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Andorra has a reputation as being a great place for business owners, thanks to its favorable tax rates. If you’re considering a move to Europe with your company, Andorra’s tax systems makes it an attractive option.
So, what are the best tax advantages for business owners in Andorra?
Sales tax isn’t charged at the till in Andorra. This attracts a lot of cross-border shopping, as with taxes already built into the price, you know for certain what you’ll pay.
Capital gains tax is also simple to understand in Andorra. Whether you’re filing as an individual or a company, capital gains are handled like other income when it comes to tax. Nominal capital gains tax rate is 10%. You won’t pay tax on any gains from selling company shares if you own less than 25% of the company. This makes buying, selling and day trading of stocks much easier as you can do it without paying any tax on the profits. If you sell an asset you’ve owned for more than 10 years, you won’t pay any tax at all.
Andorra has a low value added tax rate. Instead of a sales tax, a value added tax of around 4.5% is applied to goods and services. Some things are charged differently, such as books and newspapers at 1%, through to banking services at 9.5%. This is lower than most jurisdictions, making Andorra an attractive option. Education, healthcare and medicine are all exempt from VAT.
Tax rates for companies is also low in Andorra. If your company has its registered office, is incorporated or is managed in Andorra, you must pay taxes on profits, but this rate is quite low. Andorra has a 10% corporate tax rate, and holding companies that invest in other countries pay just 2% on profits.
Income tax is also lower than average. In Andorra, the basic personal income tax rate for residents is 10%. There are three tiers of tax brackets, and a few deductions and credits. All earnings, whether from salaries, foreign investment income and pensions are liable for the same rate. However, if you invest in Andorra, this is exempt from this tax rate. For non-residents (those who spend fewer than 183 days a year in Andorra) are also taxed at a rate of 10% on their economic activity within in Andorra, which is also much lower than average.
Related: Side Hustles and Taxes
Andorra real estate also has a generous tax rate. The sale of real estate is taxed on a sliding scale. On a basic level, you’ll pay a rate of 15% on property you owned for less than a year, which drops to 10% after three years and 0% after thirteen. This is intended to encourage people to invest in homes, and stay resident for several years.
Andorra’s tax rates are not only lower than most other jurisdictions, but the tax system is relatively straightforward and easy to understand. This makes it simple to correctly manage your company finances without falling foul of complicated tax laws. Andorra could be well worth considering as a move if you’re a business owner.
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