Alfa Capital Advisors and Assessors—a company that provides consulting and audit services—conducted the research by the order of Banca Privada d’Andorra (BPA) concerning the implementation of income tax for individuals (IPRF) from 2015. This tax comes into effect on the territory of Andorra (Pyrenees) from 1st January, 2015.
The Director and partner of Alfa Capita Vladimir Fernandez, responsible for the report, claimed that a new tax model is “simple and convenient” in comparison to analogue models, functioning in neighbor countries; it also remains compatible from the point of view of foreign investments attraction to the Principality. “It is important that in accordance to the law, the tax payers will have the right to demand for income tax reimbursement by tax deductions”, added Catharine Oliver, the Financial Director of Alfa Capital. The terms of income tax reimbursement will be written in the tax legislation of the Principality.
In accordance to Catharine Oliver, new tax model is “perfectly congruent” to the existing OECD (Organization for Economic Cooperation and Development) standards and doesn’t impede completing the agreements on tax information exchange between Andorra and EU countries. It should be recalled that corresponding agreement should be signed in 2018.
The income tax in Andorra won’t exceed 10% and will be strictly proportional to obtained income. For instance, in case annual income makes up 24000 the tax is not collected, in case the level of incomes varies between 24001 and 40000 euro the tax rate at first will make 5% and later on will be increased to 10% (the terms will also be regulated by Andorran tax legislation). Correspondingly the maximum 10% rate will be relevant for those tax payers that annually get more than 40000 of income. At that the income tax in Andorra won’t be imposed on bank deposit interests and on welfare assistance in the form of benefits (up to 3000 euro per year).
In Spain the progressive scale of income tax is functioning. For instance, the rate 24,75% is valid for the income from 0 to 17707 euro per year; the tax is increased up to 30% for the incomes ranging from 17708 to 33007 euro; 40% tax rate will be imposed on the incomes that vary from 33008 to 53407 euro; for the income from 53408 to 120 000 the tax rate will make 47%; from 120001 to 175000 euro—49%; from 175001 to 300000 euro—51%; in case the income is higher than 300000 euro per year the tax rate will make up 52%.
As for France, the tax rate here also depends on the sums of obtained incomes. The tax is not paid for the annual income from 0 to 5963 euro per year; 5,5% tax rate is valid for the incomes from 5963 euro to 11896 euro; in case the income varies from 11897 to 26420 euro the tax rate will be 14%; from 26421 to 70830 euro—30%; from 70831 to 150000—41%; from 150001 to 1000000 euro—45%; and finally in case the sum of income exceeds 1000000 euro the annual rate will make up 75%.
It is important that the status of tax resident of Andorra for non-residents of the Principality may be kept in case of the opportunity to live on the territory of Spain, France or Monaco. This is only possible in case of obtaining the status of active residency in Andorra, i.e. in case of registration and conducting business in Andorra, or in case of getting passive resident status. See more information on how to register business in Andorra with the opportunity to minimize the income tax to 2% level in order to get active residency here.
See also Andorra business guide
See also Andorra company formation
See also Taxes in Europe
See also Taxes in Andorra VS Taxes in France
See also Taxes in Andorra VS Taxes in Spain
