The Personal Income Tax in Andorra (IRPF) - PSF Consultoría empresarial

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The Personal Income Tax in Andorra (IRPF)

The IRPF is a tax that levies income on natural persons in Andorra, being the first year of application 2015, so it is a very new tax. Fortunately, it is really similar on the Spanish counterpart tax so it does not start from a totally unfavorable situation in order to get along with it.

There are two bases, the general and the savings one. The first one has everything except finnancial assets (stocks and others) and real estate (rents, flats...). It is a very simplified way of explaining it, but also very simple to understand. Basically all the cases are pretty similar and the ones that do not usually not extend enough so there is a need to know the differences perfectly as it is generally stylized in the rest of Europe.

Entering the issue, the general base does not begin to work until the € 24000 (€ 40000 proportional with non-working spouse in addition to 750 annual per ascendant and/or descendant), therefore requiring relatively high income requirements for the obligation to pay the tax. It is not as ubiquitous as in the rest of Europe. There are also several rules to tax exemptions in pension plans, housing or compensatory pensions, but in general they are small (due to the relatively low number of contributors) and trivial with respect to the taxes that we are accustomed in the rest of Europe. In pension plans it is deductible in less than 5000 € or 30% of the labor income or economic activities (for practical purposes, 5000 € always), in usual residence are maximum 1000 € and in pensions what is recognized by the competent authority.

At the base of saving starts to tax from 3000 €, so that being more achievable than the general, does not start from minute 0.

The tax rate is 10%, but between € 24,000 and € 40,000 there is a 50% exemption which makes it 5% effective. There are retentions at the salary level as in other countries, only in Andorra are tiny, so the statement will most likely pay. The trick is that being a salaried employee there is no obligation to declare, so being a salaried employee the retention is really testimonial. In things like real estate rents generally if you get a 10% retention for personal income tax.

In short, the tax has some sections that need a review, but in the meantime it is really complicated to get the obligation to pay it. If you have many savings income, it is not so difficult, so you have to be aware, although if these returns are produced in home banks, they are very efficient in helping with these issues.



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