Statutes, forms of remuneration and tax rules
Since the Law 10/2012, of June 21, 2010 relating to the investment in the Principality of Andorra, the conditions of creation or installation of a company in Andorra have greatly eased for foreign entrepreneurs. Taxation in Andorra obeys strict and clearly defined rules, but few. The benefits are in fact undeniable for companies at the tax level (10% maximum) and low payroll taxes.
The articles of association in the Principality
Business and taxation in Andorra: many advantages
A country with a population of around 80,000 inhabitants, Andorra has increased the number of measures taken in recent years to facilitate expatriation and the creation of businesses in its territory.
Let us mention, for example, the introduction of 4.5% VAT (IGI), a low tax rate on individuals and companies (up to 10% of income and profits).
The tax status of companies in Andorra is particular, and in fact, very interesting for entrepreneurs from all over the world (France, Spain, but also Russia and Asian countries). Thus do not hesitate to come and settle in the Principality ( tax residence, physical residence, and often both, the territory is offering a beautiful and very pleasant living environment!). There were 2,336 private entrepreneurs in 2006 in the country, against 5,792 a little more than ten years later.
In Andorra, there is only one fund of contribution: the CASS (Caixa Andorrana de Seguretat Social).
The contribution rates are set at around 20% of the wages received by the workers and are at the expense of:
- the workers themselves, about 5%;
- from the employer, about 15%.
This social security scheme covers the sickness, old age and family benefits branches, which are also financed by the Andorran State.
There is no unemployment insurance or organization comparable to that of the French Assedic. On the other hand, the CASS reimburses all the medical expenses of Andorran residents to the tune of 75%.
Finally, the infrastructure costs are rather low compared to the European average, with rents and real estate acquisition at very reasonable levels, in all 7 parishes of the Principality.
If you are a company manager in Andorra, you can apply for active resident status in the Principality. This will be issued approximately 15 days after a medical visit to the immigration service.
Taxation of companies in Andorra: the main taxes
In the tax system applied to companies in Andorra, the 3 main taxes are as follows:
- corporation tax (IS);
- the personal income tax (IRPF);
- the indirect general tax (IGI).
Other taxes, variable but low, are also in use. Let us mention the municipal taxes, which differ according to the parishes (Canillo, Encamp, Ordino, La Massana, Andorra la Vella, Sant Julia de Loria, Escaldes-Engordany) and the governmental tax, which is from 200 to 800 euros by year.
Business and taxation in Andorra: corporate tax (IS)
The low corporate tax rate is the main feature of the tax system for companies in Andorra.
Inescapable axis of the levy system operating in the principality, the corporate tax amounts to a maximum of 10% of the profits made by a company. Reductions are made during the first 3 years of activity depending on the amount of turnover. Do not hesitate to contact Set Up to find out more! We will study your situation precisely.
IRPF (personal income tax
Since 2015, the IRPF (tax on income of natural persons, also called tax on economic activities) is applied each year on the income of Andorran residents. From a legal point of view, it is a bit strange to the social entities represented by companies. On the other hand, it is calculated in close connection with the type of professional activity of individuals owning a business or residing in Andorra more than 183 days a year.
Ceiling at 10%, this tax does not apply to people earning less than € 24,000 per year. Its rate is 5% for profits between € 24,000 and € 40,000.
Since 2013, the IGI has been the Andorran indirect tax on consumption equivalent to French VAT. It amounts to 4.5% of the pre-tax amount of a service or merchandise (1% for food products, 2% for leisure activities, 9.5% for banking and financial services ).
In the business tax system in Andorra, companies selling goods or services outside the Principality are generally not subject to this tax.
Other points of tax assessment for companies in Andorra include:
- the consumption tax: it is a customs tax which mainly concerns agricultural products imported into the Principality;
- the tax on the register of holders of economic activities: it varies from 20 to 800 euros per year depending on the legal entity of the company (SL, SA, etc.);
- the location tax of commercial, entrepreneurial and professional activities: it is calculated according to the nature of the activity, the location of the company and the area of the premises or land of the company.
Cost of labor, wages and infrastructure.
There are many tax benefits for companies in Andorra.
Some facilities are granted during the creation of the company (exemption of certain taxes during the first 3 years), while labor and infrastructure costs are quite low.
The cost of labor
Concerning the cost of labor, it is much lower than in France or Spain, for example.
The expenses owed by companies to CASS, the only social security organization, amount to about 15%, compared with more than 30%, at least, in the two aforementioned countries. Hiring is easier in the Principality and the labor market is much more fluid.
Salaries are very competitive in Andorra. The average salary today stands at € 1,950, while the minimum wage is around € 950 per month.
The advantages for French companies coming to expatriate in Andorra are thus clearly defined (by accounting for the low rate of social charges). From a fiscal point of view, they are likely to achieve savings of more than 20% on their total profits, thanks to the 30% margin realized on labor costs.
Taxation for companies in Andorra is also interesting in the context of renting or buying offices or premises. The real estate offer is very competitive and local taxes are low compared to neighboring countries.
Do not hesitate to contact Set Up, Private Concierge of the Principality, for any question concerning the taxation of companies in Andorra or in relation to the subject of expatriation.