I have received many questions about the changes introduced by the Andorran Government in the last 12 months, and how the new Tax Laws will impact a country that has by tradition, (and written in the constitution) has not burdened its citizens (and residents) with taxation, nor has it taken a watch dog approach on the international laws of Private Banking. Such an extreme move towards the exterior world, with the introduction of Personal Income Tax, Corporate Tax and the cession of “Private Banking” is being perceived as killing the goose that lay the golden egg by many long term residents, and others who look to Andorra as a reasonable tax option, along with Malta, Cyprus and Monaco for a European base. The introduction of Double Taxation Treaties also have left pundits scratching their collective heads as to the direction the current government is carrying this micro-nation, as flames of Andorra being consumed by the European are being fanned by many of the speculative journalists within the Principality.
So why the changes?
It all comes down to to self preservation, and a better, more secure lifestyle for those who are genuinely interested in what Andorra has to offer.
- Private Banking will continue as it has now, to all official Residents in Andorra. The OECD and European Union Laws of Banking Transparency will of course affect individuals who wanted to use Andorra as a banking hub. People willing to comply with the regulations required to be a resident in Andorra will be justifiably protected in terms of their banking secrecy.
- Income Tax has been introduced on all international income over €24 000 (5%) and 10% for income over €40 000. Shares and dividends of Andorran Companies to Andorran Residents are not taxed. This is obviously directed in Andorra becoming a business centre, not relying on individual High Net Worth, but the formation of companies and the introduction of new enterprises in Andorra.
- Double Taxation Treaties that have been signed (to date) with Spain and France, and ratified with Portugal, the U.K. Germany, Italy and many other countries including the distant shores of Australia and New Zealand, have not been hastily introduced for the payment to foreign Tax Offices, but rather to allow International Businesses an advantage over the current scheme whereby all funds from foreign Investment are charged with the E.U. withholding tax of €35%. Under the new scheme, this taxation will be set at 10%, therefore international businesses with their headquarters based in Andorra will only be taxed 10% on all foreign income, and the dividends and shares paid out to shareholders will be taxed at 0% as long as the receiver is an Andorran Resident.
It comes clear after reading the above points that gone are the days of Andorra being an offshore “low tax” option, but rather the direction that the Andorran Government navigating a way to ensure that there are genuine fiscal advantages for those individuals who want to live, work and invest in the country.
The introduction of these new fiscal laws should open opportunities for many individuals who would not have considered the Principality under the old fiscal regime. They have also created many new avenues of financial structures for international (and local) enterprises to improve their current situation. It would be very beneficial to investigate these these individual options by contacting a specialist in Andorran Fiscal Law, we currently have been receiving excellent consultancy from the company Òptim Tax, but there are many other similar organisations in Andorra who would be able to assist in this task.