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Tax System
The approval of the Customs Union Agreement between the Principality of Andorra and the European Union and the adoption of the Constitution, provided a new foundation for modernising and developing the Andorran tax system.
The system is based on indirect taxation. There is no direct taxation on company profits or on personal wealth or income in the Principality. However, with the imminent passage of the Companies Law, there is an expected tax on company profits that will be between 5 – 10%. This however is only relevant to anyone who wishes to carry on business in the domestic market and will have little or no consequence for WKI designed structures.
An Indirect Merchandise Tax (IMI) is levied on the import of merchandise. The rate is 4% on most goods, 7% on electronic products, perfume and optical products and 12% on jewellery and recreational equipment. There is an indirect tax on domestic production (IPI) which applies the same rates as the IMI on products produced or manufactured in Andorra. Indirect Tax on Services (ISI) was introduced in 2007 and is currently set at 4%.
Tax on Real Estate Transactions (ITP) is levied directly on transfers of real estate between living persons. This tax is applicable to all transfers of real estate located in the Principality of Andorra and to the creation or transfer of rights over such real estate exercisable in Andorra. The tax rate is currently set at 4%.
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