Andorra introduced income tax in 2015 — but “income tax” in Andorra means something very different from what it means in France, Germany, or the UK. The IRPF rate caps at 10% above €40,000 of income. There’s no capital gains tax, no inheritance tax, no wealth tax, and VAT runs at 4.5%. For the right person — a business seller, an investor with significant capital gains, or a high earner who can credibly move their center of life — Andorra’s tax structure is among the most favorable in Europe. This guide explains exactly how the system works and what it means in practice.
Book a consultation call to talk through whether Andorra’s tax structure makes sense for your situation. We work with licensed Andorran advisors.
The IRPF: Andorra’s Income Tax
The IRPF (Impost sobre la Renda de les Persones Físiques) was introduced in 2015 after international pressure for Andorra to end its status as a zero-tax jurisdiction. The result is a very low but real income tax:
| Income bracket | Rate |
|---|---|
| First €24,000 | 0% |
| €24,001–€40,000 | 5% |
| Above €40,000 | 10% |
The effective rate on €100,000 of income: 0% on €24k (€0) + 5% on €16k (€800) + 10% on €60k (€6,000) = €6,800 total = 6.8% effective rate. On €500,000 of income: €46,800 in tax = 9.4% effective rate. The rate approaches 10% at very high income levels but never exceeds it.
Compare this to: France (top rate 45%), Spain (47%), UK (45%), Germany (42%), or even Malta’s GRP at 15% minimum. For high earners, the savings versus any major European country are substantial.
Recorded in December 2025, before the February 2026 passive residency changes (now a €1,000,000 investment and a non-refundable €50,000 state payment). See our Andorra passive residency page for the current rules.
Capital Gains Tax: Zero
Andorra levies no capital gains tax on gains from the sale of securities (stocks, bonds, funds), financial instruments, or business interests. If you sell a business or a major investment portfolio after establishing Andorran tax residency, those gains are not taxed in Andorra.
There is a real estate transfer tax (Impost sobre Transmissions Patrimonials) of approximately 3–4% on property sales. This is a transaction tax, not a capital gains tax — you pay it regardless of whether you made a gain. Real estate gains from property held less than 3 years are subject to a speculative gain tax, but long-held property has no capital gains tax.
The practical use case: someone who has built a significant investment portfolio and anticipates a major capital event (selling shares, liquidating investments) can potentially establish Andorran residency, complete the disposition in Andorra, and pay zero capital gains tax on those gains. This requires genuine residency establishment — not just a passport stamp.
Inheritance and Gift Tax: Zero
Andorra has no inheritance tax and no gift tax. Assets can be transferred between generations without any Andorran tax liability. This is a meaningful advantage for wealth preservation and intergenerational planning, particularly for European families who would otherwise face substantial inheritance taxes in France, Germany, or Spain.
VAT Equivalent: IGI at 4.5%
Andorra’s equivalent to VAT — the IGI (Impost General Indirecte) — runs at 4.5% as the standard rate, with reduced rates (0%, 1%, 2.5%) for specific goods categories. Compare to Spain’s 21%, France’s 20%, or Germany’s 19%. This explains why Andorra has historically been a cross-border shopping destination for French and Spanish consumers: electronics, alcohol, tobacco, perfume, and fuel are all meaningfully cheaper. As a resident, you benefit from this permanently.
What It Actually Takes to Establish Tax Residency
This is where many people fall short. Andorra’s tax advantages only apply if you’re a genuine Andorran tax resident — which requires more than just having a residency permit. Tax authorities in your home country (particularly France and Spain) scrutinize Andorran residency claims aggressively because Andorra is geographically adjacent and the income differential is enormous.
Genuine Andorran tax residency means:
- 183+ days per year in Andorra (the Andorran passive residency minimum of 90 days is not enough to be a tax resident — 183 is the standard threshold)
- Center of economic interests in Andorra — your accounts, business relationships, and financial activity should be based there
- No tax domicile in France or Spain — you must have formally severed tax residency in your home country, which involves more than just moving. In France specifically, this requires filing a tax exit return and not maintaining a home available for your use there
- Substance in Andorra — a genuine home (not a hotel), local bank account, registered address, regular presence
The Spanish and French tax authorities challenge Andorran residency claims regularly. High-profile cases (Spanish athletes, celebrities) have resulted in large back-tax assessments when courts found that the center of life remained in Spain or France. Taking Andorra seriously as a tax domicile means genuinely living there 183+ days per year, not just maintaining a paper address.
Andorra for Non-European Nationals
For US citizens: Andorra residency does not eliminate US tax obligations. Americans are subject to IRS taxation on worldwide income regardless of residency. The IRPF’s 10% rate can be credited against US taxes via the Foreign Tax Credit, potentially reducing the US tax bill — but the fundamental US filing obligation remains. Andorra’s main tax benefit for Americans is on capital gains and inheritance, where Andorra’s zero rates compare favorably to US capital gains rates (15–20% federal + state) and US estate tax (up to 40%).
For Canadians: Canada taxes on worldwide income but allows you to formally sever tax residency by cutting residential ties. Andorra residency, properly established with 183+ days presence and severed Canadian ties, can legitimately end Canadian tax obligations on most income. The departure tax implications (deemed disposition on Canadian assets) need careful planning before departure.
Want to model out whether Andorra’s tax structure makes financial sense for your income level and jurisdiction? Book a consultation call — we’ll run the numbers and compare with alternatives like Malta, Paraguay, or Panama.
Frequently Asked Questions
What is the income tax rate in Andorra?
Andorra’s IRPF: 0% on the first €24,000 annually, 5% on €24,001–€40,000, and 10% on income above €40,000. The effective rate approaches but never exceeds 10%. Introduced in 2015 — the old “zero income tax” claim no longer applies.
Does Andorra have capital gains tax?
No. Andorra levies no capital gains tax on securities, financial instruments, or business dispositions. Long-held real estate is also exempt. There is a real estate transfer tax of approximately 3–4%, but this applies to the transaction value regardless of gain.
Does Andorra have a tax treaty with the US?
No. The US has no tax treaty with Andorra. US citizens in Andorra can claim the Foreign Tax Credit for IRPF paid, but the lack of a treaty means some categories of income face potential double taxation. This is less of an issue given Andorra’s low rates, but it’s worth modeling with a tax advisor.
Is Andorra a tax haven?
Andorra is no longer on international “tax haven” blacklists. It implemented automatic exchange of information (AEOI/CRS) with EU countries and introduced the IRPF income tax in 2015 specifically to meet international standards. Andorra’s tax system is legitimate, transparent, and low — not zero or opaque. It’s a competitive low-tax jurisdiction, not a secrecy haven.
Related Articles
- Living in Andorra as an Expat: Tax Residency, Costs, and Life
- Andorra Passive Residency Service
- Expat Tax Planning: Reduce Your Tax Bill Legally
- Territorial Tax Countries: The Complete List
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