A Country Nobody Talks About: Is Andorra 🇦🇩 Europe's Tax Haven?

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Andorra, officially the Principality of Andorra, is a sovereign landlocked microstate on the Iberian Peninsula, between France and Spain.
Andorra is the sixth smallest state in Europe, with an area of 468 square kilometers (181 sq mi) and a population of approximately 77,006. Andorra is the world's 16th-smallest country by land and 11th-smallest by population. Its capital, Andorra la Vella, is the highest capital city in Europe, at an elevation of 1,023 meters (3,356 feet) above sea level. The official language is Catalan, but Spanish, Portuguese, and French are also commonly spoken.

Andorra is not a member state of the European Union, but the euro is its official currency. It has been a member of the United Nations since 1993. In 2013, Andorra had the highest life expectancy in the world at 81 years, according to the Global Burden of Disease Study.

Andorra has the lowest VAT rate in Europe! Instead of sales tax, a value-added tax is applied to goods and services. In Andorra, the VAT is the lowest anywhere in Europe, with a general rate of 4.5%. It is known as “I.G.I.”, short for “impost general indirecte“.

The basic personal income tax rate in Andorra is 10% for resident individuals. In Catalan, this income tax is called “Impost sobre la renda de les persones físiques” or IRPF for short.

Income below 24 000 EUR per year is tax-free for single individuals, and for married couples, it's 40 000 euros or less. If a single person makes between 24 000 and 40 000
EUR per year, they will only pay 5% in taxes.

The Andorran corporate tax rate is 10%. For now, holding companies that invest outside of Andorra only pay a 2% tax rate on profits.

For both individuals and companies, capital gains are treated like any other income from a tax perspective. That means that the nominal capital gains tax rate is 10%.

It is important to note that you do not pay tax on gains from selling shares if you own less than 25% of the company. That means that you can effectively buy and sell (or day trade) most stocks without paying tax on the profits.

Also, the Andorra tax rate is 0% on gains from selling an asset that you have owned for more than 10 years.

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Author: Michael Rosmer

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