Avoid Surprises: Tips for Preparing Your IRPF in Andorra in Advance

Preparing the IRPF declaration in Andorra may seem challenging, but with proper planning, it is possible to avoid unpleasant surprises. In this article, we will offer practical advice and detailed information to help you manage your IRPF efficiently and stress-free.

What is the IRPF?

The IRPF, or Personal Income Tax, is a tax that levies the income earned by individuals who are considered tax residents in Andorra. This includes all income, regardless of where it was earned or the state where the payer is established. In other words, the IRPF taxes the worldwide income obtained by the taxpayer.

Definition of a Tax Resident

A tax resident in Andorra is any individual who meets one of the following conditions:

• Lives more than 183 days in Andorran territory during the calendar year.
• Has in Andorra the main nucleus of their economic activities or economic interests, directly or indirectly.

Exceptions to Tax Residence

Cross-border workers who commute daily from Spain or France and have been hired by tax-resident companies in Andorra are not considered tax residents in Andorra.

Who is required to file the IRPF declaration?

Obligations for Tax Residents

Individuals who are tax residents in Andorra must file the IRPF declaration if they meet any of the following conditions:

• Obtain income from economic activities.
• Have real estate capital income and/or labor income equal to or greater than 24,000 euros.
• Obtain non-withheld movable capital income greater than 3,000 euros.
• Obtain capital gains and losses.

Exemptions

Exempt incomes, such as labor income, movable capital income, or capital gains and losses, do not need to be declared.

What incomes are subject to the IRPF?

Labor Income

Includes all remuneration derived from a labor relationship, such as wages and salaries.

Real Estate Capital Income

These are incomes derived from the exploitation of real estate or rights over these properties, such as property rentals.

Economic Activity Income

Income derived from business or professional activities, as well as from the functions of administrators.

Movable Capital Income

These incomes include, among others, participation in the equity of entities (such as dividends), the transfer to third parties of own capital (interest), and capitalization and life or disability insurance operations.

Capital Gains and Losses

These are returns derived from the alteration of the asset composition. Acquisitions by gratuitous title (inheritances, donations) and incomes derived from the transfer of real estate taxed by the capital gains tax are excluded from the IRPF.

What is the applicable tax rate?

Tax Rates

The tax rate for the IRPF in Andorra is 10%. However, for incomes between 24,000 and 40,000 euros, the equivalent rate will be 5%, applied through a maximum bonus of 800 euros for obtaining certain incomes.

What are the reductions to the tax base?

Deductions and Bonuses

There are various deductions and bonuses available to reduce the effective taxation, such as deductions to eliminate domestic and international double taxation. In the case of economic activities, there are also deductions for new investments and job creation.

What is the settlement period?

Taxpayers must file the IRPF declaration between April 1 and September 30 of the year following the declaration year.

How is the withholding rate determined?

Labor Income

The Department of Taxes and Borders determines the applicable withholding percentage for labor income, considering the reductions and bonuses to which the taxpayer is entitled.

Movable Capital Income

A fixed withholding percentage of 10% is generally applied. There is the possibility of requesting a reduction for incomes below 3,000 euros, identifying the account to which it applies.

How a Tax Advisor Can Help You

Preparing and filing your IRPF in Andorra can be a complex task, especially if you have multiple sources of income or deductible expenses.
Working with a tax advisor can offer you various benefits, from optimizing your deductions to ensuring you comply with all tax regulations.
Below, we detail the advantages of working with a tax advisor and how to choose the best one for your needs.

Benefits of working with a tax advisor

Knowledge and Experience
Tax advisors have a deep understanding of current tax laws and regulations. Their experience allows them to identify tax-saving opportunities that may go unnoticed by most taxpayers.
Additionally, they are aware of the latest updates and changes in tax legislation, ensuring that your declaration complies with the law.

Optimization of Deductions and Exemptions
One of the main advantages of working with a tax advisor is the ability to optimize your deductions and exemptions.
The advisor will help you identify all expenses that can be deducted and ensure they are correctly documented. This can result in significant savings on your tax bill.

Reduction of Stress and Anxiety
Preparing the IRPF can be a source of stress and anxiety, especially if you are not familiar with tax regulations. A tax advisor can alleviate this pressure by handling all the technical and administrative aspects of the declaration.
This allows you to focus on other important aspects of your personal and professional life.

Ensuring Compliance
Tax advisors ensure that your declaration complies with all legal regulations. This includes the correct submission of all necessary documents and verifying that all deductions and credits applied are valid.
This reduces the risk of audits and penalties by the tax authority.

Long-Term Tax Planning
Tax advisors not only help with the current IRPF declaration but can also offer long-term tax planning services.
This includes strategies to reduce the tax burden in future years, optimize investments, and plan for retirement.

Preparing your IRPF in Andorra may seem like a complex task, but with good planning and organization, it is possible to avoid unpleasant surprises and ensure that you comply with all your tax obligations.
Remember to stay informed about tax updates and consult a professional if you have any questions or need additional help.

We hope this article has been helpful to you.
If you need more information, do not hesitate to contact us through the form (link) or directly by email at info@psf.ad.
Sincerely,
Plus Serveis i Família