Andorra tax treatment on cryptocurrencies

Jose Maria ALFIN
April 12, 2022

Andorra tax on cryptocurrencies summarized

Andorra is a jurisdiction with an attractive tax regime which subject to tax the worldwide income of the individuals residing in the country from the tax point of view.

The Andorra tax system is based on two groups of income:

General Base: Employment Income; Business Income and Income from Real Estate (leasings…)

Savings Base: Dividends; Interests; Coupons and Capital Gains arising from any transaction.

The first base is based on three scales:

0-24,000 €.- Minimum Exempt.

24,000-40,000 € 50% over the general tax rate. (in practice, 5%)

40,000 € or more.- 10%.

The tax savings base subject to taxation the items as follows: interests, dividends (if they are not distributed by a local entity or has not been subject to withholding at the source) and capital gains (with some exceptions). The rate is 10% with a minimum exemption up to 3,000 €.

That means that capital gains arising from trading in cryptocurrencies are subject to 10%. The key question here is when the tax is accrued.

Some countries, such as the Spanish case, subject to tax each transaction where the cryptocurrency is exchanged by another different cryptocurrency. According to this position and using the FIFO methodology, each exchange would be a tax event and the gain or loss should be calculated at that moment.

The Andorra Tax Authority issued a binding consultation on 2018 in this regard, saying that the accrual of capital gains arising from cryptocurrencies should be treated in the same form that an exchange of official currencies. In summary, according to the criteria of the Andorra administration, the capital gain should be accrued at the moment of the conversion of the virtual currency into the official currency or in the case of an exchange of a virtual currency by another virtual currency if that exchange originates a gain, the accrual is produced at that moment.