Overview of the taxation and the corporate tax rate in Andorra
The main points of the legislation
The Principality has one of the most advantageous tax systems in Europe and even the world, whether it concerns individuals or "non-physical" entities such as companies. Here are the elements to take into account regarding the global framework of taxation and corporate tax rate in Andorra:
- the corporate tax rate varies from 2% to 10% maximum;
- no tax on dividends or on wealth;
- absence of inheritance rights;
- no real estate tax;
- no tax on company cars;
- low social security (CASS) contributions;
- the VAT rate (IGI, Indirect General Tax) is the lowest in Europe: 4,5%.
Taxation and corporate tax rate in Andorre: a concrete case for a company manager
A manager of the company has two ways of retribution that will impact the taxation and the corporate tax rate of his Andorran business:
- he pays himself a salary (see the following point, «personal deductions»);
- he is only paid in dividends (these are not taxable).
If the entrepreneur pays a salary of € 5 ,000 per month, or € 60 ,000 of annual remuneration, and his company makes a profit of € 100 ,000 before a salary payment, there remains € 40,000 of profit in the company once the salary is deducted. The company will have to pay 10% tax on the profit, i.e. € 4 ,000. An amount of € 36 ,000 of dividends is then non-taxable, thereby increasing net disposable income.
Specification for the taxation and the company tax rate in Andorra
If the highest tax rate on corporate profits in Andorra is 10%, international companies, holding companies and intra-group financial management organizations or SICAVs benefit from lower or even zero rates, as in the following examples:
- International corporation: taxation of 2% maximum;
- Holding (on foreign companies): 0% tax;
- Management company and intragroup financial investment: maximum 2% tax;
- SICAV management company: 0% tax.
It should be noted that companies wishing to benefit from the status of international company or management company and intragroup financial investment must be installed in Andorra (owners or tenants of offices in the territory, company name domiciled in the Principality).
Regardless of taxation and corporate tax rate in Andorra, the individual contributions of persons residing in Andorra are:
- 0% for the first € 24 ,000 of taxable income;
- 5 % of any portion of taxable income between € 24 ,001 and € 40 ,000;
- 10 % of any portion of taxable income over € 40 ,000.
Entrepreneurial policy and the financial system: two other assets of the Principality
Starting a business
For several years, Andorra has been encouraging massive foreign investment and business creation in its territory.
It must be said that the country, located in the heart of the Pyrenees, just a two-hour drive from Barcelona and two and a half from Toulouse, is enough to arouse interest, and not only at the level of low taxation and reduced corporate tax rate. In Andorra life is very pleasant. The Principality has ideal infrastructure for the development of enterpreneurs, as well as for many other residents, families, high-level athletes, etc.
Moreover, despite the fact that Andorra is not integrated into the European Union, there are fiscal conventions with the other countries of the continent, and particularly with France, which make it possible to avoid double taxation.
Efficient financial system
The Principality has five national banks which are considered among the most solvent and most profitable in Europe. These institutions scrupulously respect international standards for money laundering.
The country’s financial system shows excellent stability and plays a leading role in the growth of the territory’s economy.