

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Low tax system: Andorra. Tax rates

The taxation system in 2017. What haven is?

The taxation system in the Principality of Andorra was developing in accordance with the activities and the economic structure of the country, expanding tax bases in order to optimize the distribution of tax levies for the transition from almost entirely indirect taxation system to direct taxation system, corresponding the international level.

In accordance with the mandate established in the Constitution, the tax powers are distributed between the municipalities and the Government.

On the municipal level, an adopted law on the delimitation of competences of municipalities of November 4, 1993 establishes and defines the powers of municipalities within their self-government authorities. The law determines the local tax authority for the following taxes types:

– Traditional tax for residents.

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– Income tax expense of tenants.

– Tax on conducting business, entrepreneurial and professional activities.

– Tax on construction.

In 2003, Law 10/2003 of June 27, on municipal finances combines the basic elements of municipal taxes and homogenizes the basis of various tax concepts that these local authorities develop through the appropriate decrees.

At the state level, the Customs Union Agreement between the Principality of Andorra and the European Economic Community modifies the structure of consumption taxes, and sets the start of the general indirect taxation.

The period from 1994 and 1996 is an important stage in the development of the taxation system, marked by the introduction of five new taxes:

– Tax on possession of vehicles (1994).

– Tax on the right to use the trademark (1995).

– Tax on registration of owners of economic activity (1995).

– Court fees (1995).

– Taxes on lotteries (1996).

In 2000, the legislative authority approved a tax on the provision of services (ISI) in accordance with the indirect taxation generalization political model in all sectors of the economy. It is a framework law that determines the basis for indirect taxation on services and that by means of specific legislation shall be introduced in all sectors within two years.

In May 2002, an indirect tax levied for the provision of banking and financial services (now canceled) and an indirect tax on the provision of insurance services were imposed. In the same year a tax levy on notary certification (now also canceled) and a tax on the transfer of title to real property under the tax liability between the municipalities and the government were approved.

Finally, on November 3, 2003, three special taxation laws, summarizing an indirect taxation in all areas of the economy were adopted:

– Indirect tax on the provision of professional and business services.

– Indirect tax on domestic production.

– Indirect tax on commercial activity.

These three new taxes, which entered into force on January 1, 2006, have been replaced by a general indirect tax (IGI), which entered into force on January 1, 2013.

Direct state taxation began to be applied in 2006 with the entry into force of the capital gains tax  in transfer of immovable property. This is a direct taxes imposed on the increase in real property values, and being applied in transfer during lifetime of the encumbered or profitable real estate and the establishment or assignment and alienation of rights to this property.

On December 29, 2010, three very important laws in the field of direct taxation were adopted:

– Law 94/2010 from December 29 on the tax on income of non-residents.

– Law 18/2011 from December 1 on the Amendments to the Law 94/2010 from December 29 on Income Tax on non-residents.

– Law 95/2010 of 29 December on the corporate tax.

– Law 17/2011 from December 1 on the Amendments to the Law 95/2010 from  December 29 on the corporate tax.

– Law 96/2010 from December 29 on the tax on income from business activities.

– Law 19/2011 from December 1 on the Amendments to the Law 96/2010 from December 29 on the tax on income from business activities.

The introduction of these three taxes meets all the specifics and fits perfectly into a real economic policy of the Principality of Andorra as a center of international services provision. Andorra’s economy being opened to the outside world, along with the modernization of the taxation system and a more rational distribution of tax liabilities were the main reason for the determination of the legislative initiative.

In 2013, a general indirect tax (IGI) was introduced. Its implementation allows to replace most of the existing indirect taxes levying an industrial consumption within our territory. Thus, the structure of indirect taxation becomes more neutral and efficient for businesses and citizens.

Finally, on January 1, an income tax on individuals (IRPF) came into force, which ultimately determines the tax base of Andorra and introduces a tax corresponding to a tax existing in other countries across the European Union and the OECD. The new tax applies to all income received by the taxpayer, regardless of its type and source, including corporate income tax previously taxed on profits from business activities.

– Law 5/2014 from April 24 on the tax on income of individuals

– Law 42/2014 from December 11 on amending the Law 5/2014 from April 24 on the tax on income of individuals

Taxes and fees

– Tax on lotteries “Joc del Bingo”

– Tax on lotteries “Joc del Quinto”

– Tax on keeping the register of owners of economic activity

– Taxes on ownership of vehicles

– Tax on immigration

– Court fees

– Tax for the right to use the trademark

– Visitor prices

– Fee for the issuance of work permits

– Fees on animal health and food safety (2012)

 Direct taxes

– Capital gains tax in transfer of real estate rights (PLV) (2006)

– Tax on income of non-residents (IRNR) (2010)

– Tax on profits of companies and legal persons (IS) (2010)

– Tax on business and economic activities (IAE) (2010)

– Tax on income from savings

– Tax on income of individuals (IRPF) (IAE to 31/12/2014)

 Indirect taxes

– Tax on transfer of rights to real estate (ITP) (2000)

– Tax on the provision of insurance services (2002)

– Special taxes (2008)

– General indirect tax (IGI) (2012)

Customs duties

– Consumption tax (1985)

– Common external tariff

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 Tax on income of individuals (income tax)

1. What is a tax on income of individuals (IRPF)?

Income tax (IRPF) is a tax levied on income received by individuals having the status of a tax resident in the territory of Andorra. Income tax is levied on all types of taxable income, regardless of the source, the place of receipt and registration of the payer.

In other words, all the income obtained by the taxpayer shall be taxable.

A taxpayer is any individual who:

– lives more than 183 days in the territory of Andorra during the calendar year;

– directly or indirectly exercises in Andorra and its economic activity has economic interests and profit here.

Near-border workers daily arriving to Andorra from Spain or France, hired by companies, firms and enterprises that are tax residents in Andorra are not considered tax resident in Andorra.

Revenues that border and seasonal workers receive are taxed on the income of non-residents, despite the fact that the latter may choose application of special scheme of payment of the same tax. This scheme allows them to pay taxes in accordance with the general rules established by the Income Tax Act.

2. What taxes are subject to income tax (IRPF)?

Taxable income is defined and measured according to their type and origin.

Tax base of income tax
Common base Base of savings
Income from work activity Income from real estate Income from economic activities Income from movable property Increase and decrease in capital

2.1 INCOME FROM WORK ACTIVITIES

Any monetary compensation resulting from the employment relationship (i.e. wages).

2.2 INCOME FROM REAL ESTATE

Income from the operation of real property or rights to such property (e.g. rental properties).

2.3 INCOME FROM ECONOMIC ACTIVITIES (unchanged)

Same income that until 2014 were taxed on economic activities (e.g. business or professional activity).

2.4 INCOME FROM MOVABLE PROPERTY

Income received from an ancestral capital, assets, property or rights to not related to real property (e.g. insurance payments and compensations).

2.5 GAIN AND REDUCTION OF CAPITAL

Income obtained as a result of change in composition of assets. Non-repayable acquisition (inheritance, donations, etc.)and income received from real estate transfer, subject to tax on income from the transfer of ownership of real property received in Andorra, are beyond the scope of application of income tax. (WITHOUT CHANGES)

3. Elements determining a tax

The following types of reducing the tax base exist:

3.1 GENERAL BASES

Minimum per person 24,000 EUR per a taxpayer with the ability to increase up to 40 000 EUR in case of unemployed spouses (proportionally)
Minimum per family 750 EUR per year for ascendants and descendants who are dependent (multiplied by 1.5 in case of disability)
Living area, accommodation Minimum 1,000 EUR per month
Contributions to pension fund A maximum annual amount is a minimum amount of 5,000 EUR or 30% from income from labor and economic activities
Child support or annual living wage An amount set in accordance with current Civil Code, court order or regulating agreement

3.2 BASES OF SAVINGS

Minimum per person 3,000 for a taxpayer

In addition, there are certain deductions and allowances that reduce an actual taxable base and allow to avoid double taxation: i.e. payment of domestic taxes and taxes of other countries , and, in the case of economic activities, deductions in case of investment and when creating new jobs.

4. Applicable tax rate

The rate of income tax (IRPF) is 10%. However, incomes in the amount of 24,000 to 40,000 are taxed at the rate of 5%, which is applied to the tax rate by the maximum allowance of 800 EUR to receive certain income.

5. Period for payment

A taxpayer is obliged to submit a tax return for the period from April 1 to September 30 of the following tax reporting period.

Individuals receiving only income from employment or capital gains that have been withheld or are not subject to taxation do not submit a declaration.

6. Withholdings and income from interest on deposits

Payers of labor and investment income shall make appropriate retention and transfer them to the ministry responsible for finance.

6.1 LABOR INCOME RESULTING FROM WORK ACTIVITIES

Tax and Customs Board determines the percentage of a withholding corresponding a labor income. This percentage is calculated taking into account the reductions of allowances and compensations for which the taxpayer is entitled. For this reason, both the payer of income, and the taxpayer shall provide relevant data in this regard.

(RETENTION SHALL NOT BE MADE FOR THE NET PROFIT UP TO 24,000 EUR)

6.2 Income from capital gains (investment income)

As a rule, a fixed percentage of withholdings equal to 10% is applied.

There is a possibility of rate cuts when receiving investment income, identifying the account to which it relates (special account).

7.  Regulation of withholdings from labor income

At the end of the year until March 31 of the following period, the Tax and Customs Board regulates the established withholdings on labor income and establishes the payment of tax.Application of withholding in 2015 to labor income

8. From January 1, 2015, employers and other payers of labor income are obliged to make a corresponding deduction from income to the ministry responsible for finance, via CASS (Caixa Andorrana de Seguretat Social).

Initial procedure for calculating withholdings from labor income

In 2015, a payer of income applies a withholding rate, in accordance with the table of approved by the tax regulations on income tax payment (IRPF).

AMOUNT OF INCOME
Income for 2014 % of withholdings
from 0,00 EUR to 27,000.00 EUR 0.0 %
from 27.000.01 EUR to 30,000.00 EUR 0.5 %
from 30,000.01 EUR to 40,000.00 EUR 1.0 %
from 40,000.01 EUR to 50,000.00 EUR 2.0 %
from 50,000.01 EUR to 60,000.00 EUR 3.0 %
from 60,000.01 EUR to 70,000.00 EUR 4.0 %
from 70,000.01 EUR to 80,000.00 EUR 4.5 %
from 80,000.01 EUR to 90,000.00 EUR 5.0 %
from 90,000.01 EUR to 100,000.00 EUR 5.5 %
from 100,000.01 EUR to 120,000.00 EUR 6.0 %
from 120,000.01 EUR to 150,000.00 EUR 6.5 %
from 150,000.01 EUR and more 7.0 %

– Retention rate is determined depending on the income received by the taxpayer during 2014.

– During 2015, taxpayers have the opportunity to request the regulation of this initial retention. You must report your financial data on income to be received during 2015, along with your personal data, to be eligible for this regulation.

– A taxpayer is not required to provide his personal and financial data, if his net income is less than 24,000 EUR.

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 Business tax

With the entry into force of the Law on the Corporation income tax and the Act on the tax on business activities, taxpayers are obliged to make the first payment in September 2012 (payment on account).

A tax on legal entities (IS) is a tax on income obtained by legal entities and companies, and a tax on business and economic activities (IAE) is a tax on income from business activities carried out by individuals (musicians, farmers, doctors, lawyers, engineers, entrepreneurs, etc).

Who pays a tax on economic and business activities?

Tax on profit from business and entrepreneurial activities (IAE) shall be paid by persons who have business in Andorra or stay for more than 183 days a year in the country and are engaged in entrepreneurial activities here.

Methods and terms of tax payment

An amount payable under the tax is 5% of the profits or entrepreneurial activities in 2012. This payment is divided into two parts, namely:

– In September 2012 an advance payment is made at the rate of 2.5% of income received from entrepreneurial activities in 2011.

– In July 2013 a final calculation is made at the rate of 5% of the income received from entrepreneurial activities or business in 2012 minus the amount of the payments made initially in September 2012.

Payment of tax in July 2013 = 5% of the income or entrepreneurial activities in 2012 minus the amount of payment made in September 2012.

Practical example

The following case is shown as an example. For more information, check with the Law on revenues from business and entrepreneurial activities (IAE).

You have your own restaurant in Andorra. In 2011 this restaurant made a profit of 65,940 EUR (according to financial statements)

In September 2012 you made an advance payment of 2.5% of the profit for 2011 (the first installment).

65,940 EUR x 2,5% = 1,648.50 EUR

In 2012 your restaurant made a profit of 76,368 EUR. We make calculations of the amount of the second payment as follows:

The second payment = [profit for 2012 minus 40,000 EUR (fixed amount payable for a tax on economic or entrepreneurial activities IAE)] x 5%.

76,368 EUR – 40,000 EUR = 36,368 EUR

36,368 EUR x 5% = 1,818.40 EUR

The final payment on tax payment = 5% of the company’s profit for 2012 minus the amount paid by the advance payment in September 2012.

The final payment on tax payment = 1,818.40 EUR – 1,648.50 EUR = 169.90 EUR

This example demonstrates that this result was obtained after deducting the first payment made by you in September. That is, you would have to pay a tax at the rate of 1,818.40 EUR, but since in September you have made the payment of 1,648,50 EUR, in this the second payment you would have to pay only EUR 169.90.

Total amount paid by you: 1,648.50 EUR in September 2012 and 169.90 EUR in July 2013.

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Corporation income tax

With the entry into force of the Law on the Corporation income tax and the Act on the tax on business activities, taxpayers are obliged to make the first payment in September 2012 (payment on account).

A tax on legal entities (IS) is a tax on income obtained by legal entities and companies, and a tax on business and economic activities (IAE) is a tax on income from business activities carried out by individuals (musicians, farmers, doctors, lawyers, engineers, entrepreneurs, etc).

Who pays a tax on individuals (IS)?

Income received by legal entities is subject to this type of tax.

Methods and terms of tax payment

An amount payable under the tax is 5% of the profits or entrepreneurial activities in 2012. This payment is divided into two parts, namely:

– In September 2012 an advance payment is made at the rate of 2.5% of income received from entrepreneurial activities in 2011.

– In July 2013 a final calculation is made at the rate of 5% of the income received from entrepreneurial activities or business in 2012 minus the amount of the payments made initially in September 2012.

Payment of tax in July 2013 = 5% of the income or entrepreneurial activities in 2012 minus the amount of payment made in September 2012.

Practical example

The following case is a demonstrative example. For more information, refer to the Law on Corporate Income (IS):

The company “Tech & Associats”, JSC providing Internet services, is located in Sant-Julia. The Company’s income in 2011 amounted to 265,315 EUR (according to accounting).

In September 2012 an advance payment was made (the first payment) equal to 2.5% of the reported income for the year 2011.

265,315 x 2.5% EUR (profit in 2011) = 6,632.88 EUR

Income of “Tech & Associats”, JSC for 2012 amounted to 292,678 EUR.

To calculate the amount of the final payment (the second payment) in 2013 you need to calculate 5% of the income in 2012: 292,678 EUR x 5% (income in 2012) = 14,633.90 EUR

In other words, the Company has to pay 14,633.90 EUR on corporate income tax for 2012, but due to the fact that the first (advance) payment was made in September 2012, the amount for the final payment is the difference between the profit for 2012 and the first payment of tax in 2012:

The amount for the final repayment of the tax = 14,633.90 EUR (5% of the profit for 2012) minus 6,632.88 EUR (the first advance payment) = 8,001.03 EUR

Therefore, in September 2012 the Company made payments in the amount of 6,632.88 EUR and it made the second payment in July 2013 in the amount of 8,001.03 EUR.

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General indirect tax

General indirect tax (IGI) is imposed on operations of shipping, delivery and import of goods and services in the territory of Andorra carried out by entrepreneurs, made regularly or periodically for economic purposes and for the needs and development of their entrepreneurial activity and import.

Definitions and Concepts:

Economic, entrepreneurial and BUSINESS ACTIVITIES

An economic activity includes activities on planning and distribution of entity’s own production and human factors for the purpose of production activities, distribution of goods and services provision. Leasing and rent are also considered an economic activity.

ENTREPRENEUR

Individuals or legal entities engaged in economic or business activities are not considered entrepreneurs who undertake to pay this type of tax (except when they officially express a desire to relate to them):

– If their annual turnover from the delivery of goods and services provision does not exceed an amount of 40,000 EUR.

– If their annual turnover from agricultural and livestock activities does not exceed an amount of 150,000 EUR.

General indirect tax (IGI) replaces the following:

– Indirect tax on goods (IMI)

– Tariff for electricity consumption and telephone services

– Fee for notary services

– Indirect tax on the provision of banking and financial services (banking and finance ISI)

– Indirect tax on the provision of entrepreneurial and professional services (ISI)

– Indirect tax on internal production (IPI)

– Indirect tax on commercial activities (IAC)

It does not replace the following:

– Indirect tax on the provision of insurance services.

Applicable tax rates

Total Rate: 4.5%
Extrareduced rate: 0%

 

 

 

 It applies to the following:• Health and hospitalization services provided by non-governmental organizations• Support of individuals reimbursed by the CASS.• Provision of social assistance by officials with the CASS.• Services in the field of education, training, childcare…• Private lessons, given by individuals (school and university programs).• Services related to sport or physical education provided by public or non-profit organizations.

• Services in the cultural sphere provided by state or non-profit organizations.

• Transport and ambulance

• Rental housing.

• Medicines reimbursed by the CASS.

• Transfer of housing that is not subject to the transfer of property rights on real estate due to the first purchase of housing.

• Delivery of stamps and signs for lawful moneys at a price not exceeding their nominal value.

• Investment gold

 

Reduced rate: 1% It applies to the following:
• Human food (excluding alcoholic beverages) or animal feed, live animals, seeds, plants.• Drinkable water for humans or animals or for irrigation works.• Books, newspapers, magazines and publications that do not contain advertising information.
Special Rate: 2,5% It applies to the following:
• Cable haulage and the sale of it.• Vehicles to transport people and sale of it.• Sale of tickets for exhibitions or thematic zoo animals or thermo-entertainment centers.Provision of services listed below if they are not provided by the public-state, non-profit and social organizations or cultural institutions: visiting libraries, archives, fairs, museums, galleries, art halls, cultural monuments and historical sites, botanical gardens, zoos and nature parks as well as other protected areas of this type, theater, music, dance, film performances, exhibitions and other educational, cultural or social events
• art objects, collections and antiques.
Increased rate: 9,5% It applies to the following:
• Financial and banking services.

Tax shifting

A taxpayer shifts the tax burden entirely to the person who carries out a particular operation, taxable; after which that person becomes a carrier of the tax as long as the shift of the tax complies with the provisions of the Act.

A shift of the tax is carried out by a bill or substitute document, and this amount shall be transferred separately from the tax base, even in cases where prices set administratively, indicating the tax rate.

When importing goods a tax shifting is carried out by means of the corresponding document issued by the customs.

Who pays a general indirect tax (IGI)?

A general indirect tax (IGI) shall be paid by the final consumer of goods and services.

Who makes the payment of the tax, and how is it calculated?

An entrepreneur pays a general indirect tax (IGI) when buying goods or services, and shifts this tax when selling goods or services. You must regularly submit to the tax authorities a declaration in which a tax paid is deducted from the shifted tax. The result obtained would be a tax that the end consumer has to pay tax or the amount returned to him by the tax authorities.

Tax payment

The taxpayers shall periodically submit this declaration in accordance with the annual rate of income from all commercial activities in the past year:

<250,000 EUR – every six months in July and January.

<3.6 million EUR – every quarter: in April, July, October and January.

In other cases – monthly.

When importing goods, the tax shall be payable in the manner prescribed by the relevant customs legislation.

Special simplified mode (scheme)

A special simplified order may be applied at the request of employers when the turnover of goods and services for the year did not exceed the sum of 100,000 EUR. Once this order has been selected, it will be valid for at least three years. An amount paid is determined by the difference between the amounts shifted in the repayment period, and further indicated estimated percentage applicable to the amount of income from the fees paid in accordance with the type of economic activity.

The following interest expenses exist:

– In the field of commercial activity a fee to be paid is measured by 3 percent of the income indicator. In other economic activities fees to be paid amount to 1.5 percent of total income.

– In the tax return the deduction of the shifted tax from the paid one is made, resulting in an amount that is subject to payment or return.

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Tax on income of non-residents in the territory of Andorra

What is a tax on tax non-residents income?

A tax on income of non-residents is a tax applied to persons or companies that receive their income in the Principality of Andorra, but are not its residents.

Who pays a tax on income of foreign persons?

A tax on income of foreign persons (IRNR) is paid by companies and persons who are not residents of Andorra and receive income within its territory as a result of the provision of any services in Andorra, associated to the letting of apartments in Andorra, etc.

The main types of income subject to taxes on income of non-residents (IRNR) are the following:

If the following services are provided in the territory of Andorra:

– Services of repair

– Services of maintenance

– Other professional work with the movable or immovable property

If there is a use of the following services in the territory of Andorra:

– Education, training, projects, technical support

– Conferences

– Plays, shows, performances

Other:

– Reinsurance operations

– Rent of immovable property of non-resident persons

– Since 2015 the wages of workers, included in CASS. For information about the special scheme for seasonal and border workers please visit

– Since 2015 pensions paid by the CASS organization to non-residents in Andorra

The following are not subject to income tax:

– Dividends

– Interest and other investment income

– International Sale of Goods

How and when a tax is paid?

The amount of tax payable is usually 10% of the paid invoice. When it comes to the established tariff the tax makes up 5% of the paid bill and 1.5% for the reinsurance. In the case of rental property, a decrease of 20% is applied on the amount received.

On the Andorran companies paying wages to companies or individuals that are non-resident of the principality, for services provided in Andorra, the following obligations are imposed:

– To hold the amount of the tax rate applicable to the amount in the bill as payment of the tax;

– To issue to the taxpayer a certificate attesting a withholding (in the case of the application from the taxpayer or if the account does not provide for withholding);

– To submit to the Ministry of Finance report on profits and withholdings in respect of tax during April, July, October and January, immediately after making  a withholding.

– Persons or companies receiving income in Andorra may submit a declaration-payment individually.

The law also stipulates that a taxpayer shall appoint a tax representative when it receives income from a private person or a permanent enterprise.

Practical example

I am an entrepreneur who used the services of a non-resident consultant on the restructuring of my company for 10,000 EUR.

Do I have to pay the tax? How much?

1. In the bill I have to make a fee and to pay the consultant the amount after deductions.

Taxable base = 10,000 EUR

Deduction in respect of tax on income of non-residents (IRNR) = 10% X 10,000 EUR = 1,000 EUR
Thus, a net amount equal to 9,000 EUR shall be paid

2. At the beginning of each quarter I will be required to declare the deductions and transfer them to the state.

The amount of tax deductions will amount to 1,000 EUR

Consultant who in this case is the taxpayer shall not file a tax return.

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 Other Taxes in Andorra

– ISI – Indirect Insurance Service Tax

Taxation subject: Granting of insurance services, the subject of which is all risk types insurance.

The application of this Law is not extended to:

a) Social insurance system

b Capitalized products, such as pension funds, pension plans and other similar products.

Taxpayers: Insurance companies, which executes activities liable to taxes.

Taxable base consists of total sum of insurance fee the owner of insurance policy should pay.

Taxation rate: 4%

Exceptions:

a) Reinsurance operations
b) Insurance operations connected with international transportation of goods and cargoes.
c) Insurance operations which are directed exclusively to cover additional benefits and payments for  CASS members within the limits of their obligations and until the right for these tax remissions is specified by the right for expenses reimbursement by CASS

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ITP – Indirect Tax on Ownership (Real Estate) Transfer Transactions

Taxation subject:  Transfer of ownership on different real estate, including assignment and transfer of proprietary right on real estate.

Taxpayers: Purchasers of property or rights, transfer subject, or persons in favor of which the legal right is established or transferred.

Taxable base consists of actual value of transferred property or established or transferred right.

Taxation rate: 4% (Government – 2,5%, Communities – 1,5%)

Exceptions:

– Right transfer, executed by: General Council, Government, Communities, Public Law Organizations, monarchs and churches.

– Between husband and wife in case of divorce. Establishment or transfer of legal rights in guarantee. Between husband and wife or permanent partners.

– Transfer of stocks and/ or shares of companies between husband and wife or permanent partners between spouses and natural persons having direct blood ties as forbears and descendants and/or lateral ties up to the third degree.

– Investments by way of real estate  or lien in company, the shareholders having direct blood ties as forbears and descendants and/or lateral ties up to the third degree.

– Transfer of real estate between companies with the members having direct blood ties as forbears and descendants and/or lateral ties up to the third degree.

– Investments by way of real estate or liens of the property in group of companies.

– Transfer of real estate and establishment or profitable transfer of legal rights for the benefit of noncommercial organizations and associations.

– Transfer, executed by administrations for redivision of territories which is their property and which remained in plans of parochial building as an appropriate active unit.

– Transfer of burdened or profitable real estate in favor of natural persons.

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Capital Gain Tax

Taxation subject: Value growth and augmentation which occurs in transfer inter vivos of   burdened or profitable real estate and establishment or transfer of rights on real estate.

Taxpayers: Natural persons or legal entities who transfer real estate proprietary rights or interests.

Taxable base consists of positive difference between actual value of transferred property or transferred rights and its purchase price.

Taxation rate: from 1% till 15%

Exceptions:

– General Council, Government, Communities, Public Law Organizations, monarchs and churches.

– Deed of a gift between spouses in favour of the other spouse, or as part of the dissolution or liquidation of the marriage.

– Deed of a gift between spouses and natural persons having direct blood ties as forbears and descendants and/or lateral ties up to the third degree.

– Deed of a gift of stocks and/ or shares of companies between spouses and natural persons having direct blood ties as forbears and descendants and/or lateral ties up to the third degree.

– Investments by way of real estate or natural persons rights in favor of companies.

– Transfer for free use between companies.

– Investments by way of real estate or liens of the property between companies of one group.

– Transfer, executed by administrations for redivision of territories which is their property and which remained in plans of parochial building as an appropriate active unit.

– Transfer to natural persons of burdened or profitable real estate which is the permanent place of residence of the taxpayer.

Tax concessions: Non-residents pay 5% from capital growth.

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Special taxes

What is special tax?

The tax is established for appropriate products: alcohol, tobacco, oil products. This tax is used for products import and production (domestic market).

Who should pay a special tax?

Persons, who executes import and production of alcohol, tobacco and oil products.

How and when the tax should be paid?

General rule: the payment should be executed in the moment of goods entering in Principality or when the goods were manufactured for purpose of use in domestic market.

However the Law allows other ways of tax obligations fulfillment.

The sum of tax depends on type of product.

The Law establishes different tax rates:

Tobacco:2 rates: 1€/kg (example: tobacco leaf)0,02 €/un. (example: pack of cigarettes) Alcohol:3 rates: 0,0136 €/l (example: beer)0,0312 €/l (example: wine)25€ for hectoliter of absolute alcohol (examples: vermouth, whiskey, cognac, vodka) Hydrocarbons:6 rates: 0,5 €/l (petrol)0,439984 €/ l (petrol without lead ‹ 98)0,476214 €/l (petrol without lead 98)0,285285 €/l (diesel)0,065426 €/l (nonferrous diesel)

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Savings Revenue Tax

Taxation subject: Savings revenues, deposits revenues, which were placed in the Principality of Andorra in favor of beneficiaries, natural persons stated as residents of states members of European Union.

Taxpayers: For the purposes of this Agreement, the term “beneficiary” means any natural person, who obtains interest profit or any natural person, who is supposed to receive interests, except cases when there are evidences that this payment was not executed or was considered to be their own gains.

Taxable base: Gains, received by non-resident beneficiaries.

Taxation rate: 35%

Exceptions: Andorra Kingdom approves the procedure, which allows beneficiaries to escape tax withholding, in case when the beneficiary gives to his payment agent the certificate, which was issued on his name by authorized body of his state.

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Legal Regulation

  • Main Law of Tax System

Main Law of Tax System, dated on 19-12-96

Law of Tax System Basis, dated on 21/2014 from 16 of October

Decree on approving the regulations of taxation, dated on 11-02-2015

 Decree on approving of in-order, incompatibility regime and confidentiality of Technical Tax Committee issues dated on 11-2-2015.

  • General Indirect Tax

 Law 29/2012 dated on 18 of October, about introduction of alterations in Law 11/2012 dated on 21 of June, about general indirect tax.

 Amendments to published applications to the Decree, establishing regulations about general indirect tax dated on 7-11-2012.

 Law 11/2012 dated on 21 of June, about general indirect tax.

 Law 3/2014 dated on 23 of January, about budget for financial 2014 year (twelfth additional regulations).

Law 11/2013 dated on 23 of May about introduction of alterations in Law 11/2012 dated on 21 of June about general indirect tax.

Law 10/2014 dated on 3 of June about introduction of alterations in Law 11/2012 dated on 21 of June about general indirect tax, which is substituted by Law 29/2012 dated on 18 of October and Law 11/2013 dated on 23 of May.

 Decree dated on 26-6-2013 about introduction of alterations in Order about general indirect tax.

 Decree dated on 27-11-2013 about introduction of alterations in Order about general indirect tax

 Decree dated on 2-07-2014, approving the Order about general indirect tax.

 Decree dated on 23-07-2014 about publishing of unabridged version of Law 11/2012 dated on 21 of June about general indirect tax.

  • Tax on Legal Entities

 Decree dated on 13-06-2012, approving the Order about the tax on legal entities and about the tax on economic and business activities.

 Law 95/2010 dated on 29 of December about tax on legal entities.

 Law 17/2011 dated on 1 of December about introduction of alterations in Law 95/2010 dated on 29 of December about tax on legal entities.

 Unabridged unofficial version of Law about tax on legal entities.  (242 Kb.)

  • Tax on Economical Activity

 Decree dated on 13-06-2012, approving the Order about the tax on legal entities and about the tax on economic and business activities.

 Law 96/2010 dated on 29 of December about the tax on economic and business activities.

 Law 19/2011 dated on 1 of December about introduction of alterations in Law 96/2010 dated on 29 of December about the tax on economic and business activities.

 Unabridged unofficial version of  Law about the tax on economic and business activities  (102 Kb.)

  • Income Tax for Fiscal Non-residents of Andorra

 Law 94/2010 dated on 29 of December about income tax for non-residents of Andorra.

 Law 18/2011 dated on 1 of December about introduction of alterations in Law  94/2010 dated on 29 of December about income tax for non-residents.

 Decree dated on 25-01-2012 approving the Order about income tax for non-residents of Andorra.

 Decree dated on 25-01-2012 about regulations on forms publication, stated in the Order about income tax for non-residents of Andorra.

 Decree dated on 12-06-2013 about introduction of alterations in Order about income tax for non-residents.

  • Tax on Natural Persons Income (Income Tax)

 Law 5/2014 dated on 24 of April about income tax on natural persons.

Law 42/2014 dated on 11 of December about introduction of alterations in Law 5/2014 dated on 24 of April about income tax on natural persons.

 Decree dated on 23-07-2014, approving the Order of application of Law 5/2014 dated on 24 of April about income tax on natural persons and about introduction of alterations in Order about income tax for non-residents.

______________________________

INTERNATIONAL TAX AGREEMENTS

State Signature Entry into force
France 04/2013 01/2016
Spain 01/2015 02/2016
Luxembourg 06/2014 01/2017
United Arab Emirates 07/2015
Portugal 09/2015
Liechtenstein 09/2015
Malta 09/2016

Currently, Andorra is negotiating on Double taxation treaties with Austria, Cyprus, Belgium and the Netherlands.

OECD Agreements on automatic exchange of information in tax matters (2014) and Membership to Inclusive Framework on BEPS-Base Erosion and Profit Shifting (2016)

Tax information exchange agreements (11.2016) – 24. *

 Assignment date  Effective date
1

Austria

17/09/2009 10/12/2010
2

Lichtenstein

18/09/2009 10/01/2011
3

Monaco

18/09/2009 16/12/2010
4

San-Marino

21/09/2009 07/12/2010
5 France 22/09/2009 22/12/2010
6

Belguin

23/10/2009 04/02/2015
7 Аrgentina 26/10/2009 15/06/2012
8 Holland 06/11/2009 01/01/2011
9

Portugal

30/11/2009 31/03/2011
10

Spain

14/01/2010 10/02/2011
11

Sweden

24/02/2010 11/02/2011
12

Finland

24/02/2010 12/02/2011
13

Norway

24/02/2010 18/06/2011
14

Denmark

24/02/2010 13/02/2011
15

Iceland

24/02/2010 14/02/2011
16

Greenland

24/02/2010 06/04/2013
17

Faroe islands

24/02/2010 18/06/2011
18

Germany

25/11/2010 20/01/2012
19

Australia

15/03/2012 03/12/2012
20

Poland

15/06/2012 18/12/2013
21

Czech republic

11/06/2013 5/06/2014
22

Switzerland

17/03/2014

* + Slovakia and South Korea.

The detailed comparative analysis of the tax systems of Andorra (tax haven) and Spain can be found in the article “Comparative analysis of the tax systems of Andorra and Spain”

 The detailed comparative analysis of the tax systems of Andorra (tax haven) and France can be found in the article “Comparative analysis of the tax systems of Andorra and France”

 

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