The Andorra tax system for individuals with tax residence in Andorra is based on two groups of income:
General Base: Employment Income; Business Income and Income from Real Estate (leasings…)
Savings Base: Dividends; Interests; Coupons and Capital Gains arising from any financial transaction.
The first base is based on three scales:
0-24,000 €.- Minimum Exempt.
24,000-40,000 € 50% over the general tax rate. (in practice, 5%)
40,000 € or more.- 10%.
The tax savings base subject to taxation the items as follows: interests, dividends (if they are not distributed by a local entity or has not been subject to withholding at the source) and capital gains (with some exceptions). The rate is 10% with a minimum exemption up to 3,000 €.
Andorra tax on cryptocurrencies is 10%. The key question here is when the tax is accrued.
Some countries, such as the Spanish case, subject to tax each transaction where the cryptocurrency is exchanged by another different cryptocurrency. According to this position and using the FIFO methodology, each exchange would be a tax event and the gain or loss should be calculated at that moment.
The Andorra Tax Authority issued a binding consultation on 2018 in this regard, saying that the accrual of capital gains arising from cryptocurrencies should be treated in the same form that an exchange of official currencies. In summary, according to the criteria of the Andorra administration, the capital gain should be accrued at the moment of the conversion of the virtual currency into the official currency or in the case of an exchange of a virtual currency by another virtual currency if that exchange originates a gain, the accrual is produced at that moment.
Tax Savings treatment in Andorra
(I) Deposits / Interest-bearing bank accounts / Structured products
The proceeds of this source are subject to Personal Income Tax at the rate of 10%
(II) Andorran Equity on Investment Funds (Andorran Pooled investment funds or SICAVs)
Income arising from investments in pooled collective investment vehicles located in Andorra is treated as follows.
Dividends: Fully exempt.
Capital Gains: Exempt if the individual held less than 25% or if he maintained the investment for at least 10 years as from the acquisition.
(III) Equity from Investment funds non-Andorran
Income arising from investments in pooled collective investment vehicles located out of Andorra is treated as follows.
Dividends: Subject at the rate of 10% (applying the elimination of international tax withholding at the source).
Capital Gains Tax: Exempt if the individual held less than 25% or if he maintained the investment for at least 10 years as from the acquisition.
(IV) Fixed income securities (bonds or any other financial asset coming from non-equity and producing interests, etc.)
This income is subject to the rate of 10%
(V) Dividends on Equities
If the company is non-resident, then the dividends are taxed at the rate of 10%,
In the case that the company is resident, then the dividends are fully exempt.
(VI) Currencies or Cryptocurrencies
Income coming from trading in official currencies or cryptocurrencies are subject to income tax in Andorra at the rate of 10%.
The key matter is the moment of the accrual of the tax. The Andorra Tax Authority has determined that any exchange of a currency or cryptocurrency is subject to income tax at the moment of exchange and it is not necessary to wait until the currency or cryptocurrency has been converted in official currency.
(VII) Capital Gains Tax on investments
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