Andorra – Taxation

How does the tax system in Andorra work?

Andorra’s fiscal framework operates on two levels: the seven local parishes, called comuns, administer taxes on property, rental income, commercial operations, and construction, while the national government is responsible for collecting personal income tax, corporate tax, VAT, capital gains tax, withholding taxes, and vehicle duties. This division of responsibilities has a structural resemblance to Switzerland’s cantonal model, yet the overall tax burden remains considerably lighter.

The legislative foundation governing individual taxation in Andorra is the Personal Income Tax Law (Llei de l’IRPF), introduced through Llei 5/2014. This law sets out a progressive rate structure that still places Andorra well below the income tax burden found across the rest of Europe.

For tax purposes, an individual is regarded as resident in Andorra if they are present in Andorran territory for more than 183 days during a calendar year — with sporadic absences counted as days spent in Andorra unless the taxpayer can demonstrate established tax residency elsewhere — or if the primary nucleus of their economic activities is located within the country.

It is important to understand that holding an Andorran administrative residence permit does not automatically confer tax residency. A passive residence permit may only require physical presence for 90 days annually; if the remainder of the year is spent in another country where strong economic ties exist, that country may assert tax residency instead. Your precise status should always be confirmed with a qualified tax adviser and with the official authority, the Departament de Tributs i de Fronteres (DTF), available at govern.ad.

As a tax resident you are assessed on your worldwide income, whereas non-residents are only taxed on income generated within Andorra. Unlike systems such as the UK’s PAYE, where employers automatically deduct income tax from monthly salaries, Andorran residents are responsible for submitting a self-assessed annual declaration.

Andorra’s tax framework has undergone considerable transformation since 2011, progressing from a regime that relied almost entirely on indirect taxation to a broader structure incorporating direct taxes — while preserving the attractive low-rate environment that draws individuals and businesses alike.

Does Andorra have double taxation agreements, and how do they affect expats?

Andorra has concluded full Double Taxation Conventions (DTCs) with ten countries: Cyprus, France, Hungary, Liechtenstein, Luxembourg, Malta, Portugal, San Marino, Spain, and the United Arab Emirates. The purpose of these treaties is to ensure that the same income stream is not taxed in both Andorra and the country from which it originates.

Beyond its DTC network, Andorra has executed 24 Tax Information Exchange Agreements (TIEAs) with countries including Argentina, Australia, Austria, Belgium, Czech Republic, Denmark, Finland, Germany, Iceland, Italy, Netherlands, Norway, Poland, Sweden, and Switzerland, among others. While TIEAs do not themselves prevent double taxation, they enable the sharing of financial data between revenue authorities.

The tax residency certificate issued by the DTF is the document required to correctly invoke double taxation treaty provisions and to avoid excess withholding on foreign income streams such as dividends, interest payments, or pensions. In practical terms, you present this certificate to your overseas bank, employer, or pension administrator so that the reduced or zero withholding rate permitted under the applicable treaty can be applied.

The DTF issues the certificate in two forms: a standard certificate for proving tax residency to entities in countries with which Andorra has no DTC, and a DTA-specific certificate used exclusively with entities in countries covered by a double taxation treaty.

On 7 June 2017, Andorra signed and ratified the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting (MLI), which entered into force for Andorra on 1 January 2022. This brings Andorra’s treaty network into alignment with current OECD anti-avoidance standards. For the most up-to-date listing of Andorra’s active treaties, consult the Andorran Government portal or the OECD’s treaty database.

What taxes do expats need to pay in Andorra?

Andorra’s fiscal system is widely recognised for its accessibility and modest rates. The principality maintains competitive personal and corporate income tax, and levies no taxes on wealth, inheritance, or most categories of capital gain. Below is an overview of the principal taxes an expat living in Andorra is likely to encounter.

Personal Income Tax (IRPF)

From 2023 onwards, the income tax bands are: 0% on annual income up to €24,000; 5% on income between €24,001 and €40,000; and 10% on any income exceeding €40,000. These rates apply to tax residents on their total worldwide income. For comparison, Spain’s top marginal rate reaches 45% and France’s tops out at 40%, making Andorra considerably more appealing for those with higher earnings.

Every taxpayer must file their own individual return; combined declarations — for instance, for married couples — are not available. Income arising from Andorran investments, such as returns on government bonds or dividends from Andorran entities, is excluded from personal income tax.

Non-Resident Income Tax (IRNR)

Those who do not hold Andorran tax residency are subject to the Impost sobre la renda dels no-residents fiscals (IRNR), charged at a uniform rate of 10% regardless of the level of income involved. This levy applies exclusively to income generated through economic activity conducted within Andorra.

Capital Gains Tax

Andorran tax residents are generally subject to a 10% tax on capital gains, with the first €3,000 exempt. Where a taxpayer holds 25% or less of a company, any profit realised on the disposal of those shares is entirely exempt — meaning that selling a small stake in a foreign-listed company at a profit will typically attract no Andorran capital gains liability.

Gains on the sale of immovable property are taxed at progressive rates ranging from 0% to 15%, calculated by reference to the period for which the property was held. Properties owned for more than 12 years may qualify for full exemption from this charge.

Indirect Tax / VAT (IGI)

The central indirect levy in Andorra is the IGI (Impost General Indirecte), which functions as the equivalent of VAT elsewhere. The headline rate of 4.5% applies to most goods and services, well beneath the rates imposed in neighbouring countries. Selected categories attract reduced rates of 2.5%, 1%, and 0%, while banking and financial services carry a rate of 9.5%.

Property Tax

An annual property tax averaging around €100 per property applies. The transfer of real estate between individuals is subject to a transfer tax of between 1.5% and 2.5% of the purchase price. These levies are administered at the parish level by the comuns, and rates may differ slightly between parishes.

Wealth, Inheritance, and Gift Tax

Andorra imposes no net worth tax and no inheritance tax. The transfer of assets between individuals — whether through inheritance or donation — is not subject to inheritance or gift levies of any kind. This represents a substantial benefit relative to countries such as France, Spain, or Germany, where such transfers can attract significant charges.

Social Security Contributions (CASS)

Both employers and employees must contribute to the Cassa Andorrana de Seguretat Social (CASS), which funds healthcare, maternity, paternity, and retirement provision. Contributions are calculated on the employee’s gross salary and are divided between a general branch covering health and maternity/paternity benefits and a retirement branch. Employers pay approximately 15.5% in payroll contributions covering social security, healthcare, and related statutory benefits.

For self-employed individuals, social security contributions in Andorra are calculated annually at 22% of the country’s average salary, which stood at €533.87 in 2024. Rates and thresholds are reviewed each year, so always check the CASS website at cass.ad for the current figures.

Are there any tax breaks or special regimes for expats in Andorra?

Unlike Portugal’s former Non-Habitual Resident scheme or Italy’s flat-tax programme for new residents — both of which grant a defined period of preferential treatment on foreign-source income — Andorra does not offer a time-limited tax holiday for new arrivals. Its advantages are instead embedded in the permanent rate structure: low headline rates apply universally to all tax residents from the moment they qualify.

Among the benefits available to individuals who establish Andorran tax residency are: personal income tax of 0% on earnings up to €24,000, a ceiling of 10% above that threshold, and the complete absence of taxes on wealth, inheritance, and gifts.

The capital gains exemption on shareholdings below 25% is particularly attractive for investors. If your stake in a foreign company falls beneath this threshold and you realise a profit on disposal, no Andorran capital gains tax will apply — a meaningful advantage for portfolio investors.

Andorra’s Digital Nomad residency pathway provides an option for professionals who carry out their work online without requiring a physical local business presence. This route allows successful applicants to obtain both administrative and tax residency in Andorra, with their professional income taxed under the standard IRPF framework. Applications require a favourable decision from the relevant ministry, typically processed within two to four weeks, and the programme is selective, targeting highly technological, innovative, and digitally oriented profiles.

Like the passive residence route, Digital Nomad residency requires only 90 days of physical presence in Andorra annually. Its principal advantage over standard active residency is that applicants are not required to lodge the €50,000 deposit. The trade-off is that those on this pathway do not contribute to CASS and therefore do not receive social security coverage.

Holding companies that invest outside Andorra may benefit from a reduced corporate tax rate of 2% on profits — a feature that can appeal to investors structuring international holdings. The eligibility criteria for this rate should be carefully reviewed with a specialist and cross-checked against current legislation at govern.ad.

How and when do expats file a tax return in Andorra?

The tax year for individuals in Andorra runs in step with the calendar year, from 1 January to 31 December. The personal income tax return must be submitted and any tax liability settled between 1 April and 30 September of the year that follows the relevant reporting period. For example, the 2024 tax return must be filed between 1 April and 30 September 2025.

Between 1 April and 30 September 2024, all taxpayers were required to submit their personal income tax return for the 2023 tax year, confirming the consistent annual pattern. Always check the precise dates for the current year with the Departament de Tributs i de Fronteres at govern.ad, as the official start date can shift slightly year to year.

The steps below outline the typical process for expats completing their first tax return in Andorra:

1. Obtain administrative residency. Before you can become a tax resident, you must hold a valid Andorran residence permit — either active (employee or entrepreneur) or passive (financially independent). Apply through the Ministry of the Interior (Ministeri de l’Interior).
2. Register with the DTF. Once you satisfy the conditions to be treated as a tax resident, obtain the official tax residency certificate (certificat de residència fiscal) issued by the Departament de Tributs i de Fronteres (DTF), Andorra’s tax authority.
3. Enrol with CASS. If you are employed or self-employed, register with the Cassa Andorrana de Seguretat Social to begin making social security contributions.
4. Gather your income documentation. Compile records of all worldwide income — employment earnings, rental receipts, dividends, capital gains, and any foreign-source income — covering the relevant calendar year.
5. Prepare your return. Each taxpayer files an individual return; joint declarations are not permitted. Returns are submitted electronically through the Andorran government’s online portal. Visit govern.ad for the portal and the latest official forms.
6. Submit and pay within the window. File your return and settle any outstanding tax between 1 April and 30 September following the end of the tax year. Late submission attracts surcharges and penalties, so it is wise to begin collating documents well ahead of the deadline.
7. Retain all records. Keep copies of your submitted return, supporting documentation, and your tax residency certificate for a minimum of five years, as the DTF may request these in the event of an audit.

The Andorran government website’s section covering Taxes — Personal Income Tax contains general guidance on the annual return process. Engaging a local tax adviser or accountant, particularly for your first filing year, is strongly recommended to ensure all available deductions and exemptions are correctly claimed.

What are the tax implications of leaving Andorra?

Relocating away from Andorra involves a number of tax steps that must be addressed to prevent continuing obligations or unforeseen liabilities. Unlike certain other jurisdictions, Andorra does not currently apply a standalone exit tax on unrealised asset gains at the point of departure, but you remain fully liable for all taxes that have accrued through to the date on which you cease to be a resident.

A final IRPF return should be filed covering the period from 1 January to the date of your deregistration as a tax resident. This return falls within the standard filing window of 1 April to 30 September in the year following your departure, though specific circumstances may require earlier submission — confirm the applicable rules with the DTF before you leave.

Once you are no longer an Andorran tax resident, you will ordinarily be absorbed into the tax system of your new country of residence. If you are relocating to France or Spain, for instance, properly establishing tax residency there ends your Andorran fiscal residency — though those departing for Spain should also familiarise themselves with Spain’s own exit tax provisions applicable to holders of large shareholdings.

To complete the formal deregistration, you must notify both the DTF and the Ministry of the Interior that you are relinquishing your residence permit. Any refundable deposit will be returned once deregistration is finalised and all outstanding tax obligations have been cleared. Bear in mind that your destination country may also impose its own exit charges on individuals who relocate while holding significant unrealised gains.

Should you retain Andorran assets after leaving — such as real estate or a shareholding in an Andorran business — income or gains from those assets may remain subject to the non-resident IRNR rate of 10%. Professional advice ahead of your departure is strongly recommended to ensure all obligations are properly addressed.

Practical tips for managing taxes as an expat in Andorra

• Keep a precise record of your days. Tax residency is triggered by spending more than 183 days in Andorran territory over the calendar year, and sporadic absences count as days in Andorra unless you can demonstrate residency elsewhere. Maintain a travel diary, retain boarding passes, and collect any other evidence of your movements throughout the year.
• Recognise that administrative and tax residency are distinct concepts. Regardless of which residence permit you hold, satisfying its administrative conditions does not automatically make you a tax resident. Confirm your exact status with the DTF as soon as you arrive in the country.
• Secure your tax residency certificate without delay. This certificate is the key document needed to demonstrate your Andorran tax status to foreign tax administrations, financial institutions, and any other party requiring verification. Without it, overseas payers may apply default withholding rates to income remitted to Andorra.
• Make proactive use of double taxation agreements. Where income originates in a country that has a DTA with Andorra, present your Andorran tax residency certificate to the foreign payer before payment is made, so the reduced or eliminated withholding rate under the treaty is applied at source rather than reclaimed later.
• Take specialist advice before disposing of significant assets. The rules governing capital gains — particularly on real estate and majority shareholdings — are detailed and can be time-sensitive. The rate applicable to a property sale can vary considerably depending on how long you have owned it. Careful planning with a professional before any disposal is essential.
• Plan your social security obligations from the outset. CASS contributions are compulsory for employees and the self-employed and must be incorporated into your financial projections from day one. The monthly CASS contribution for self-employed individuals amounts to 22% of the country’s average salary (as of 2024), representing a meaningful commitment alongside income tax.
• Engage a local tax specialist with cross-border experience. While Andorra’s domestic rules are comparatively straightforward, their interaction with your country of origin can be complex — particularly if you receive foreign pensions, hold rental properties abroad, or own shares in overseas companies. A professional with expertise in expat or cross-border taxation in Andorra is invaluable, especially during your first year of residency.
• Monitor legislative developments closely. Andorran tax law has seen several significant changes between 2023 and 2025, including the introduction of controlled foreign company rules, restrictions on the deductibility of financial charges, and the creation of a Foreign Investment in Real Estate Tax (FIRET). Subscribe to updates from the DTF or retain an adviser to stay informed of changes that could affect your situation.

Frequently asked questions about taxation in Andorra

How do I become a tax resident in Andorra?

Under Andorran law, an individual qualifies as a tax resident if they spend more than 183 days in the country in a calendar year (or 90 days under the passive and digital nomad residency pathways), or if their centre of economic interests is situated in Andorra — meaning the jurisdiction from which the majority of their personal income derives. A valid administrative residence permit must also be held before tax residency status can be formally recognised.

Does Andorra tax worldwide income?

Yes, Andorran tax residents are liable to personal income tax on their total worldwide income. Those who are not tax residents are assessed only on income that originates within Andorra. This approach mirrors the standard adopted by most OECD nations and means that once you hold recognised tax residency, all global income streams — salary, rental receipts, investments, and pension payments from any country — must be declared.

Are foreign pensions taxable in Andorra?

Salaries, most foreign investment income, and pension payments are all subject to the same income tax rates in Andorra. Accordingly, a foreign pension received by an Andorran tax resident is in principle liable to IRPF. However, where a double taxation agreement is in place with the country paying the pension, relief may be available. Obtaining your tax residency certificate and presenting it to your pension provider is the recommended way to claim any applicable treaty benefit.

Is there any tax on dividends in Andorra?

Dividends paid by Andorran tax-resident entities are not subject to tax in Andorra. Conversely, dividends paid by a non-resident company to an Andorran tax resident form part of that resident’s taxable income and are subject to IRPF. Where a DTA exists with the paying country, it may reduce the foreign withholding tax deducted before the dividend is received.

What is the filing deadline for the Andorran income tax return?

Personal income tax returns must be filed and any outstanding liability paid between 1 April and 30 September in the year following the reporting period. Extensions are not routinely available, and late submission may attract surcharges and interest. Always verify the precise dates for the current year with the DTF at govern.ad.

Does Andorra have an inheritance tax?

Andorra levies no net worth tax and no inheritance tax whatsoever. This exemption applies irrespective of the value of the estate or the nature of the relationship between the deceased and their beneficiaries. However, where inherited assets are located in another country, the inheritance tax legislation of that jurisdiction may still apply depending on where the assets are situated and where the beneficiary is domiciled.

How does Andorra’s VAT compare to other European countries?

The contrast is striking: Spain’s standard VAT rate stands at 21% and France’s at 20%, whereas Andorra’s standard IGI rate is just 4.5%. Education, healthcare, and medicine are entirely exempt from the IGI in Andorra, adding further to the system’s favourable character.

Can I lose my Andorran tax residency if I travel abroad frequently?

Residency is established by spending more than 183 days in Andorra during the calendar year, with occasional absences treated as time in Andorra unless you can prove fiscal residency elsewhere. If you are spending a substantial portion of the year in another jurisdiction — for example, managing business operations overseas — you should obtain specialist advice on whether that country may assert a competing tax residency claim, which only a DTA can resolve where one exists.

What happens to my taxes if I leave Andorra permanently?

You must file a final IRPF return for the period during which you were resident, formally deregister with the Ministry of the Interior and the DTF, and clear all outstanding tax liabilities. From the point at which your Andorran tax residency officially ends, you will generally enter the tax system of the country to which you have relocated. Any Andorran-source income or gains arising after your departure may still attract non-resident IRNR at a rate of 10%, so structured advance planning is strongly advisable.