Income Tax in Andorra: A Comprehensive Guide to IRPF
Tax Rates, Brackets, Exemptions, and Residency Requirements in 2026
Key Point: The Andorran personal income tax is capped at 10%, with a full exemption on the first 24,000 euros of annual income (Art. 35, Law 5/2014). For dividends paid by an Andorran company, the exemption is total (Art. 5.j). This regime is permanent—it is not time-limited, unlike schemes such as Portugal’s IFICI.
The IRPF — Impost sobre la Renda de les Persones Físiques — is the income tax for individuals residing in Andorra. Introduced in 2015 by Law 5/2014, it features one of the most favorable tax rates in Europe: a marginal tax rate capped at 10%, a personal exemption of €24,000 per taxpayer, and significant structural exemptions on dividends, estates, and gifts. This guide explains how the system works in full—including tax rates, taxable bases, deductions, residency requirements, filing obligations, and key considerations—to enable individuals of all circumstances to accurately assess the tax impact of taking up residence in Andorra.
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What is the Andorran personal income tax, and who is subject to it?
The IRPF is a direct, personal tax levied on the income earned by individuals residing in Andorra on their worldwide income (Articles 1 and 2, Law 5/2014). Its entry into force in 2015 marked the modernization of the Principality’s tax system in response to the transparency standards promoted by the OECD. Andorra was removed from the blacklist of tax havens in 2011 and has since signed 24 agreements on the automatic exchange of information.
Contrary to popular belief, Andorra is not a secretive jurisdiction: Andorran banks automatically report account balances to the tax authorities in the account holders’ countries of residence under the CRS. The transparency of the personal income tax system stems from its legal simplicity—not from secrecy.
Who is considered a tax resident in Andorra?
Article 8 of Law 5/2014 defines two alternative criteria for Andorran tax residency:
| Criterion | Andorra (Art. 8, Law 5/2014) | France (Art. 4B of the General Tax Code) |
|---|---|---|
| Physical presence | More than 183 days a year | More than 183 days a year |
| Center of Economic Interests | That alone is enough | That alone is enough |
| Permanent Residential Facility | Not specified | Autonomous trigger criterion |
| Occupancy for a passive house | 90 days per year (special status) | Unparalleled |
A crucial point for French nationals: Andorran tax residency cannot be obtained simply by registering with the authorities. It requires a documented severing of tax ties with the country of origin—actual presence in Andorra, a shift in the center of vital interests, and the closure or regulated maintenance of French entities.
The Income Tax Schedule: Verified Rates and Brackets
The Andorran personal income tax system is based on a flat rate of 10% (Art. 43, Law 5/2014), applied after deducting the personal exemption—the €24,000 personal allowance provided for in Article 35. The apparent progressivity (0% / 5% / 10%) results from the application of this allowance and the tax base brackets, not from a multi-rate schedule in the technical sense.
| Annual income bracket | Effective income tax rate | Practical Calculation |
|---|---|---|
| 0 to 24,000 € | 0 % | Full personal exemption — no tax |
| €24,001 to €40,000 | 5% of the surplus | €40,000 in income → €800 in income tax |
| Over 40,000 € | 10% on the excess | €100,000 in income → €6,800 in income tax (effective rate of 6.8%) |
Sources: Art. 35 (personal exemption of 24,000 €), Art. 43 (rate of 10%), Law 5/2014, of April 24, on personal income tax.
The two contribution bases: general and savings
The IRPF distinguishes between two categories of income that are taxed separately (Art. 30–34, Law 5/2014):
| Taxable base | Nature of Income | Specific deduction |
|---|---|---|
| General Information | Wages, rental income, economic activities, pensions | Minimum personal income of 24,000 € (Art. 35) |
| Savings Account | Dividends*, interest, capital gains on securities, life insurance | Minimum exemption: 3,000 € (Art. 37) |
* Dividends distributed by Andorran resident companies subject to Andorran corporate income tax are fully exempt from personal income tax (Art. 5.j, Law 5/2014). They are therefore not included in the savings base.
Comparison with the French pay scale
| Tax criterion | ★ Andorra — Personal Income Tax | France — IR |
|---|---|---|
| Maximum marginal rate | 10 % | 45 % |
| Basic Personal Exemption | 24,000 € | Approx. 11,497 € (1 share) |
| Dividends from Resident Companies | 0% (Art. 5.j) | 30% flat tax or progressive tax scale |
| Wealth tax | None | IFI up to 1.5% |
| Inheritance Tax on Direct Descendants | 0% (Art. 5.l and 5.m) | Up to 45% |
| IS companies | 10 % | 25 % |
| VAT / GST | 4.5% (IGI) | Standard 20% |
| Duration of the program | Permanent — no limit | N/A |
For a taxpayer with €100,000 in annual income, the Andorran income tax liability is €6,800, or an effective rate of 6.8% —compared to approximately 28% to 35% in France, depending on household composition. The annual savings for this profile can reach €20,000 to €30,000, and these savings are permanent with no time limit.
Exemptions and Deductions: What Is Not Taxed Under the IRPF
The 10% rate does not, on its own, reflect the actual tax burden in Andorra. The structural exemptions provided for in Law 5/2014 reduce the tax base, sometimes to the point of eliminating all taxation for well-structured asset portfolios.
Major Exemptions (Art. 5, Law 5/2014)
| Type of income | Income Tax Processing | Legal Reference |
|---|---|---|
| Dividends from Andorran companies | Full Exemption | Art. 5.j, Law 5/2014 |
| Inline Successions (Inheritance) | 0% — exempt | Art. 5.l, Law 5/2014 |
| Direct Online Donations | 0% — exempt up to the third degree | Art. 5.m, Law 5/2014 |
| Capital Gains on Andorran Mutual Funds | Exonération (participation < 25 %) | Art. 5.k, Law 5/2014 |
| Capital gains on the sale of equity interests held for more than 10 years | Full Exemption | Art. 5.k, Law 5/2014 |
| Capital gains on a primary residence in Andorra | Conditional Exemption | Art. 5.r, Law 5/2014 |
| Andorran Public Debt Revenue | Full Exemption | Art. 5.o, Law 5/2014 |
Key structural advantage: An Andorran tax resident who is a partner in an Andorran SL may receive all of their compensation in the form of dividends, which are 100% exempt from personal income tax (Art. 5.j). At the same time, they are exempt from French corporate income tax (25%), the French flat tax (30%), the IFI, and inheritance tax. The effective tax burden on investment income can be zero—legally and on a long-term basis.
Personal and Family Deductions (Art. 35, 37–39)
| Deduction | Amount | Reference |
|---|---|---|
| Minimum personal exemption (individual deduction) | 24,000 € / year | Art. 35.1 |
| Spouse with no income | Tax deduction raised to 40,000 € | Art. 35.1 |
| Taxpayer with a disability | Tax deduction raised to 30,000 € | Art. 35.1 |
| Per dependent descendant under the age of 25 | 1,000 € per year | Art. 35.2.a |
| For each dependent ascendant over the age of 65 | 1,000 € per year | Art. 35.2.b |
| Higher Education Enrollment (Descending) | Up to 300 € per year | Art. 35.2.d |
| Minimum exemption for savings income | 3,000 € (savings account) | Art. 37 |
| Tax Deduction for Primary Residence (Interest + Principal) | 50% of the amounts paid, up to 5,000 € per year | Art. 38 |
| Contributions to Andorran retirement plans | Max 30% of net income or €5,000 | Art. 39.1 |
A taxpayer with two dependent children and a spouse with no income can increase their total tax deduction to more than €42,000. On income of €60,000, the effective income tax liability drops to approximately €1,800—an effective tax rate of less than 3%.
Eligibility for the IRPF Tax System: Active Residence and Passive Residence
To qualify for the IRPF, you must establish valid Andorran tax residency. There are two categories of residency that determine eligibility, each with very different requirements.
| Criterion | Passive house | Active residence |
|---|---|---|
| Minimum attendance | 90 days per year | 183 days per year |
| Professional activities in Andorra | Not required | Required |
| Required investment | €1,000,000 (reducible to €400,000 through Fons Habitatge) | AFA Deposit: 50,000 € |
| Relevant profiles | Investors, annuitants, retirees, digital nomads | Employees, self-employed individuals, and active executives |
| Processing time | 3 to 6 months | 2 to 6 months |
Passive residency is the flagship option for high-net-worth individuals: only 90 days of presence required, no obligation to work in Andorra, and an investment that is an asset rather than an expense. The €1,000,000 investment can be reduced to €400,000 through the Fons Habitatge, provided the funds are used for housing within Andorra.
Requirements for Actual Tax Residency (Art. 8, Law 5/2014)
Article 8 of Law 5/2014 sets forth two alternative criteria for Andorran tax residency: spending more than 183 days in the country, or having the primary focus of one’s economic activities or interests there. Administrative residency (residence card) and tax residency (criteria under Article 8) are two distinct concepts—both must be established.
A Common Mistake — Confusing Administrative Residence with Tax Residence
Obtaining an Andorran residence card is not sufficient to establish tax residency. The French tax authorities may challenge Andorran residency if actual presence is not documented, if the family home remains in France, or if the center of economic interests (banks, equity holdings, business activities) remains in France. Both aspects must be established simultaneously.
Common Mistake — Leaving a French Second Home Available for Use
Maintaining a property in France for one’s own use (even if it is not one’s primary residence) establishes a permanent residence within the meaning of the Franco-Andorran agreement. This factor alone may be sufficient to maintain tax residency in France despite holding an Andorran residence card.
Nathalie, 48 — SaaS Executive, Relocation from France to Andorra
Initial situation: CEO of a B2B SaaS company valued at 4 M€, a French tax resident, corporate income tax rate of 25%, flat tax of 30% on dividends, and real estate wealth tax (IFI) of 0.7% per year. Objective: to optimize the structure prior to a fundraising round followed by a partial sale.“What convinced me wasn’t just the tax rate. It was the permanence of the system and the total exemption on dividends from my Andorran SL. In France, every euro distributed was subject to a 30% flat tax. Here, it’s zero—legally and permanently. The sale of my securities in ten years’ time will not be subject to any Andorran tax. That’s a fundamental difference when it comes to managing a business venture over the long term.”
Income Tax Reporting Requirements: What You Need to Know
Being a tax resident of Andorra entails filing obligations with the Andorran government’s Department of Finance. Failure to comply with these obligations may result in penalties and surcharges calculated based on the amount of tax owed.
Annual Income Tax Return — by March 31 of Year N+1
Any individual who is a tax resident of Andorra must file their personal income tax return covering income from the previous calendar year by March 31 of the following year, through the Andorran government’s online portal. All worldwide income must be reported, regardless of its geographic source.
Breakdown of Income Between General Account and Savings Account
The tax return must distinguish between income included in the general tax base (wages, business income, rent) and income included in the savings tax base (interest, capital gains). Dividends from Andorran companies, which are exempt from personal income tax (IRPF), are not reported under these tax bases—but must be verifiable in the event of an audit.
Parallel Obligations for Contractors (IS)
If the resident owns an Andorran limited liability company (SL), a separate corporate income tax return must be filed by July 31 of year N+1. The two obligations are separate—filing the corporate income tax return does not exempt the resident from filing a personal income tax return.
Installment Payments (Advance Payments)
For income from business activities that exceeds certain thresholds, the Andorran tax authorities may require quarterly estimated tax payments. This mechanism is similar to corporate income tax prepayments—it smooths out the tax burden over the course of the year and prevents an excessively large adjustment in March.
Certificate of Tax Residency — Key Document
Upon request, the Andorran government issues a certificate of tax residence, which is used to justify the reduced withholding tax rate of 5% (compared to 15% without a tax treaty) applicable to dividends from French sources, and to support the application for an exemption from the exit tax after five years.
Income Tax and Exit Tax: What French Citizens Need to Know
For French nationals who transfer their tax residence to Andorra while holding significant equity interests in companies, Article 167 bis of the General Tax Code triggers the exit tax—the taxation of unrealized capital gains at the time of departure, regardless of whether any actual sale has taken place.
The Exit Tax does not apply to Andorran personal income tax (IRPF)—it is payable to the French tax authorities and is calculated based on the values as of the date of transfer of residence. Its impact can be significant for startup founders or holders of unlisted equity interests with substantial capital gains.
| Exit Tax Mechanism | Andorra — implications |
|---|---|
| Triggering | Transfer of Tax Residency Outside France + Significant Equity Interests (Art. 167 bis of the General Tax Code) |
| Plate | Unrealized gains on equity interests, securities, and receivables as of the date of departure |
| Rate | 30% flat tax (PFU) or standard tax schedule option |
| Deferral of Payment | Possible under certain conditions (guarantees, annual declaration) |
| Tax Relief After 5 Years | If there is no sale within 5 years of the transfer |
| 2013 France-Andorra Agreement | Andorran tax residency is recognized by France—a necessary condition for deferral |
The 2013 Franco-Andorran agreement is the key factor here: since Andorran tax residency is recognized by France, a deferral of the Exit Tax payment is available. The application for a tax refund may be filed five years after the transfer if no sale has taken place. Optimizing the timing of the departure and structuring the transaction through an Andorran holding company prior to the transfer can significantly reduce the tax impact.
A Common Mistake — Relocating Without Planning for the Exit Tax
Many entrepreneurs only learn about the Exit Tax after they have begun the process of transferring their residence. However, the triggering event is the actual date of departure. Planning in advance—including setting up an Andorran holding company, establishing a departure timeline, valuing equity interests, and obtaining a tax ruling—can reduce the resulting tax liability by half or even two-thirds. This work must be done beforehand, never afterward.
Mistakes to Avoid When Filing Your Andorran Income Tax Return
Mistake 1 — Paying yourself a salary instead of dividends
In Andorra, managing partners never receive compensation in the form of a salary. Dividends distributed by an Andorran SL are exempt from personal income tax (Art. 5.j) — and are not subject to any social security contributions. A salary results in cumulative contributions of approximately 22% (employee and employer shares) and may be subject to withholding tax. Tax optimization through dividends is legal, immediate, and has no upper limit.
Mistake 2 — Investing capital through the company rather than personally
Interest on capital invested in the name of a company is taxed at 10% (corporate income tax). Interest earned on personal investments qualifies for a €3,000 deduction from the savings base (Art. 37) and is then taxed at a reduced rate. For capital that generates interest income (financial investments, bank deposits), holding it personally may be more tax-advantageous than holding it through a corporation.
Mistake 3 — Failing to document your actual presence in Andorra
Andorran tax residency must be proven, not merely declared. Andorran invoices, local bank statements, medical records, sports membership fees, and third-party documentation of your presence—all of these elements constitute the body of evidence in the event of an audit by the French tax authorities. An annual document review is strongly recommended.
Mistake 4 — Confusing the income tax exemption on Andorran dividends with foreign dividends
The exemption under Article 5.j applies exclusively to dividends paid by entities that are tax residents of Andorra and subject to Andorran corporate income tax. Dividends from foreign sources (French subsidiaries, foreign equity interests) are not covered by this regime and are taxable as part of the savings base at the applicable rate, after a deduction of €3,000. Structuring the group with an Andorran holding company at the top resolves this issue.
Mistake 5 — Missing the March 31 income tax filing deadline
Unlike in France (where tax returns are filed in May–June), the Andorran income tax return must be filed by March 31 of the following year. This deadline often comes as a surprise to many new residents. A late filing may result in penalties and surcharges calculated based on the amount of tax owed, with no automatic exemptions.
IRNR: Income Tax for Non-Residents in Andorra
Individuals who receive income from Andorran sources but are not tax residents of Andorra are subject to the IRNR— Impost sobre la Renda dels No Residents. This tax regime applies at a flat rate of 10% on Andorran income, with no deductions or progressive tax brackets. It applies in particular to: French and Spanish cross-border workers, non-resident investors receiving Andorran rental income or dividends, and occasional service providers without a permanent establishment in Andorra.
For non-residents, the 2013 France-Andorra tax treaty is decisive: it specifies which country has the right to tax each category of income and prevents double taxation. The withholding tax rate applicable to dividends of Andorran origin paid to a French tax resident is 5% (compared to 15% without the treaty)—upon presentation of a French tax residency certificate.
Cross-border worker
IRNR 10%An employee residing in France or Spain who works in Andorra. Subject to a 10% withholding tax on their Andorran salary. Not eligible for personal income tax deductions.
Nonresident investor
IRNR 10%Dividends or rental income from Andorra. 10% withholding tax. The treaty provides for a reduced rate depending on the category and country of residence.
One-time service provider
IRNR 10%Invoicing to an Andorran entity without a permanent establishment. The substance of the business activity remains a key criterion.
Reverse Timeline: From the Decision to the First Andorran Income Tax Return
Andorra’s personal income tax system is not a temporary measure designed to attract specific groups—it is the permanent tax structure of a sovereign state. Its stability over the past ten years stands in contrast to the successive reforms seen in jurisdictions such as Portugal (where the NHR was abolished), Dubai (where corporate tax was introduced in 2023), or Italy (where special tax regimes are regularly overhauled). Establishing tax residency in Andorra means building on a legislative foundation whose permanence is not merely a political promise—it is the general tax framework of a principality with 77,000 inhabitants.
Calculate Your Actual Income Tax Liability in Andorra
Tax rates, deductions, exemptions, holding companies, exit tax: Your effective tax burden depends on your specific circumstances. Our experts will work with you to develop the optimal structure before you relocate.
Schedule an appointment with an expertFAQ — Income Tax in Andorra (IRPF)
What is the maximum personal income tax rate in Andorra?
The personal income tax rate is 10% (Art. 43, Law 5/2014). This rate applies to the taxable income base, that is, to income after deducting the personal exemption of €24,000 and any other applicable deductions. In practice, the effective tax rate is often less than 10%: a taxpayer with €100,000 in annual income and two dependent children will pay less than €7,000 in personal income tax, representing an effective rate of approximately 7%.
Are dividends from my Andorran company subject to personal income tax (IRPF)?
No. Article 5.j of Law 5/2014 fully exempts dividends distributed by entities that are tax residents of Andorra from personal income tax (IRPF), provided that they are subject to Andorran corporate income tax. This is one of the regime’s most powerful structural advantages: the flow from the company to the resident shareholder is tax-neutral. There is no flat tax, no social security contributions on dividends, and no withholding tax.
How many days do you need to spend in Andorra to be considered a tax resident?
Article 8 of Law 5/2014 provides for two alternative criteria: presence in Andorran territory for more than 183 days per year, or the establishment of the primary focus of economic activities and interests in Andorra. For passive residency (administrative status), the minimum presence requirement is 90 days per year—but effective tax residency as defined in Article 8 often requires a more thoroughly documented presence to withstand an audit by the tax authorities of the country of origin.
Does Andorran personal income tax apply to foreign retirement pensions?
Yes, foreign retirement pensions are subject to Andorran personal income tax (IRPF) under the general tax bracket, after deducting the personal exemption of €24,000. For an annual pension of €40,000, the IRPF tax liability is €800, or an effective rate of 2%. This treatment is considerably more favorable than the French system (progressive income tax) or the post-NHR system in Portugal, where foreign pensions are now subject to the Portuguese progressive tax scale, which can reach up to 48%.
Do you have to report your worldwide income in Andorra?
Yes. In accordance with Article 2 of Law 5/2014, the scope of the personal income tax (IRPF) covers all income and gains of Andorran tax residents, regardless of their geographic source. This includes foreign wages, rent received abroad, dividends from non-Andorran companies, and capital gains on the sale of foreign assets. The double taxation treaties signed by Andorra (including the 2013 treaty with France) determine which country has the right of priority taxation and provide mechanisms for eliminating double taxation.
What is the IRNR, and how does it differ from the IRPF?
The IRNR (Impost sobre la Renda dels No Residents) is the tax on income from Andorran sources received by non-residents. It is levied at a flat rate of 10% with no deductions or progressive tax brackets—no personal exemption, and no exemption on Andorran dividends for non-residents. A foreign national who receives Andorran rental income or dividends without being an Andorran tax resident is subject to the IRNR, not the IRPF. Bilateral tax treaties signed by Andorra may reduce this withholding tax rate depending on the category of income and the beneficiary’s country of residence.
Is Andorra's personal income tax likely to change or be reformed?
The personal income tax system is enshrined in Law 5/2014—Andorra’s general income tax law. It is not a temporary measure or a politically fragile tax exception, but rather the permanent tax structure of a sovereign state. Andorra has not undergone any major personal income tax reform since its introduction in 2015. Compliance with OECD standards (CRS, FATCA, automatic exchange of information) and the 2013 Franco-Andorran treaty anchor the system within a stable bilateral framework—which structurally distinguishes Andorra from jurisdictions that have reformed their systems under political pressure (Portugal, Dubai).
