Andorra: A Little Paradise for Companies
By Josep Garcia, Advantia Assessors
The signing of agreements on the automatic exchange of information at the international level has removed Andorra from the list of tax havens, and it no longer features on the OECD blacklist.
In addition, the country has developed a tax system designed by and for foreign companies so they will see establishing themselves in Andorra as an attractive option.
As a result, companies pay a maximum of 10% corporate tax on profits — which in some cases, depending on the activity of the company, is reduced to 2% or even made exempt. VAT is only 4.5% (the lowest in Europe) and annual company maintenance fees are below EUR 850 for ordinary companies.
In addition to this, it should be noted that compared to Spain or France, labour costs and social security contributions are very low. Companies pay only 15.5%, while in Spain and France they pay in excess of 30%. This makes it easier to hire employees and reduces the fixed costs of any entrepreneur setting up a company in Andorra. In fact, the cost of Social Security contributions increases wages in Spain by 15% compared to Andorra, a percentage which is increased to 40% in the case of France.
Andorra’s IGI (a tax equivalent to Spanish IVA or French TVA) is the lowest in Europe. The general IGI is 4.5%, while in the cultural, education, or health sectors, it is as low as 1%. This translates to much lower prices compared to Spain and other countries.
In Andorra, net incomes under EUR 24,000 are tax exempt. For net incomes between EUR 24,001 and EUR 40,000, personal income tax is only 5%. Incomes over EUR 40,000 only pay 10% (much lower than other European countries). Tax on income from savings is also 10%, with the first EUR 3,000 of profit being tax exempt.
And don’t forget that the dividends received from a resident company in Andorra are exempt from tax and there are no taxes on inheritance or net worth.
Josep GarciaGGI member firm
Advisory, Auditing and Accounting, Corporate Finance, Fiduciary and Estate Planning, Tax
T: +376 802250
Advantia Assessors is an accounting and tax consultancy company located in Andorra la Vella. Advantia Assessors predominantly serves Andorran entities of foreign investors, mid-size Andorran companies with cross-border activities, and wealthy private individuals.
Josep Garcia is Founder and Managing Partner of Advantia Assessors. He is an Andorran accountant and Andorran tax advisor and specialist advisor for international taxation with more than 10 years of experience. Since 2018, he has been a board member of the Andorra Tax Advisors Association.
Published: International Taxation Newsletter, No. 12, Spring 2020 l Foto: Uwe Rieder