Low tax rates, as well as the non-existence of Estate Tax or Inheritance and Gift Tax, are some of the reasons that make Andorra’ s tax system one of the most attractive tax systems in the Euro Zone. For this reason, Andorran taxation has become one of the reasons why more and more people decide to move there. But what are the main tax obligations in Andorra?
Very well, from WIT we will begin to explain these obligations from the role of the tourist who goes on a trip.
What taxes do I have to pay if I travel to Andorra?
The tourist tax is a tax added to the price of accommodation in hotels, apartments or campsites that operates in many European countries, such as France, Spain or Italy.
This tax is usually administered as a finalist fund to pay for increased spending on public services, such as transportation, waste management or healthcare, due to the high presence of tourists. And Andorra is no exception in this respect.
Thus, as of July 1, 2022 , there will also be a tourist tax in Andorra. This tax will be used to finance various projects to improve the quality of tourism services, as well as to deseasonalize the influx of visitors, diversify the country’s offer and maximize the positive experience of customers.
But how much is the tourist tax in Andorra?
How much does the tourist tax cost in Andorra?
The tourist tax will have a different price depending on the category of the accommodation you book and will be established in the invoice separately from the cost of the services, therefore:
- If you stay in a 5-star hotel, you will pay 3 euros per person per night.
- If you stay in a 4 star or 4 ears hotel (unit used to rate rural accommodations), you will pay 2 euros per person per night.
- If you sleep in a tourist apartment, it will cost you 2 euros per person per night.
- If you stay in a 2 or 3 star hotel, you will pay 1.50 euros per person per night.
- In other accommodations, such as pensions or camping sites, you will pay 1 euro per person per night.
Likewise, it is essential that you know that 4.5% IGI (General Indirect Tax) will be added to this amount. This rate would be equivalent to VAT in Spain, but with lower percentages. Therefore, if for example, in a 4-star hotel you would pay 2€ per person per night, adding the IGI you would be charged a total of 2.09€.
However, who is exempt from paying this type of tax?
Who is exempt from paying the Andorra tourist tax?
Andorran regulations provide for exemptions from paying your country’s tourist tax. Therefore,minors under 16 years of age, people staying in the same accommodation for more than 14 consecutive days and stays organized by decision of the social services of the Government of Andorra will not pay anything .
In addition, persons staying in Andorra for reasons of force majeure, stays in accommodation classified as holiday camps and hostels when organized or promoted, in whole or in part, by public entities and residents living in Andorra who are tourists in Andorra will be exempt from paying the tourist tax.
Now, but what kind of taxes do residents of Andorra pay?
What taxes do I have to pay if I am a resident in Andorra?
The tax system in Andorra is one of the greatest advantages enjoyed by the residents of the country, due to the fact that it has a system that favors tax members.
In spite of including in its structure the statutes of conventional systems, it manages to incorporate some points in its favor. This gives them a great advantage over other countries. But what are the main tax obligations in Andorra?
State taxes
Regarding direct taxation, both individuals and companies, tax residents in Andorra, are taxed in the country for all worldwide income received, with Personal Income Tax (IRPF) and Corporate Income Tax (IS), respectively. Subject to a tax rate of 10%, there are some exemptions in the case of personal income tax.
Therefore, how much personal income tax does a resident of Andorra have to pay?
In that country, net income of less than €24,000 is tax-free. However, income between €24,001 and €40,000 is taxed at half, i.e. 5%, and income over €40,000 is taxed at 10%.
On the other hand, non tax residents in Andorra are subject to Non-Resident Income Tax, which is levied at 10% on income obtained in the country (salaries, rents or any income arising from the exercise of any economic activity in Andorra), but exempt from taxation on the receipt of passive income, dividends and interest.
With respect to indirect taxation, professionals, businessmen and companies whose turnover exceeds 40,000 euros must file a General Indirect Tax (IGI) return, subject to a tax rate of 4.5%.
Real estate transactions carried out in Andorra are subject to capital gains tax and real estate transfer tax.
Who pays and how much is the Capital Gains Tax and the Real Estate Transfer Tax?
If you are going to carry out a real estate transaction in Andorra, you should know that it implies the payment of the Capital Gains Tax, and the payment of the Real Estate Transfer Tax (Impuesto sobre Transmisiones Patrimoniales Inmobiliarias).
The Capital Gains Tax must be paid by the transferor (who sells the property), at the time of the sale. This tax is levied at a graduated rate of 1 to 15%. Those who have owned a property for more than 10 years are exempt from this tax.
The purchaser (who buys the property) must pay the Real Estate Transfer Tax (Impuesto sobre Transmisiones Patrimoniales Inmobiliarias) at 4% of the real value of the property. However, it should be noted that the transfer of land or property between spouses or domestic partners, collateral relatives or affinity relationships are exempt from taxation.
Common and local taxes and fees
In addition to the above, both individuals and corporations may be subject to common and local taxes or fees related to residence, the exercise of an economic activity or the tendency of a real estate property.
What are the local taxes and fees in Andorra?
- All individuals between 18 and 65 years old who live in one of the parishes of Andorra must pay the Foc i lloc fee, which can vary from 20 to 40€ depending on the Comú.
- Those who own a property must pay the Property Tax of 0.55% on the square meters. If, in addition, the property is rented, they will have to pay the Tax on Leasehold Income, which is 2 or 3% of the rent.
- Individuals and legal entities, tax residents in Andorra must pay the Public Hygiene Tax, between 30 and 50€, as well as the Public Lighting Tax.
- The granting of the authorization to establish a business: the holder of the professional, commercial or economic activity must pay the Tax on the Authorization of Establishment, which is between 23.50 and 120 euros, depending on the Comú.
- Those who carry out an economic activity must pay the Tax on the Establishment of Commercial, Business and Professional Activities in the corresponding parish, from 0.5 to 2%, depending on the meters of the surface exploited.
If you have any questions about the taxes you might pay in Andorra, do not hesitate to contact us. From WITwe offer the best tax, financial, labor and accounting advice to you and your company.
