Taxation in Andorra: structure, rates and real advantages

🕒 Reading time: 7 minutes

💡 Introduction

The Andorran tax system has undergone a profound transformation over the past two decades, evolving from a model that was virtually tax-free to a modern framework aligned with European standards and designed to attract investment and talent.

Today, Andorra combines a simple and competitive tax structure, with low rates and a coherent system that encompasses personal income, corporate profits, consumption, and local taxes.

➤ For an overview of the different types of tax residence and how they affect taxation, you can read Types of residence in Andorra: active, passive and tax residency (2025).

1️⃣ Personal Income Tax (IRPF)

Regulated by Law 5/2014, structured in two bases:

• General base: employment, business, and rental income.
• Savings base: interests, dividends, capital gains.

The maximum rate is 10%, but reduced effective brackets apply only to the general base:

• Up to €24,000: exempt.
• From €24,001 to €40,000: 5%.
• Above €40,000: 10%.

First €3,000 of savings income is exempt; the rest taxed at 10%.
Andorran dividends are fully exempt for residents and holding entities, making the jurisdiction particularly efficient for wealth management.

Under Law 5/2023, real estate capital gains were integrated into IRPF and Corporate Tax, simplifying the framework.

➤ If you want to explore how tax residency is determined and its implications, see the article Tax residency in Andorra: requirements, implications and advantages.

2️⃣ Corporate Tax (IS)

Regulated by Law 95/2010, general rate 10%.
Based on accounting profit per the Andorran General Accounting Plan.

Main features:

• Simplified thresholds for SMEs (< €600,000).
• Sworn declaration allowed (< €150,000).
• Transparency and international alignment.

Special regimes:

• Holding regime — exemption for qualified share dividends and gains.
• IP Box regime — for Andorra-developed intangible assets.

Real estate gains are now taxed under Corporate Tax, while the Economic Activities Tax (IRAC) is deductible.

For more information on how to set up a company and the related tax incentives, see Setting up a company in Andorra: steps, requirements and benefits.

3️⃣ General Indirect Tax (IGI)

Equivalent to VAT, per Law 11/2012.
Main rates:

• 4.5% → general.
• 1% → basic goods.
• 0% → exports.
• 9% → financial services.

Services rendered abroad are exempt under reverse charge rules.
The system ensures neutrality and predictability for professionals.

4️⃣ General Tax Framework (LBOT)

Law 21/2014 establishes principles of legality, proportionality and legal certainty, consolidating a transparent tax administration.

5️⃣ Local and Communal Taxation

Common local taxes:

• Foc i Lloc — annual residence or ownership tax.
• Urban lease tax — up to 3%.
• Works and opening fees — depending on the parish.

These moderate taxes preserve local ties and fund basic services.

6️⃣ Inheritance, Gifts and Wealth

Andorra levies no inheritance or gift taxes, regardless of family relationship.
Transactions must be documented for anti-money laundering compliance.
Foreign assets may still face taxation in their country of location.

7️⃣ Customs and EU Relations

Since 1990, Andorra has had a Customs Union Agreement with the EU for industrial goods.
The 2025 Andorran Customs Code aligns with EU Regulation 952/2013, improving control and efficiency.

➤ If you’re interested in Andorra’s economic context and international integration, we recommend Andorra’s international evolution: from tradition to a global economy.

🧭 Conclusion

Andorra’s tax model blends clarity, stability, and efficiency.
With a 10% maximum rate, 4.5% IGI, and no inheritance or gift tax, it offers a secure and competitive framework for entrepreneurs and investors.

📚 Related articles (EN)

• Double taxation treaties and their practical application — How to avoid international double taxation and optimise your global tax burden.
• Types of residence in Andorra: active, passive and fiscal (2025) — Which residence type best suits your personal and professional situation.
• Setting up a company in Andorra: steps, requirements and advantages — Incorporation process and tax implications for companies in Andorra.

Last revision date: October 2025