Andorra is a small country located in the Pyrenees and which, since the end of World War II, has been characterized by its economic dynamism, thanks to its advantageous taxation.
Why invest in Andorra
Andorra is a country that has good road infrastructure with the rest of the continent, a dynamic and growing economy and a skilled workforce. During the 1950s, it went from being an isolated and poor country to one of the richest states on the planet.
The form of government is the Parliamentary Coprincipate, since the promulgation of the 1993 Constitution and the successive governments have been characterized by prudence, introducing moderate fiscal reforms and prioritizing private economic activity as the engine of the country’s economic development.
First of all, it is important to say that Andorra is not considered a tax haven since February 2011, when double taxation agreements entered into force with Spain but, even so, taxation in Andorra is very attractive in most taxes with Regarding your neighbors.
Second, although Andorra is not a member of the European Union, it does maintain a customs union agreement, so the products do not have to pay tariffs (except for agricultural ones), and the legal tender in the country is the euro.
Finally, it should be noted that, together with fiscal reforms, Andorra opened the doors wide for foreign investment.
Taxes in Andorra
The most important taxes in Andorra are the IGI, the Corporate Tax, the IRPF, the IRNR that stand out for having a much lower average rates than those of Spain and France.
Taxation in Andorra is one of its main values, both to acquire items and to sell them or establish a company and, of course, in the case of wanting to reside in this small country in the Pyrenees.
Indirect General Tax (IGI)
The Andorran equivalent of Value Added Tax (VAT) is the Indirect General Tax (Impost General Indirecte – IGI), with a tax rate of 4.5% for regular consumer items, and there is a reduced rate of 1% and a super reduced rate of 0%.
In comparison, just remember that the general VAT rate is 21% in Spain and 20% in France.
Corporation Tax (Impost de Societats – IS)
The investment possibilities in Andorra are very interesting for those who want to establish a company. A company in Andorra is governed by the Impost de Societats, which is taxed at 10%, a really low rate compared to 25% in Spain and 33.3% in France.
Business structures such as the Holding are taxed at 0%.
To create a society in Andorra, it is no longer necessary for an Andorran citizen to have 49% of the capital, as in the past. Today it is possible for non-residents to establish mercantile companies in the country with guarantees for investors, with prior authorization from the government.
Personal Income Tax (IRPF)
The Personal Income Tax (Impost sobre la Renda de les Persones Físiques – IRPF) of Andorra differs from that which applies in Spain or France in that it is not progressive, since it has a general rate of 10% for the income of more than 24,000 euros.
In comparison, marginal rates in Spain range between the exemption for the lowest income and 45%, similar to those in France.
Non resident Income Tax (IRNR)
TheNon resident Income Tax (Impost sobre la Renda dels No-Residents – IRNR) is a tax that the Government of Andorra has implemented in the framework of fiscal harmonization measures with its closest environment. It records the services or yields obtained by non-residents in the Pyrenean country with 10% of the total value; conferences, housing rentals, temporary jobs or pensions are included.
However, it is important to highlight that the dividends received from a company based in Andorra, the international sale of goods and interests of movable capital, are exempt from the IRNR, and therefore continue to offer interesting comparative advantages with respect to tax figures in Spain or France. It should not be forgotten that dividends, in Spain, are subject to a 19% withholding tax.
Finally, it should be noted that in Andorra there are other taxes that include the contracting of insurance, hydrocarbons, asset transfers, gambling and capital gains from current accounts, among others. These tax figures are similar to those in force in Spain and France.
Establish a business in Andorra
To create a company in Andorra, only minimum capital and government authorization are required in the case of being a foreigner. The two types of mercantile companies that can be created are the Societat Limitada (SL) and the Societat Anònima (SA), with minimum capital of 3,000 and 60,000 euros, respectively, similar to those needed in Spain; there is also the figure of the sole proprietorship.
This type of investment in Andorra requires a physical registered office in the country and an Administrator. Today, it is possible to have 100% of the capital being a foreigner, but if you are going to have more than 10%, you will have to apply for a government authorization. In any case, it should be noted that, in recent years, the Government of Andorra is especially interested in promoting foreign investment, and the procedures have accelerated.
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