Corporate income tax (CIT) in Andorra: rates, special regimes and tax deductions

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🏁 Origin and purpose of the tax

The Corporate Income Tax (CIT) is a direct tax levied on the income of legal entities (companies) resident in the Principality.

It was established by Law 95/2010 of 29 December and entered into force on 1 January 2012, completing Andorra’s fiscal harmonisation process.

This law consolidated Andorra’s direct tax system, aligning it with international OECD standards and providing a stable, competitive framework.
The Regulation of the tax, approved on 20 June 2012, is based on the Andorran General Accounting Plan, inspired by the Spanish and European models.

➤ To better understand how this tax fits within Andorra’s broader fiscal structure, see Taxation in Andorra: structure, rates and real advantages.

💼 Taxpayers and fiscal residence

All legal entities resident in Andorra are subject to corporate tax, including:

• Public limited companies (SA) and limited liability companies (SL)
• Public or semi-public entities
• Collective investment institutions established under Andorran law

Entities are considered tax-resident if they meet at least one of the following criteria:

• Incorporated under Andorran law
• Registered office located in the Principality
• Effective management and control exercised in Andorra

They may also transfer their fiscal residence to the Principality under commercial law.

This definition of residence is consistent with that used for individuals, as explained in Tax residency in Andorra: requirements and real advantages.

📊 Tax base and accounting principles

The tax base is determined from the accounting result, adjusted according to the fiscal corrections established by Law 95/2010 and its subsequent amendments.

The system is based on Andorran accounting standards, which follow the General Accounting Plan and record income and expenses on an accrual basis.

➤ For further detail, see The Andorran General Accounting Plan and its tax application.

Key principles include:

• Neutrality between legal form and actual activity (the company’s structure does not change its tax treatment).
• Correlation between income and expenses (only business-related expenses are deductible).
• Limited deduction of certain costs, such as net financial expenses or impairment provisions.

💰 General rate and other applicable types

The standard corporate tax rate is 10% on the taxable base.

However, the law provides for certain reduced rates or exemptions:

• Special regimes: “holding” companies or those exploiting intangible assets may benefit from additional reductions.
• Philanthropy and donations: deductions are available for recognised contributions under Article 44 bis of the law.

❗Under Law 5/2023, the principle of fiscal fairness was reinforced and minimum effective taxation thresholds were introduced to ensure that profitable companies contribute proportionally.

🧩 Special regimes: holding companies and patent box

These special regimes, previously more generous, were revised to comply with OECD guidelines (BEPS Project, Action 5).

Two remain currently in force:

• Holding companies: may benefit from exemptions on dividends and capital gains arising from qualifying participations, provided that:
  • The shareholding is at least 5%, and
  • The subsidiary is subject to a comparable tax at 50% or more of the Andorran rate.
• Patent box (exploitation of intangibles): grants favourable treatment for income derived from research and development (R&D) activities effectively carried out in Andorra.
  It only applies when there is real economic activity and a substantial connection between the R&D and the income generated.

This regime complements the one governing corporate restructuring operations (mergers, demergers or in-kind contributions), discussed in Tax regime for corporate restructuring operations in Andorra.

📉 Deductions and non-deductible expenses

Only expenses directly linked to business activity are deductible.

Non-deductible items include:

• Fines, penalties and donations unrelated to the business
• Personal or non-business expenses
• Impairment losses on investments, except in specific cases
• Net financial expenses exceeding 30% of operating profit, with a maximum of €500,000 per year (Law 5/2023)

The remuneration of directors is deductible only if expressly provided for in the company’s bylaws and related to actual management or executive duties.

➤ For further insight, see How to remunerate partners and directors legally and in a tax-efficient way.

⚙️ Depreciation and fiscal limits

Article 10 of the law sets the maximum depreciation rates according to the nature of each asset.

Following the 2023 reform:

• Depreciation limits were reduced to align with the real useful life of assets.
• The special regime for new investments was abolished.
• Intangible assets with indefinite useful life, such as goodwill, may be amortised up to 20% per year, without the need for an accounting provision.

These measures aim to balance fiscal deduction with the economic substance of the asset.

🧾 Exempt income and double taxation relief

Certain income categories are exempt to avoid double taxation:

• Dividends and profit shares received from other entities, resident or non-resident, if minimum participation and effective taxation conditions are met.
• Capital gains arising from the transfer of qualifying participations.
• Income derived from corporate restructurings (mergers, demergers, or non-cash contributions) under Law 17/2017.

❗The law also provides relief for domestic and international double taxation (Article 43 bis), capped at 70% of the tax liability and available for carry-forward in future periods.

🎯 Tax incentives and philanthropy

The 2025 reform introduced specific incentives for cultural, scientific and social philanthropy, regulated by the Ministerial Order of 26 March 2025 and Article 44 bis of the law.

Companies may deduct part of their cash or in-kind contributions, provided they are irrevocable, unconditional and duly certified by the beneficiary organisation.

These incentives encourage private sector participation in projects of general interest, strengthening corporate social responsibility and the reputation of Andorran companies.

Practical conclusions

Andorra’s corporate tax provides a stable, transparent and competitive environment, with a nominal rate of 10% and multiple mechanisms to avoid double taxation.

Recent reforms (2018, 2019, 2023 and 2025) have modernised the system, aligning it with international standards and ensuring legal certainty for both local companies and foreign investors.

👉 If you wish to optimise your company’s taxation or review its structure, contact ELYSIUM Consulting through our contact form.

Last review: November 2025