Colloquially speaking, we could say that Andorra has done its homework. In the process of its approval by the international fiscal community, it has ended up strategically positioned as one of the most competitive jurisdictions in the world for those individuals who are looking for a country from where they can manage their business and personal wealth in optimum conditions.
Andorra has been brave to the challenge making a conscious decision to complete its fiscal model. Aware of the demands of the current international environment, which increasingly exert more pressure, and, despite the fact that this has meant that sacrifices have had to be made by the Andorran citizen, passing the law of income tax (IRPF, 5/2014 of the 24th April 2014) has meant a real step has been taken towards direct taxation in our country. The goal was to generate a climate of trust, internationally, that would point favourably to Andorra’s offer as a strategic location.
Recent events have proven right the captains of industry and those in the Andorran government who were well aware that passing the personal tax law (IRPF) was key to negotiating treaties to avoid double taxation. As a direct result of this legislative change, and very soon afterwards, France began the final process of parliamentary ratification, Luxembourg signed and there has been significant progress in the negotiations with Spain and Portugal.
In the last few months, and parallel to the above, there has been a significant increase in authorisation of approved investments. This has been achieved despite the usual limitations that crop up during any form of politically driven economic change in a country. The number of these investments has reached 883 as of the 30th of June 2014. In monetary terms this is expected to be 64 million euros of investment to form, or acquire 733 companies and open up 322 new businesses.
For those expats with active residency whose income is essentially work related, the tax rates are very reasonable: 0% for incomes up to 24,000€ per annum
When all is said and done, behind every investment, are the individuals who have been attracted by, and put their trust in, the advantages our country offers. If any of them were interested, and should they wish to ask those that are dedicated to the consultancy business of Andorra what we are promoting, we would quite obviously answer the excellence that is our country. International observers have analysed our jurisdiction and arrived at the conclusion that, if someone is looking for the optimum fiscal environment, Andorra is now the second most attractive place in the world to set up residency. The values considered in this study were: legal security and personal safety, governmental political attractiveness to new investors, speed of administration, strategic geographic location and access to primary services, and, of course, the tax level for residents of the country.
For those expats with active residency whose income is essentially work related, the tax rates are very reasonable: 0% for incomes up to 24000€ per annum, 5% between 24000€ and 40000€ and 10% for incomes above this value. For passive residents without active income, ie. those who live from “wealth management”, the tax rate will be anything from 0 to 10%, the first 3000€ being exempt. The final figure will depend on their use of collective financial offerings such as the Andorran SICAVs which can effectively reduce tax to nil. Additionally, as an example of a further advantage in an already advantageous fiscal system, the distribution of dividends to partners of Andorran companies is exempt of tax.
The Andorran jurisdiction is aiming to be the preferred jurisdiction for High Net Worth Individuals from all over the world who are looking for a strategic location in Europe that offers guarantees at all levels and a place to live with advantages not offered elsewhere.
Vice-president of the CEA’s Comission of International and Institutional Relations