Andorra Taxes in 2025 Explained by Experts

Nestled in the eastern Pyrenees mountains between France and Spain, Andorra is a small but prosperous country known for its stunning alpine landscapes, robust economy, and high quality of life. Covering an area of 470 square kilometers, it is one of Europe's smallest nations. As of 2024, Andorra's population is approximately 82,000, with a population density of about 170.4 people per square kilometer. The official language is Catalan, and the country operates under a parliamentary democracy co-governed by two princes: the President of France and the Bishop of Urgell from Spain. 

Moreover, Andorra boasts a high Human Development Index (HDI) of 0.884, reflecting its advanced economy and quality of life. The nation attracts approximately 8 million visitors annually, drawn by its renowned ski resorts, duty-free shopping, and picturesque mountain villages. 

With a favorable tax regime, Andorra has become a popular destination for investors and expatriates. The country's political stability, modern infrastructure, and commitment to environmental sustainability further enhance its appeal, making it an attractive choice for those seeking residency in a unique and scenic European setting.

Andorra Tax System Overview

Andorra's tax system is renowned for its simplicity and low rates, making it an attractive destination for individuals and businesses seeking a favorable fiscal environment. The country offers competitive personal income and corporate taxes. Additionally, Andorra does not impose taxes on wealth, inheritance, or most forms of capital gains, providing substantial benefits for asset protection and wealth management. With one of the lowest value-added taxes in Europe, the country ensures lower costs for goods and services, benefiting both consumers and businesses. This advantageous tax framework, combined with a stable economy and modern infrastructure, encourages foreign investment, entrepreneurship, and long-term residency, solidifying Andorra's reputation as a prime low-tax jurisdiction in Europe.

Andorra Tax Laws

Andorra’s tax system is governed by a set of laws. Key legislation includes the Personal Income Tax Law (Llei de l’IRPF), established under Llei 5/2014, which outlines progressive income tax rates that remain lower than in most European countries, encouraging individuals to retain more of their income. For businesses, the Corporate Tax Law (Llei de l’Impost de Societats), Llei 95/2010, offers a favorable corporate tax rate structure that promotes local and international investment. Moreover, Andorra's VAT system, governed by the Law on Value Added Tax (Llei de l’IGI), Llei 11/2012, sets one of the lowest VAT rates in Europe, reducing both business and consumer costs. For real estate, the Capital Gains Tax on Property Transfers Law (Llei de l’Impost sobre les Plusvàlues en les Transmissions Patrimonials Immobiliàries) provides regulation for capital gains on property, specifying when and how such gains are taxed. 

Is Andorra a Tax Heaven?

While Andorra is often referred to as a “tax haven,” it is essential to separate its low-tax environment from traditional offshore tax havens. Andorra has made significant strides to align with international standards on transparency and information exchange. Although the country has a favorable tax regime, with personal income tax capped at 10% and no inheritance, gift, or wealth taxes, it has established more than 15 tax treaties with several countries and complies with OECD guidelines. In comparison, neighboring Spain has a progressive personal income tax system with rates reaching up to 47% and also imposes inheritance, gift, and wealth taxes. France's personal income tax can go as high as 45%, alongside substantial inheritance, gift, and wealth taxes. Andorra’s corporate tax rates are also competitive, generally ranging from 2% to 10%, while the corporate tax in Spain and France is 25%. These factors make Andorra particularly attractive to businesses and high-net-worth individuals. However, its efforts to modernize its financial regulations and increase tax transparency mean that it does not meet the typical definition of a tax haven, as the country now operates under rigorous anti-money laundering laws and cooperates with international financial authorities.

Andorra Taxes for Residents vs Non-Residents

Andorra's tax system distinguishes between residents and non-residents, applying different tax obligations to each group.

Tax Residents

Individuals are considered tax residents in Andorra if they meet any of the following criteria:

• Reside in Andorra for more than 183 days during a calendar year.
• Have their main economic interests in Andorra.
• Have their primary family interests in Andorra.

Tax residents are subject to the Personal Income Tax (IRPF), which is applied progressively:

• Income up to €24,000: 0% tax rate.
• Income between €24,001 and €40,000: 5% tax rate.
• Income over €40,000: 10% tax rate.

Non-Residents

Non-residents who earn income from economic activities in Andorra are subject to the Non-Resident Income Tax (IRNR), which is generally a flat rate of 10%. This tax applies to income such as salaries, rents, or any income derived from economic activities within Andorra. However, dividends and interest from Andorran sources are exempt from taxation for non-residents. 

Corporate Tax Residency

A corporate entity is considered a tax resident in Andorra if it meets any of the following conditions:

• It is incorporated in Andorra
• Its management and control center (i.e., where strategic decisions are made) is located in Andorra.

Andorran corporate tax rates are advantageous, with a standard rate of 10% on profits. However, special deductions and tax benefits may apply for certain sectors, such as innovation, holding companies, and intellectual property. Importantly, dividends distributed by Andorran companies to both residents and non-residents are exempt from Andorran taxation, enhancing Andorra’s appeal as a jurisdiction for holding and investment companies.

Andorra Tax Rates 

Personal Income Tax

Andorra introduced its personal income tax (IRPF) on January 1, 2015, with a progressive structure. Income up to €24,000 is exempt from taxation, providing residents with a substantial tax-free allowance. For income between €24,000 and €40,000, a 5% tax rate applies, and any income exceeding €40,000 is taxed at a maximum rate of 10%. Savings income follows a similar regime, with the first €3,000 of investment income exempt from tax, and amounts beyond this taxed at 10%.

Property Tax

There is no specific property tax in Andorra. However, property transactions are subject to registration fees, which amount to about 4% of the property value, split between the buyer and seller. 

Dividend Tax

Dividends distributed by Andorran companies to residents are generally not subject to further tax if corporate tax has already been paid at the entity level. 

Capital Gains Tax

When an individual sells property in Andorra for a profit, a capital gains tax applies, with rates depending on the length of property ownership. The tax rate starts at 15% if the property is sold within the first year of ownership, reducing to 13% in the second year and 10% in the third. After the third year, the rate decreases by 1% each subsequent year, eventually reaching 0% by the twelfth year. In addition, to incentivize reinvestment in Andorran real estate, individuals can avoid paying capital gains tax if they purchase another property within six months of the sale.

VAT Andorra

Although Andorra is in a customs union with the European Union, it is not part of the EU VAT area. On January 1, 2013, Andorra replaced its former sales tax regime with the Impost General Indirecte (IGI), which serves as its main value-added tax. The standard IGI rate is 4.5%, but several specific rates apply to various goods and services:

• Super Reduced Rate (0%): Applied to essential services such as healthcare and CASS (Andorra's social security), educational services, gold investment, and certain services provided by NGOs.
• Reduced Rate (1%): Applied to items for human consumption, as well as books and magazines.
• Special Rate (2.5%): Applied to public transportation as well as artistic and cultural services.
• Increased Rate (9.5%): Applied to banking and financial services.

Tax on Foreign Income

Foreign income earned by Andorran residents is typically not subject to additional tax in Andorra, providing favorable conditions for international workers and investors.

Corporate Tax

The primary tax for corporations in Andorra is the Impost de Societats (IS), which applies a fixed general rate of 10% on corporate profits.

For newly established companies, Andorra provides some tax incentives to ease initial tax burdens:

• First-Year Reduction: All new taxpayers receive a 50% reduction on the settlement fee in their first year.
• Reduced Tax Rates for Startups: For entrepreneurs or newly registered businesses with annual income below €100,000, a reduced tax rate applies for the first three years:some text
  • 5% on the portion of the tax base up to €50,000.
  • 10% on the remaining taxable base. 

For convenience, the above-mentioned taxes are outlined in the following table: 

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5 Advantages of Andorra Tax Rates from Golden Harbors

Andorra’s tax system offers a unique blend of benefits that can be particularly advantageous for clients seeking tax optimization and financial planning strategies. At Golden Harbors, we highlight the following advantages of Andorra’s tax rates to help clients make informed decisions:

1. Low Personal Income Tax Rates
   Andorra’s income tax rates are some of the lowest in Europe, with a maximum rate of only 10% for income above €40,000. This creates opportunities for high-net-worth individuals to reduce their overall tax burden, allowing for greater financial freedom and flexibility.
2. Corporate Tax Efficiency
   Corporate tax in Andorra is also highly favorable, capped at just 10%. This is particularly beneficial for business owners and entrepreneurs who are looking to establish a company or relocate their business to a low-tax jurisdiction, ensuring better profit retention and growth potential.
3. Tax Residence Advantages
   By becoming a tax resident in Andorra, clients can benefit from one of the most advantageous personal tax systems in Europe. With residency options that require relatively low physical presence (only 90 days per year for certain residency types), Andorra is appealing for those who want tax efficiency without full-time relocation requirements.
4. Double Taxation Agreements (DTAs)
   Andorra has established DTAs with various countries, including France, Spain, and Portugal, helping to prevent clients from paying taxes on the same income in two different countries. This is ideal for individuals and businesses with international interests, as they can avoid unnecessary tax duplication, enhancing their tax optimization strategy.
5. Tax Optimization and Planning Opportunities
   Andorra’s stable and predictable tax regime facilitates effective tax planning and optimization. With no wealth, inheritance, or capital gains tax (on assets held outside Andorra), clients can strategically manage their global assets to maximize tax efficiency. This approach is ideal for individuals and families seeking to protect and grow their wealth.

At Golden Harbors, we guide our clients through each step of this process, from becoming a tax resident to maximizing tax efficiency, all tailored to meet individual financial goals. Our experienced team of professionals has a proven track record in international tax planning, residency solutions, and corporate structuring. With years of expertise and a client-centric approach, we ensure that every solution is customized to align with your unique needs and long-term objectives.