Andorra Personal and Corporate
Income Tax RatesIn Andorra there is no direct tax on business profits, individual income tax or capital income tax. Andorra tax system is based on indirect taxation. The only tax on companies as of now are business license fees, social security contributions to Andorran Social Security Fund (CASS), and property taxes. Corporate entities pay registration fees to Andorra Government.
The Tax System In AndorraIn Andorra there is no system of direct taxation on the income of natural persons, on trading profits or on assets. However, the Andorra government is planning to introduce an inheritance tax, an indirect tax on services provided as well as an ecotax to protect the environment. With the imminent passage of the Companies Law, there is an expected tax on company profits that will be between 5% - 10%. Also, a VAT rate of 5.5% may be introduced in the future.
The Andorran system is based on indirect taxes which represent approximately 12.6% of the Gross National Product.
The Law of 19 December 1996 which governs the Andorran fiscal system establishes the general framework of taxes and organises the sectors that are subject to tax. Although this law establishes the framework for the implementation of tax related legislation, it does not define the different categories of taxes existing in the Principality of Andorra.
On the other hand, regional bodies, "Municipalities" are competent to develop and regulate taxes at local level (local taxes).
National Taxes in AndorraIndirect Goods Tax (IMI) and the Consumer Tax (customs system)
General rate: 4% on most goods.
In Andorra, an Indirect Merchandise Tax (IMI) is levied on the import of merchandise. The rate is 4% on most goods, 7% on electronic products, perfume and optical products and 12% on jewelry and recreational equipment.
The application of the agreement of 28 June 1990 between Andorra and the EEC includes entry into the Community Customs Union of goods figuring in chapters 25 through 97 of the harmonized Community system of naming and codifying goods. A result of this agreement was the passing of the Law on the indirect goods tax (IMI), which is an indirect tax levied on the production and importing of goods as a percentage of their value. The rate goes from 0% on certain products, through a reduced rate of 1% on agricultural products to a normal rate of 4%, an increased rate of 7% and a special rate of 12%.
Indirect Tax on the Supply of Services (ISI)
Indirect Tax on Services (ISI) is currently set at 4%.
ISI is levied on services supplied by businessmen or professionals, whether individuals or companies, whether habitually or occasionally, while carrying out business or professional activities. The payer of this tax is the businessman who provides the service, who will pay tax according to a module system or according to a system of direct calculation based on the reality of operations carried out and noted in an accounting system. ISI is a tax which is imposed of the end consumption of the service; consequently the businessman has to formally pass on the tax to the client making him or her pay 4% of the value of the payment for the service. This tax was initially applied with its specifics (tax rate, calculation of the quota) to services provided by banks and insurance company and starting on 1 January 2006 it has been generalized to all sectors of the Andorran economy.
Indirect Tax on Internal Production (IPI)
There is an indirect tax on domestic production (IPI) which applies the same rates as the IMI on products produced or manufactured in Andorra.
IPI is levied on the delivery of goods produced or transformed in Andorra by businessmen or professionals, whether habitually or occasionally, in the course of carrying on their business or professional activities. The payer of this tax is the producer established in Andorra, who delivers the goods previously produced by him, who will have to pay tax according to a system of modules or an alternative system of direct calculation based on the reality of operations carried out and noted in an accounting system. The businessman will pass on or charge the tax to the purchaser of the goods, applying the appropriate tax rate (0%, 1%, 4%, 7% or 12%) depending on the nature of the product to the value of his consideration. This tax began to be applied on 1 January 2006.
Tax on Real Estate Transactions (ITP)
ITP is levied directly on transfers of real estate between living persons. This tax is applicable to all transfers of real estate located in the Principality of Andorra and to the creation or transfer of rights over such real estate exercisable in Andorra. The tax rate is currently set at 4%.
Indirect Tax on Commercial Activities (IAC)
Indirect Tax on Commercial Activities is levied on the commercialization of goods within Andorra, whether these be imported goods or goods produced within the country. The payer of the tax is the importer of the goods and also the Andorran producer of goods who later puts them up for sale. If the taxpayer is the importer, he will have to pay a supplement or equivalent surcharge on the IMI tax rate when introducing the merchandise through customs. If the taxpayer is a producer established in Andorra, he will have to pay a coefficient proportional to the quota of the indirect tax on internal production (IPI). The taxpayer has to pass the tax on to those purchasing the goods. This tax began to be applied on 1 January 2006.
Withholding Tax on Interests to EU Member States
The tax on the taxation of savings is levied on the interest on monetary and fixed return products deposited in financial bodies in Andorra by individuals residing in one of the member states of the European Union. The withholding tax rate on interest is now 20%, and will be at that 20% rate until 30 June 2011. The tax rate will be to 35% of the interest earned from 1 July 2011 onward. The Principality of Andorra retains 25% of the revenue coming from this retention and transfers 75% of it to the public treasury of the member state of the Community where the end beneficiary resides, while maintaining banking secret when managing this transaction, i.e. the person from whom a part of the interest has been retained will not be identified. Andorra does not disclose the individual names of the EU residents from whom tax is withheld. This tax began to be levied on 1 July 2005.
Tax on the Registration of Persons in Charge of Economic Activities
What gives rise to this tax is the act of registering with and remaining on the Register of Persons in charge of Economic Activities which contains the following sections: Register of Merchant Companies, Register of Commerce and Industry and Register of Liberal Professions. The registered holder, whether an individual or a company, entered in the Register of Commerce and Industry pays an annual fee of 184.90 € for each authorized registration of a shop.
Capital Gains Tax on Real Estate
Capital Gains Tax on real estate was enacted on 14 December 2006. This tax is levied directly on capital gains arising from the transfer of real estate between living persons and is set between 0% and 15% based on the number of years that the real estate has been owned by the taxpayer.
Vehicle Tax
Tax on vehicles in Andorra is levied on the ownership of any type of vehicle figuring in the Register of Vehicles. It is payable annually and the contribution depends on the type of vehicle and its official horsepower rating.
Tax on Electricity and Phone
The levy on electricity and phone consumption has as its tax base the consumption of electricity and the use of any telecommunications service by the end user. The contribution is calculated by applying a tax rate (at present 10%) to the taxable amount. The levy is handled through the supplier bodies.
Tax on Registration of Trademarks
The tax on the registration of trademarks levies a fixed sum on the registration and renewal of a trademark.
Tax on Bingo
The tax on bingo is levied on the total face value of cards used to play the game. The current tax rate is 12%.
Tax on the Transfer of Real Estate
The tax on the transfer of real estate is levied on the transfer of real estate between living persons for lucrative or chargeable considerations. The tax base is the real value of the goods or rights transferred or assigned. There are two tax rates: one levied by the state of 1.25% and the other levied by Andorra Communes also of 1.25%.
Andorra Business Registration Taxes, and Other Taxes for BusinessesPeople carrying on a business activity in Andorra are subject to the payment of a flat-rate tax, payable when they register on the Trade Register and then subsequently each calendar year between 1st April and 30 June.
This tax concerns three professional categories:
- People owning a Société Anonyme (a Public Limited Company) or a Société à Responsabilité Limitée (a Private Limited Company) registered on the Corporate Register,
- People carrying on a business activity registered on the Trade Register,
- People authorised to practise as a member of one of the professions.
Corporate Register Tax for a Private Limited Company (Société à Responsabilité Limitée)
People who are registered on the Corporate Register must pay a tax of 330 euros at the time of registration and subsequently a tax of 670 euros every calendar year in the case of a Private Limited Company.
Corporate Register Tax for a Public Limited Company (Société Anonyme)
People who are registered on the Corporate Register must pay a tax of 495 euros at the time of registration in the case of a Public Limited Company, and must pay an annual tax of 735 euros.
Registration Tax for a Public Limited Company and Private Limited Company
Other than these taxes, people wanting to create a company must pay what corresponds to a Registration Tax.
The amount of this tax is 661 euros for a Public Limited Company and 463 euros for a Private Limited Company.
Tax for Tradespeople and the Professions
Tradespeople registered on the Register of Commerce must pay a tax of 170 euro annually for every business premise registered.
The professions must pay a tax of 330 euros annually, from the third year following their registration as a member of one of the professions.
Andorra Inheritance Tax - Transfers of Assets (applicable to assets located in Andorra) The Law of 29 December 2000 regulates indirect tax imposed on transfers of real estate inter vivos, as well as on the creation or transfer of rights in rem on assets located in Andorra.
As regards local taxes, they depend on the municipality in which the assets are located.
There is no Inheritance Tax in Andorra. However, assets located outside the Principality of Andorra and belonging to foreigners who are residents of Andorra will be subject to the rules of the countries in which such assets are located.
This law also applies to:
- shares and participating interests in trading companies, the creation or transfer of rights in rem over these shares or participating interests if at least 50% of the assets of these companies are composed of personal property or rights in rem over real estate.
- contractual commitments or options if these contracts concern real estate or rights in rem over real estate.
In addition, in the case of a cancellation of a contract with the agreement of both parties, this cancellation is considered as a new transfer and is therefore subject to tax.
Exceptions:
Transfers and the creation of rights in rem over real estate are exempt from tax when they are made in favour of:
- the Conseil General (Parliament), the Government, Municipalities (town-halls) and Quarts (county-towns)
- spouses or the communal estate in favour of the other spouse, or as part of the dissolution or liquidation of the marriage
- between spouses and natural persons having direct blood ties as forbears and descendants and/or lateral ties up to the third degree
- shareholders of a company or between companies if the shareholders have direct blood ties as forbears or descendants and/or lateral ties up to the third degree
- and also for the transfer and creation of real guarantee rights
The amount of taxes to be paid by the acquirer or by the persons in whose favour a right in rem is created or transferred is as follows:
- Government tax: 1.25%
- Local tax: the minimum rate is 0.50% and the maximum rate is 1.25%
The tax to be paid will therefore be equivalent to a maximum of 2.50% of the value of the assets transferred.
Social Security System in AndorraGeneral Regulations of the Andorra Social Security system establishes that two distinct social security regimes are in force: a specific regime for health insurance and another regime for old-age insurance. All salaried workers in Andorra must pay contributions to the Andorra Social Security Fund (CASS).
Social security in Andorra is based on a points system. This means that the insured pays contributions towards his/her old-age pension and on reaching retirement age will receive a pension proportional to the number of points collected. The amount of the retirement pension consequently depends on the category of old-age pension contributions chosen by the insured. Part of the contributions are withheld from salary and another part is paid by the employer. The employee pays between 5-9%, and the employer pays between 13-14%.
Health Insurance / Withheld from Salary / Paid by Employer
General regime 3% 7%
Complementary regime 1%
Old-age insurance Class A 2% 6%
Old-age insurance Class B 4% 6%
Old-age insurance Class C 6% 6%
TOTAL 5%, 7% or 9% 13% or 14%
Andorra Local TaxesThe local authorities, the "Municipalities", of each parish are authorised by the Andorran Parliament to apply a general tax, and also to establish, administer and apply additional taxes.
Even if tax regulations are not unified between the different parishes, it is possible to identify the most important taxes in this regard:
1. Service taxes: taxes on hygiene, lighting services, drinking water, urban contribution, etc.
2. Taxes on permits and planning permission, changes of corporate names and registration of addresses, installation of signs.
3. Taxes on commercial and industrial activities, rents, the ownership or acquisition of real estate, transfers of property and assets.
Establishment of Commercial, Business and Professional Activities
Tax is levied on the exercise of a commercial, business or professional activity on the territory of a parish. To calculate this tax, the type of activity, establishment and operating surface area in square metres are taken into account. It is a yearly tax.
Tax on House Rents
This tax is levied on rent obtained from the renting out of real estate situated in the territory of a parish. The landlord pays it annually and the amount to be paid consists of a percentage (which may go from a 0.4% minimum to a 4% maximum) of the total value of the rent obtained during the year.
Tax on Built up Real Estate
This tax is levied on the ownership of built up real estate in Andorra or of a real right of use on built up real estate. It is an annual tax. The quota to be paid is fixed by the square metres in the surface area of the real estate and its location. The type of tax applied must be between 0.30 and 3 euros per square metre built up.
Foc i lloc (Hearth and Home Tax)
Traditional tax paid by the residents of a parish It is levied on the fact of residing in a parish. It is paid by individuals aged between 18 and 65 included by census in the territory of a parish. The tax is a yearly fixed sum, which varies according to the parish and it must be within the limits of 5 € and 50 €.
In their tax systems the Andorra Communes may fix taxes for the rendering of public services such as public hygiene, street lighting, upkeep of public spaces, removal of snow, crane haulage service, connection to the sewage and drinking water systems etc. They may also introduce taxes for carrying out the following administrative tasks: granting town planning licenses, authorizing the opening of a shop, issuing certificates etc.
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