Have you heard about the General Indirect Tax (IGI) in Andorra and wonder what it is and how it works? At WIT, we offer you a detailed guide to understand this important tax and how it affects your business.
What is the General Indirect Tax in Andorra?
The General Indirect Tax (IGI) is the Andorran equivalent of the VAT in other countries. This tax is levied on the consumption of goods and services within the Principality of Andorra.
How does the IGI work?
IGI is a tax that is added to the price of goods and services. Businesses are responsible for collecting this tax from their customers and subsequently paying it to the government.
What does the IGI tax?
IGI is levied on a wide range of goods and services, from everyday items to professional services. It is a versatile tax that affects almost all commercial transactions in Andorra.
The IGI tax rates are as follows:
- General Rate (4.5%): This is the most common rate in Andorra. It applies to most goods and services not covered by the special categories mentioned below. Comparatively, this rate is significantly lower than VAT in Spain (21%) or TVA in France (20%), reflecting a less burdensome tax policy in Andorra.
- Super-Reduced Rate (0%): applied to public healthcare, education, primary housing, and investment gold.
- Reduced Rate (1%): applies to food for human and animal consumption, water, live animals, seeds, plants, books, newspapers, and magazines.
- Special Rate (2.5%): applies to passenger transport, private cultural services, and art and antiques.
- Increased Rate (9.5%): only applies to financial and banking services.
Andorra’s tax structure, with its relatively low general rate, is a key aspect of its fiscal attractiveness, especially compared with neighboring countries like Spain and France.
IGI Filing Frequency According to Revenue
The filing and payment frequency of the IGI in Andorra varies depending on your business’s revenue. For companies with high revenue, filing may be monthly, while for smaller businesses, it could be quarterly or annual.
Special Regimes under the IGI Law
It is important to note that the IGI law establishes special regimes, tailored to different types of activities and business circumstances, providing taxation more aligned with the reality of each business.
IGI Refund
With the tax reform passed in 2023, the possibility to apply for a refund of the IGI quota on a regular basis is established. This represents a significant opportunity to improve companies’ liquidity and cash flow.
Exemption for Small Entrepreneurs
In addition, it is important to know that there is the possibility of not being considered a business or professional for tax purposes if the annual turnover does not exceed 40,000 euros. This can represent a great tax relief for small entrepreneurs and freelancers, simplifying their tax management.
In Andorra, residents who are final consumers have a notable advantage when making purchases in other countries, especially in the European Union. When they buy products in foreign countries, they have the option to claim tax free or VAT refund (Value Added Tax) when taking these products back to Andorra by paying the corresponding IGI (Value Added Tax) at customs.
The General Indirect Tax is an essential part of Andorra’s tax system. Knowing how it works, what it taxes, and how these new provisions can be applied is crucial for any business.At WIT, we help you to navigate the complexities of IGI so you can focus on what really matters: growing your business.
Do you need more information about IGI or assistance with your tax obligations in Andorra? Contact WIT, your trusted advisor, and let us help you simplify your taxation.
