Andorra tax on financial investments
Andorra tax treatment on income from dividends, coupons, capital gains, currencies, deposits
The general tax rate in Personal Income Tax for individuals in Andorra is very low (10%), but the tax arising from financial investments is even more attractive. In this summary, we will explain only the tax treatment of an individual tax resident in Andorra according to the tax system currently in force.
The Andorran income tax system is based on two main kind of rents:
General income tax base (employment, income from business or economic activities and real estate leasings).
The brackets can be summarized as follows:
As from 0-24,000 fully exempt or 0%
As from 24,000-40,000 the tax rate applicable to income is 10% but adding a bonus of 50%, the effective tax rate is 5%.
As from 40,000 in advance, the tax rate is 10%
Tax Base for Income Savings (income from capital gains, dividends or interests)
Income coming from financial investments is taxed on the basis of a fix tax rate of 10% considering the first 3,000 € fully exempt.
We will explain the five categories of income taxable and the tax treatment of each of them on the basis of the current Andorra Tax System.
(I) Andorra Tax treatment on Deposits / Interest-bearing bank accounts / Structured products
The proceeds of this source are subject to Personal Income Tax at the rate of 10%
(II) Andorran Tax for Equity on Investment Funds (Andorran Pooled investment funds or SICAVs)
Income arising from investments in pooled collective investment vehicles located in Andorra is treated as follows.
Dividends: Fully exempt.
Capital Gains: Exempt if the individual held less than 25% or if he maintained the investment for at least 10 years as from the acquisition.
(III) Andorran Tax for Equity from Investment funds non-Andorran
Income arising from investments in pooled collective investment vehicles located out of Andorra is treated as follows.
Dividends: Subject at the rate of 10% (applying the elimination of international tax withholding at the source).
Capital Gains Tax: Exempt if the individual held less than 25% or if he maintained the investment for at least 10 years as from the acquisition.
(IV) Tax Treatment on Fixed income securities (bonds or any other financial asset coming from non-equity and producing interests, etc.)
This income is subject to the rate of 10%
(V) Taxation on Dividends on Equities
If the company is non-resident, then the dividends are taxed at the rate of 10%,
In the case that the company is resident, then the dividends are fully exempt.
(VI) Tax applicable to capital gains arising from Currencies or Cryptocurrencies
Income coming from trading in official currencies or cryptocurrencies are subject to income tax in Andorra at the rate of 10%.
The key matter is the moment of the accrual of the tax. The Andorra Tax Authority has determined that any exchange of a currency or cryptocurrency is subject to income tax at the moment of exchange and it is not necessary to wait until the currency or cryptocurrency has been converted in official currency.
(VII) Capital Gains Tax on investments
Generally, capital gains originated by the participation in companies or investment funds are exempt since the law declares the exemption if the individual had an stake lower than 25% or maintained the holding for 10 years.