Andorra's Progressive Low-Tax System – Andorra

Entire first €24,000 of annual income completely tax-free. Applies to employment, business, rental income. Provides substantial benefit for middle-income earners. No tax on basic living needs.

Next €16,000 of income taxed at only 5%. Very low rate for middle bracket. Effective rate on €40,000 income is only 2%. Much lower than neighboring countries' middle brackets.

All income above €40,000 taxed at 10%. This is the maximum rate - no higher brackets exist. Person earning €100,000 pays effective rate of ~6.2%. Compare to 45%+ in France/Spain for same income.

Andorran tax residents pay on worldwide income regardless of source. Foreign tax credits available to avoid double taxation. Non-residents pay flat 10% only on Andorran-source income. Tax treaties with Spain, France, Portugal, UAE, Luxembourg.

Dividends from Andorran companies to resident individuals completely tax-free. No withholding tax. Very efficient for business owners. Encourages local investment and entrepreneurship.

Dividends from foreign companies taxed at 10% (after €3,000 exemption). Still lower than most countries. Foreign tax credits apply to reduce double taxation. Must be declared in annual return.

Selling shares where you own <25% completely tax-free. Perfect for stock market investors. Covers publicly traded stocks, ETFs, funds. If >25% ownership, 10% tax applies (0% after 10 years holding).

Interest from savings, deposits taxed at 10%. First €3,000 of savings income (interest + dividends + some gains) exempt annually. Encourages saving and investment.

Selling property within first year: 15% on capital gain. Discourages short-term speculation. Highest rate for real estate. Encourages longer-term investment.

2nd year: 13% tax. 3rd year: 10% tax. Progressive reduction encourages holding. Still reasonable rates compared to other countries.

After 3 years: rate decreases 1% per year. Year 4: 9%, Year 5: 8%, continuing down. After 12 years ownership: 0% tax. Long-term holders pay nothing.

Primary residence follows same holding period rules. No special exemption but 0% after 12 years applies. Encourages long-term homeownership. Property transfer tax applies at purchase (3-10% for non-residents).