I am pleased to say that I have teamed up with a UK based but International team of experts who are in a position to advise you on matters that may concern you in your country of tax domicile, wherever that may be, when considering a relocation to Andorra. This will be done on a free and without obligation introductory chat with an advisor to find the best way for you to take advantage of potentially minimal income tax regime of passive residency in Andorra. Whether you are concerned about or wish to legally avoid paying company taxes, income taxes, VAT or the setting up offshore companies, trusts etc, this website is a one stop service to advising you and putting theory into practice, and without obligation.
I plan to keep an explanation of recent tax agreements very simple:
Before these agreements Andorra enjoyed one of the most secretive banking systems in the world, and after these agreements that in most cases remains as is (although the word secret should be replaced with say "private"). Residents of Andorra are not affected firstly by the EU Witholding Tax, and that includes passive residents no matter where their previous country of residence.
From July 2011 any resident of an EU country who is not a resident of Andorra and who has a bank account in Andorra has 35% of all interest or profit earned on investment retained by the bank who will pass the funds to the Fiscal Department here in the Andorran Government.
Then, 75% of that money will be remitted to the country of residence of the EU National, and 25% retained by Andorra. Contrary to rumour, absolutely NO information on the identity of or details of the account holder WHATSOEVER will be passed to whichever country where the funds are remitted. In other words "private" banking continues as normal, albeit with a penalty tax.
Andorra opted for this route rather than the sharing of information which some other offshore jurisdictions have. As a resident you will NOT be liable for any witholding tax whatsoever.
Secondly there are the agreements signed between Andorra and other countries called Financial Disclosure Agreements. As at March 2012 a total of 17 bilateral agreements have been signed between Andorra and:-
France, Portugal, Spain, Austria, Belgium, Netherlands, Denmark, Sweden, Finland, Norway, Iceland, Liechtenstein, San Marino, Monaco, Argentina, the Faroe Islands and Greenland.
However Andorra’s former Head of Government, James Bartumeu, announced on May 3rd 2010 that Andorra had opened negotiations with Australia, the US and Britain regarding new treaties. Nothing has been heard since, and it is debatable whether the will for more treaties is there as the total of 17 countries was the minimum number of agreements that Andorra had to sign to be removed from the list of financial paradises demanded by the EU. As at May 2012 no further news has been received concerning further negotiations.
The criteria for Andorra to be removed from the blacklist has now been satisfied.
So why the do I say that the secrecy (privacy !) has been retained ?
Any request for financial information is not a fishing expedition and strictly must derive from a judicial request relating to the evasion of tax by an individual (resident or non-resident in Andorra) from one of the signatory jurisdictions. The Ministry of Finance in Andorra will consider the request and either issue the disclosure order to the relevant bank or not. As at July 2012 not one single disclosure request has been received from the Ministry of Finance. So unless you are criminally evading tax payable in one of these countries and it is so proven to the Andorran authorities, your banking here remains (very) "private".
In fact it remains a criminal offence here for any person to disclose any information on any account to anyone, and that goes as far as confirming the person even has an account. There will continue to be no liaison directly with tax authorities in any jurisdiction in the world except as explained above on a judicial request.
The advice laid out here is my personal advice and does not constitute legal advice.
EU Withholding tax (Fiscalitat dels rendiments de l’estalvi)
A tax of 35% is withheld on all interest and profits derived from bank accounts held in Andorra by non residents and who are residents of an EU country. The purpose of this was to remove Andorra from the list of financial paradises as cited by the European Parliament. Andorra chose this route rather than direct financial disclosure of accounts of non-residents as some countries chose to do. This has retained a degree of privacy especially as a portion of the tax collected, currently 75%, is sent to the resident country of the account holder but without any form of identification whatsoever of the individual or account dealings. This system will be replaced from 2018 ( with the exchange of financial information rules).
The Principality of Andorra established a procedure allowing beneficial owners to avoid the withholding tax, if the beneficial owner referred to produces a certificate issued in his name by the competent authority of his Member State of residence.
On January 1st 2013 the new indirect tax system was introduced called IGI (Impostos generals Indrectes) of 4.5%. This is the start of the VAT or IVA, a general levy on (most) goods and services. There are varying rates but you should mainly be concerned with the 4.5% band.
Non resident tax on Services (IRNR - Impost sobre la renda dels no-residents fiscals)
This applies to non resident individuals and companies who have derived a financial benefit in Andorra through services, repairs, maintenance etc which has been provided to an Andorran company or individual. There is the example of a non resident owner of an appartment earning rental income from a resident (or other non resident). The Agent is now obliged to reatin and declare 10% of the renatl income and pay the same to the Government.
On all non resident entities earning money in Andorra there is a 10% tax declarable and payable in Andorra. The law also provides that the non resident company or individual must appoint a tax representative in Andorra to declare and arrange for payment.
Capital Gains Tax (Plusvàlua) ( For Andorran Property only)
This applies to the sale and transfer of property only and is not a general tax. It is payable on the difference in the purchase and sale price and diminishes to from 15% to 0% liability over a period of 11 years. If the property is a main residence and the person purchases another within six months, no tax is payable. There is a complicated calculation formula compiled by Notaries upon a property transaction. There is no other capital gains tax on financial instruments or sale of assets outside Andorra where the proceeds are remitted here except under the provisions of the forthcoming IRPF.
Tax on business activities ( Impost activitats econòmiques)
From 2013 the IAE tax has been introduced at 10% on profts. There is an allowance of the first €40,000 profit derived from these economic activities. This is specifically aimed at individual residents who provide services in Andorra for Andorran companies or individuals, for example a person who is paid for designing websites for an Andorran company, a cleaner, a self-employed mechanic etc. This is separate from Corporation tax explained below. This is to be replaced with the arrival of IRPF
Corporation Tax ( Impost sobre les societats)
From 2013 the Corporation Tax has been set at 10% and is unlikely in the near future to change. It is direct tax on profits earned by any company registered in Andorra without any allowance on profits as in the IAE category. Returns to the Government are set down for each July.
Personal Income Tax (IRPF)
As above starting from Jan 1st 2015