Becoming an Andorran resident does not automatically make you a tax resident. To be a tax resident you must spend more than 183 days per year within the country or have your center of vital/economic interests in Andorra.

Tax residents are subject to personal income tax on their worldwide profits. Non-residents are taxed on their income derived from Andorra.

The personal income standard tax rate is 10%. Annual income up to €24,000 is tax-exempt and income between €24,000 and €40,000 is taxed at a 5% rate.

Dividends received from resident entities are exempt from taxation, whereas those received from non-resident companies are taxable. Interest of bank savings are subject to the standard income tax rate, but an exemption on the first €3,000 may apply.

Capital gains are considered ordinary income and therefore subject to personal income tax. Capital gains from the transfer of immovable property are taxed separately at a progressive rate that ranges from 0% to 15%, depending on the length of time that the property has been held. Properties held for more than 12 years may be exempted from taxation.

Capital gains derived from qualifying participations, whether from Andorran or foreign companies, are usually exempt from taxation.

There are no controlled foreign companies' (CFC) regulations in Andorra. This means that profits retained in non-resident companies by a resident natural or legal person are not subject to taxation.

There is a property tax at an average of €100 per property yearly. Transfer of immovable properties between individuals is subject to a transfer tax between 1.5% and 2.5% of the purchase price.

The standard V.A.T. rate is 4.5%, though certain goods and services are taxed at reduced rates of 2.5%, 1% and 0%. Financial and banking services are subject to a 9.5% tax rate.

There are no net worth and inheritance taxes in Andorra.
Regarding corporate taxation, resident companies are subject to a 10% tax on their worldwide profits. However, companies mostly engaging in international business involving intangible assets, international trading and financial management and investment activities, may request an 80% tax base reduction.

Dividends and capital gains derived from qualified participations may be tax exempt, provided that the exclusive purpose of the company is managing interests in non-resident entities. Capital gains derived from immovable assets are subject to rates between 0% and 15%.

Dividends and interests paid to non-residents are exempt from withholding tax, whereas royalties are taxed at a 5% rate. Professional fees paid abroad are taxed at 10%.

Find out more about the Andorran tax system.