Corporation tax is a tax of a direct and personal nature for the income of legal entities in accordance with the rules established in the Regulatory Law.
The tax period coincides with the financial year of the entity and cannot exceed twelve months. In the event that the social year is longer, the period ends after twelve months.
The tax base is calculated by correcting the accounting result. The general tax rate is 10%. The tax rate is the amount resulting from applying the tax rate to the tax base. A reduced tax applies to companies that exploit certain intangible assets. International double taxation on income attributable to permanent establishments located abroad is eliminated and deductions are established to eliminate domestic and international double taxation and for job creation and investments.
In September, taxpayers must make a payment on account of the settlement corresponding to the tax period that is in progress on September 1.
Corporation tax payers must have a tax registration number, which they must apply for if they do not already have one as indirect tax payers.
In the first year of application of the tax, taxpayers enjoy a 50% reduction in the settlement fee.
For those subject to this tax who set up as new entrepreneurs of a new business or professional activity and who have an income of less than 100,000 euros, the type of tax applicable during the first three years of activity is:
- 5% for the part of the tax base comprised between 0 and 50,000 euros.
- 10% for the remaining tax base.
This tax bonus cannot be applied to taxpayers who carry out or have carried out any type of activity, either directly or through a company.
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It is a tax of a direct and personal nature for income obtained by natural persons depending on its amount and their personal and family circumstances. The tax is levied on the taxable person’s income, understood as the entirety of his income and capital gains and losses, regardless of where they occurred and where the payer resides.
Natural persons are considered tax residents in Andorran territory in which any of the following circumstances occur:
- That he stays for more than 183 days during the calendar year in Andorran territory. To determine this period, sporadic absences are counted, unless the taxpayer proves his tax residence in another country.
- That the main core or base of its activities or economic interests is located in Andorra directly or indirectly.
Workers who travel daily to the Principality from Spain or France and who have been hired by companies resident for tax purposes in Andorran territory or permanent establishments of foreign companies in Andorran territory are not considered tax residents in Andorran territory.
The tax domicile of tax-paying tax residents in Andorran territory is the one that derives from applying the rules provided for in the regulations governing the bases of the tax system.
In order to determine the bases of taxation and settlement and the calculation of the tax, income is classified into general income and savings income.
They form general income: income from work, income from economic activities and income from real estate capital. And they form the income from savings: income from movable capital and capital gains and losses.
Net income is obtained by the difference between computable income and deductible expenses. Capital gains and losses are generally determined by the difference between the transfer and acquisition values.
The various incomes are integrated and compensated according to their origin and their classification as general or savings income.
The result of these operations determines the general taxation base and the savings.
The general settlement base is the result of reducing the positive balance of the general taxation base by the amount of the reductions provided for in the Law (personal and family reductions, reduction for investment in habitual residence and reductions for contributions to pension instruments social security and compensatory pensions).
The settlement basis of the savings is determined by reducing the positive balance of the tax base of the savings by the amount of the reduction provided for in the Law (minimum exempt reduction).
The general tax rate is 10%. The tax rate is the sum of the amounts resulting from applying the tax rate on the positive balances of the general settlement and savings bases, respectively.
The settlement quota is the result of reducing the tax quota by the amount of the bonus provided for by law and by the amount that results from applying the deductions provided for in the law (deductions to eliminate internal double taxation, deduction to eliminate international double taxation and deduction for job creation and investments).
Taxpayers who have obtained income from work, income derived from economic activities or income from real estate capital will deduct from the tax quota a bonus of 50 percent of the amount that results from applying the tax rate of tax on the amount of the general taxation base of the taxpayer, reduced by the amount of 24,000 euros corresponding to the reduction provided for in the law. This bonus cannot exceed the amount of 800 euros.
The taxpayer must present and sign the declaration between April 1 and September 30 of the year following the end of the tax period.
However, taxpayers who only obtain income from any or all of the following sources are not required to submit the declaration: income from work, income from movable capital and exempt income. In any case, taxpayers who have received income from work or income from movable capital that have not been subject to the obligation to make payments on account in accordance with what is established by law are obliged to submit and sign the declaration.
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The tax on the income of tax non-residents is a direct tax that taxes the income obtained in the territory of the Principality of Andorra by natural or legal persons who are not tax residents in this territory.
Individuals and legal entities that are not fiscally resident in the Principality of Andorra who obtain income that, in accordance with this Law, are considered to have been generated in this territory are liable to pay this tax.
They are jointly and severally liable for the tax debt:
- the payer of the returns accrued in favor of the taxpayers who operate without the mediation of a permanent establishment, or
- the depositary, the representative or the manager of the assets or the rights of the taxpayers who operate without the mediation of a permanent establishment.
Non-resident tax payers are obliged to appoint a natural or legal person with residence in Andorra, to represent them before the ministry in charge of finances in relation to their obligations for this tax when they obtain income through a permanent establishment or when required the ministry in charge of finance.
For income obtained by non-resident tax payers through a permanent establishment, the tax rate is 10%. There are deductions from the tax rate. The tax period must coincide with the financial year declared by the permanent establishment, without exceeding 12 months.
For the income obtained by non-resident tax payers without the mediation of a permanent establishment, the general tax rate is 10%; when it comes to returns derived from reinsurance operations, 1.5%, and when it comes to income paid as a fee, 5%.
They are exempt from tax, among others: income from work, income from movable capital, earnings from shares or participations in Andorran companies (as long as the participation does not exceed 25% of the capital) and derived from the transfer of shares or participations in collective investment bodies.
The tax is due:
- If it is returns, when they are due or on the date of collection if this date is earlier.
- In the case of patrimonial gains, when the patrimonial alteration or transmission takes place.
- In all other cases, when the corresponding income is due.
It taxes consumption of the delivery of goods and the provision of services by entrepreneurs or professionals, as well as the importation of goods.
The general tax rate is 4.5%. A super-reduced levy rate of 0%, a reduced rate of 1%, a special rate of 2.5% for certain operations provided for by the Law and an increased rate of 9.5% for operations are applied provided by banking and financial services.
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The establishment tax for commercial, business and professional activities is a communal tax levied on the exercise of a commercial, business or professional activity carried out in the territory of a parish. The tax obligation falls on the person (natural or legal) who is the holder of the administrative resolution that authorizes the exercise of economic, commercial, business or professional activities.
The communes tax this activity taking into account the type of activity, the location of the business and the surface area of the establishment.
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It is a communal tax levied on the authorization of the establishment of a trade, industry or professional activity in the territory of the parish and/or the change of establishment or administrative owner. The amount of the fee varies according to the parish concerned.
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Persons holding an authorization to establish a commercial, business or professional activity must pay annual parish fees for these services that vary according to the commune in question. It is generally a percentage of a trade’s registration authorization fee.
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NOTE : This content is purely informative and does not constitute any legal basis
