Andorra Tax Regime

A modern tax system built after 2011

For most of its history the Principality of Andorra, a small landlocked co-principality in the eastern Pyrenees between France and Spain, had no direct taxation of income. Public revenue came almost entirely from indirect duties, customs charges on goods crossing its borders, and fees. That model changed under external pressure to meet international transparency standards and to negotiate a closer relationship with the European Union. Between 2011 and 2015 Andorra enacted a full suite of modern direct and indirect taxes: corporate income tax (Impost sobre Societats, IS) and non-resident income tax (IRNR) from 2012, the general indirect tax (Impost General Indirecte, IGI) consolidating earlier consumption levies from 2013, and personal income tax (Impost sobre la Renda de les Persones Fisiques, IRPF) from 2015.

The result is a low-rate, broad-base system that is fully OECD-compliant on transparency while retaining headline rates far below those of neighbouring EU states. Corporate profits and top personal income are each taxed at a maximum of 10%, and the standard IGI rate of 4.5% is among the lowest consumption-tax rates in Europe. Andorra is no longer classified as an uncooperative jurisdiction or a tax haven by the OECD or the EU; it exchanges financial-account information automatically under the Common Reporting Standard and has built a network of double-tax treaties.

Monetary and customs context

Andorra is not an EU member state but uses the euro as its official currency under a monetary agreement with the European Union that also permits it to mint its own euro coins. It sits within the EU customs union for industrial and manufactured goods (treated broadly as part of the customs territory for those goods) but remains outside the union for agricultural products, and it is not part of the EU VAT area, which is why it operates its own IGI rather than VAT. Andorra has been negotiating an Association Agreement with the EU that would deepen access to the single market; the substance of that agreement was concluded in December 2023 and remains subject to ratification, and could over time affect indirect taxation and regulatory alignment.

Tax administration is centralised in the Departament de Tributs i de Fronteres within the Ministry of Finance (Govern d'Andorra). Andorra has no regional or municipal income taxes, although the seven parishes (comuns) levy their own local charges on residence, business activity, property and construction.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Scope and the 10% standard rate

The Impost sobre Societats applies to companies and other legal entities that are tax-resident in Andorra on their worldwide profits. A company is resident if it is incorporated under Andorran law, has its registered seat in Andorra, or has its effective place of management in the territory. The standard rate is a flat 10% applied to taxable profit, computed from the statutory accounting result adjusted for tax purposes (non-deductible expenses, timing differences and specific reliefs). There is no separate surtax and no progressive corporate scale.

Newly incorporated companies carrying on a new business activity may benefit from a reduced rate of 2% on the first EUR 50,000 of taxable base and 5% on the excess (in practice a reduced effective rate) during their first years of activity, subject to conditions on turnover and genuine new-business status. This start-up incentive is designed to support entrepreneurship rather than to shelter relocated profits.

Participation exemption and special regimes

Andorra operates a participation-exemption system intended to prevent economic double taxation of corporate profits. Dividends and capital gains derived by an Andorran company from qualifying shareholdings are exempt or effectively relieved, provided the participation and holding conditions are met and the subsidiary is subject to a comparable tax. This makes Andorra usable as a holding location, though the regime is narrower and more substance-focused than earlier versions.

Historically Andorra offered special regimes for companies engaged in international trading of intangibles, intra-group financial management and holding activities, which could reduce the effective rate to around 2% via an 80% reduction of the taxable base. Under pressure from the OECD Forum on Harmful Tax Practices and the EU Code of Conduct Group, the harmful features of these regimes were repealed or grandfathered; taxpayers should treat any reference to a blanket 2% intangibles or trading regime as obsolete and confirm the current position, because the surviving reliefs are conditioned on genuine economic substance in Andorra.

Losses, deductions and groups

Tax losses may be carried forward and set against future profits for a defined period (generally up to ten years), with no carry-back. Andorra permits tax consolidation for qualifying groups, allowing profits and losses of group members to be pooled. Deductions are available for double taxation (both domestic and international) and for certain job-creation and investment incentives. A minimum effective floor applies in some circumstances to ensure profitable companies bear a minimum charge.

Residency and scope

The Impost sobre la Renda de les Persones Fisiques (IRPF) taxes individuals who are tax-resident in Andorra on their worldwide income. An individual is generally resident if they spend more than 183 days in Andorran territory in the calendar year or if their main centre of economic interests is located in Andorra. Residents are taxed on employment income, income from economic activities, income from movable and immovable capital, and capital gains. Non-residents are instead taxed under the separate IRNR regime on Andorran-source income only.

Rates and bands

IRPF is progressive but capped at a top marginal rate of 10%. The first EUR 24,000 of the general taxable base is taxed at 0%. Income between EUR 24,000 and EUR 40,000 is taxed at 5%, and income above EUR 40,000 at 10%. A bonification mechanism applies within the 24,000-40,000 band that in effect softens the transition, so that lower-middle earners face a very light burden. For jointly assessed married couples the tax-free threshold can effectively be higher. There are additional personal and family reductions (for instance for dependants, mortgage interest on a principal residence and pension contributions), so effective rates are materially below the 10% headline for most residents.

Savings and investment income (dividends, interest and similar) forms a savings base that benefits from an annual exemption of the first EUR 3,000, with the excess taxed at 10%. Because dividends distributed by Andorran-resident companies are exempt to avoid double taxation, resident individuals typically see their Andorran-sourced dividends untaxed at the personal level.

Capital gains

Gains on movable assets such as shares are generally taxed at 10%, but with generous exemptions: a gain on shares is exempt where the individual has held less than a 25% participation in the company, and gains are exempt after a holding period of more than ten years. Holdings between five and ten years benefit from a partial reduction. Gains on the transfer of Andorran real estate, formerly taxed under a standalone plusvalua law (repealed with effect from 1 January 2024 by Llei 5/2023 and integrated into IRPF/IS/IRNR), are taxed on a sliding scale by holding period: broadly 10% plus a 5% speculative surcharge (15% total) on a sale within the first two years, 10% between two and five years, and a coefficient reduces the taxable gain thereafter until the charge reaches 0% after roughly thirteen years of ownership.

Non-resident income tax (IRNR)

Payments of Andorran-source income to non-residents are taxed under the Impost sobre la Renda dels No-Residents Fiscals (IRNR), which carries a general flat rate of 10%. The IRNR functions both as a final withholding tax on certain passive income and as the mechanism for taxing non-residents who derive business income from an Andorran permanent establishment. Reduced IRNR rates apply to specific categories, and treaty relief can lower or eliminate the charge.

Domestic withholding rates

Andorra's domestic withholding position is notably light. Dividends distributed by an Andorran-resident company are exempt from tax whether paid to residents or non-residents and whether to individuals or entities, so there is effectively a 0% dividend withholding. Interest paid to non-residents, including interest paid by Andorran banks, is generally not subject to withholding or filing. Royalties paid to non-residents bear a 5% rate. These statutory rates apply before any further reduction under a double-tax treaty.

Treaty network

From a standing start, Andorra has built a network of comprehensive double-tax treaties (CDIs), around two dozen of which are signed and a growing number in force. Partners include neighbouring and European states such as France, Spain, Portugal, Luxembourg, Liechtenstein, Malta, Cyprus, Hungary, the Czech Republic, Croatia, Iceland, Lithuania, Latvia, Monaco, San Marino, Montenegro and Romania, along with the United Arab Emirates and South Korea. Recent additions in 2025 include treaties with Latvia and Montenegro entering into force mid-year, and treaties with Romania and the United Kingdom entering into force in December 2025; a treaty with Estonia was signed in 2025 and is progressing through ratification. These treaties follow the OECD Model, allocate taxing rights, and include exchange-of-information and anti-abuse provisions consistent with the BEPS minimum standards.

Transfer pricing and substance

Andorra applies the arm's-length principle to transactions between related parties, in line with OECD Transfer Pricing Guidelines. Taxpayers must be able to demonstrate that intra-group pricing reflects market conditions, and documentation may be required to support the positions taken. Because several of the former special corporate regimes were repealed on substance grounds, the practical emphasis today is on genuine economic activity in Andorra: offices, staff and decision-making located in the territory rather than a purely formal presence. Advance pricing and ruling mechanisms are available in appropriate cases.

Exchange of information and CRS

Andorra incorporated the OECD/G20 Common Reporting Standard into domestic law through Llei 19/2016 of 30 November, and its first automatic exchange of financial-account information took place in 2018 in respect of 2017 data. It is a member of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes and exchanges information both automatically and on request. Andorra has also signed the BEPS Multilateral Instrument, updating its treaties to include anti-abuse (principal-purpose) tests, and participates in the OECD/G20 Inclusive Framework on BEPS.

Pillar Two status

As a member of the Inclusive Framework, Andorra has endorsed the two-pillar solution to the tax challenges of digitalisation. As of mid-2026, however, Andorra had not enacted domestic Pillar Two legislation imposing the 15% global minimum tax, and its 10% corporate rate remains the operative headline rate. In practice, large multinational groups (those with consolidated revenues at or above the EUR 750 million threshold) with Andorran operations may nonetheless face top-up taxation under the rules of other implementing jurisdictions, which creates an incentive for Andorra to consider a qualified domestic minimum top-up tax in future. Groups below the threshold, which is the vast majority of Andorran business, are unaffected. Taxpayers should monitor legislative developments, as this is an active area.

General indirect tax (IGI)

The Impost General Indirecte is Andorra's consumption tax, functionally similar to VAT but with markedly lower rates. The standard rate is 4.5%, one of the lowest general consumption-tax rates in Europe. A super-reduced rate of 0% applies to certain healthcare, hospital and education services; a reduced rate of 1% applies to basic foodstuffs, books, newspapers and magazines; a special rate of 2.5% applies to items such as art objects, antiques, and cultural and museum admissions; and an increased rate of 9.5% applies to banking and financial services. Businesses register for and charge IGI, recovering input tax in the usual way, with simplified regimes for small operators below turnover thresholds.

Property, registration and local taxes

Real estate transactions attract a property transfer tax (Impost sobre Transmissions Patrimonials Immobiliaries) on the transfer of immovable property, split between a state component and a parish component and generally in the region of 4% combined. Andorra has no recurring net-wealth tax and no inheritance or gift tax, which is a notable feature of its regime. The seven parishes levy their own local taxes and fees, including charges on residence (foc i lloc), on the ownership of built property, on rental yields, on business activity (comerc), and on construction, so the total local burden depends on the parish of residence or activity.

Social security (CASS)

Social security is administered by the Caixa Andorrana de Seguretat Social (CASS). Contributions fund a general (health) branch and a retirement branch. For employees, total contributions are roughly 22% of salary, split so that the employer bears the larger share (around 15.5%) and the employee a smaller share (around 6.5%), covering both branches. Self-employed persons (compte propi) pay a monthly contribution set by reference to the average national wage, with reduced bases (for example 25%, 50%, 62.5% or 75%) available for lower-turnover activities. CASS contributions are separate from, and in addition to, income tax.

Administration

Direct and indirect taxes are administered by the Departament de Tributs i de Fronteres under the Ministry of Finance. The department handles registration, assessment, collection and audit, and it operates an electronic filing portal through which most returns are submitted. Businesses and self-employed persons obtain a tax registration number (NRT) and must maintain accounting records supporting their returns. Andorra operates a self-assessment system: taxpayers compute and pay their own liability, subject to subsequent verification by the administration.

Assessments, penalties and appeals

The administration may review returns within the statutory limitation period (generally three years, extended in cases of concealment). Where it disagrees, it issues an assessment (liquidacio) that the taxpayer can contest. Penalties apply for late filing, late payment and inaccuracies, scaled to the severity and to whether the conduct was negligent or deliberate; interest for late payment runs at the statutory rate. Disputes are first addressed through an administrative appeal to the department and then to the Government, after which recourse lies to the administrative courts (Batllia and the Tribunal Superior). Mutual agreement procedures under tax treaties are available to resolve cross-border double taxation.

Key deadlines

Andorra's tax year is the calendar year for individuals; companies generally use their accounting period. Personal income tax (IRPF) returns are filed during a campaign running from 1 April to 30 September following the tax year. Corporate income tax (IS) returns are filed within about six to seven months of the year-end, with the July window applying to calendar-year companies (Model 200), supported by advance instalment payments (Model 202) during the year. Both IS and self-employed IRPF taxpayers make advance payments during the year that are credited against the final liability.

IGI is declared periodically according to the taxpayer's turnover: larger businesses file monthly, medium-sized quarterly and small operators semi-annually, with the balance payable when the return is filed. Precise dates for each campaign are published each year by the Departament de Tributs i de Fronteres, and taxpayers should confirm current-year deadlines against official announcements.

Foreign investment liberalisation

Andorra historically restricted foreign ownership of companies, but the foreign-investment law of 2012 (Llei 10/2012) opened the economy to 100% foreign ownership across most sectors, subject to prior authorisation for certain activities. A non-resident may now hold the entire share capital of an Andorran company. Combined with the low corporate rate, this liberalisation has attracted holding structures, digital and services businesses, and entrepreneurs relocating from higher-tax jurisdictions. Setting up typically involves reserving a company name, obtaining foreign-investment authorisation where required, incorporating before a notary, registering with the company registry and the tax authority, and enrolling with CASS.

Residency programmes

Andorra offers residence permits that appeal to internationally mobile individuals. Active residence is available to those who set up and run a genuine business or take up employment in Andorra. Passive (non-lucrative) residence is available to individuals of independent means who do not work locally; it requires a qualifying investment in Andorran assets (for example real estate, a bank deposit with the regulator, or Andorran securities) and proof of sufficient income and health cover, together with a minimum physical-presence requirement in the territory. Tax residence, and therefore worldwide taxation under IRPF, follows from meeting the 183-day or centre-of-interests test, so a residence permit alone does not automatically make someone an Andorran tax resident.

Practical points for advisers and businesses: substance matters, because both the domestic anti-avoidance rules and treaty anti-abuse tests look to genuine activity; the absence of wealth, inheritance and gift taxes is a significant planning feature; and the low IGI and social-security base can meaningfully reduce total operating costs relative to neighbouring EU states. Because Andorra's system is young and evolving, and because EU-association and Pillar Two developments are ongoing, taxpayers should verify current rates and rules with the Govern d'Andorra before acting.