Andorra Crypto Tax

Andorra is among the countries that happily accept from the grassroots level all cryptocurrencies and other innovative technologies and view them so positively from the government side. The Andorran tax system for crypto businesses would be simple, quite well-structured, and not burdensome since it keeps quite low rates of taxes. Besides, it is being continuously improved in order to reach international standards and such as to meet the needs of local taxpayers.

In Andorra, the collection of taxes is done by the local councils and government, which already have the same structures as those of the EU and OECD countries but at the same time are very competitive in the context of the most developed countries.

The local councils set, collect, and administer the taxes levied on the following:

• Commercial, business, and professional activities
• The fire and place
• Property
• Rental income
• Construction

The Andorra government sets, collects, and administers the following taxes levied in respect of: Various types of personal income Corporate income Products and services sold Capital gain arising from property transfers Vehicle ownership Trademark registration Registration as the owner of economic activities Court.

It is worth noting that Andorra cooperates with international tax authorities and institutions regarding taxes and is obliged to automatically provide information about taxes to the corresponding foreign body. For example, ten years ago, the government signed the OECD declaration, which obliges countries to reject bank secrecy with respect to tax issues, which is a positive step towards full transparency of the international tax system.

Under the Digital Assets Act, cryptocurrencies are not treated as legal tender within Andorra but are considered an intangible asset or inventory for accounting and tax purposes, depending on their purpose. If the intention of the owner is to sell the cryptocurrency in the course of an ordinary business, then it would be considered as an inventory; if this is not the case, it falls under intangible assets.

Benefits of the Andorra Tax System

First of all, the tax rates in Andorra are considerably below those of other European countries, which is great for businesses and investors that wish to keep their burden of taxes as low as possible. Furthermore, the process of year-end closing is pretty simple and easy to manage; thus, it saves a great deal of time and effort.

Other remarkable benefits of the Andorran tax system are listed below:

• No wealth tax
• No succession tax
• No donation tax
• Very low Corporate Income Tax with possible exemptions
• Possible exemption of Personal Income Tax
• Very low VAT
• Moderate social contributions
• No tax on company cars

Corporate Income Tax

The regular rate of Corporate Income Tax applicable in Andorra is 10%, payable both by resident and non-resident companies, including those undertaking activities related to cryptocurrencies. Resident entities are subjected to tax on worldwide income, while non-resident entities are obliged to pay the tax only regarding their income sourced through Andorra. If the company does not have a permanent establishment in Andorra, the non-resident company is taxed on a transactional basis.

Under Law 95/2010 of 29 December, a company shall be considered tax resident if it is incorporated under Andorran law, if it has its registered office in the Andorran territory, has a place of effective management in Andorra, or has transferred its fiscal domicile to Andorra.

All companies are to file returns within one month from the six months following the end of the accounting period. Payments on account for the current accounting period must be made on the first day of the ninth month from the beginning of the accounting period.

Other laws that regulate Corporate Income Tax, among others, include:

• Holding companies whose investments are made abroad are taxed at a 2% rate.
• Tax rate for Andorran Collective Investment Institutions can be 0%.
• Under various deductions, the minimum rate when a company gains profit is considered to be 3%.

Value-Added Tax

The standard VAT rate in Andorra is 4.5%, surely the lowest in Europe, while within the EU a VAT rate may not be lower than 15%. It is charged on products and services sold in Andorra, including those imported to the Andorran territory. If the annual value of sold products or services does not exceed 40,000 EUR, there are no obligations related to the registration as a VAT payer in Andorra.

Crypto companies are also generally obliged to pay regular VAT, unless a specific business model does not establish a good enough taxable relationship between a seller and a client or a relevant law provides for tax exemption. For instance, crypto trading may be exempt from the application of VAT inasmuch as such trades are deemed financial services with the use of cryptocurrencies as means of paying. However, no guidance has yet been issued by authorities in relation to crypto. If you want your crypto business to be meticulously checked for VAT purposes, then do not hesitate to contact our consultants here at Regulated United Europe (RUE) for specific advice, and we’ll be more than glad to help.

Capital Gains Tax

This serves as a source of income for companies and individuals. Companies are required to pay a 10% tax, while individuals can be charged up to 10%, depending upon the capital gain arising from the taxable amount. Exemptions are allowed only when certain conditions are satisfied.

Following are the instances when capital gains aren’t taxed:

• When the shareholder owns less than 25% of any company, and therefore the trading of shares can be exempt from taxation.
• Sale of an asset which has been in ownership for more than 10 years.

Withholding Tax

In Andorra, the general Withholding Tax rate is 10%. Additionally, there is 1.5% on reinsurance. Interest and royalties are subjected to withholding tax at the standard rate when paid to individuals who are tax residents in Andorra. Royalties paid to resident companies are not liable for taxation. Royalties are liable to 5% withholding tax when paid to a company or individual who is not a tax resident in Andorra. Andorra companies are not obliged to withhold any amount from the payments of dividends made to non-resident or resident companies or individuals.

Individual Income Tax

For resident individuals in Andorra, i.e., those who spend more than 183 days a year in Andorra, the standard Individual Income Tax rate is 10% and it is levied on income sourced both in Andorra and abroad. Non-resident individuals will be taxed at 10%, which is only levied on the income derived in Andorra. Generally, Individual Income Tax is withheld from salaries and other payments made by Andorran companies, including those engaged in crypto activities. The rates for residents can vary depending on the size of income and available deductions and credits.

How to pay taxes on crypto in Andorra in 2024? In 2024, Andorra is still building its tax system in pursuit of the fast-developing world of cryptocurrencies and trying hard to attract investors with new technologies while offering a due share of fair taxation. The Government of Andorra understands very well that there is a serious need for the regulation of cryptocurrency transactions, including the taxation of related revenues as part of international standards and for financial security.

Andorra’s Cryptocurrency Taxation Basics

No exception is Andorra as the governments go about enacting legislation, regulating cryptocurrency transactions in one way or another. The income from cryptocurrencies belongs to the category of general income of a citizen or corporate profit and thus shall be taxed in accordance with the national tax code accordingly.

Declaration of Income

The obligations of persons and legal entities receiving an income in cryptocurrencies are to declare such income in their respective tax returns. Conversions of income in cryptocurrencies to euros or other currencies should, of course, be affected using the exchange rate on the date of receipt of such income to correctly denote the amount to which tax will attach.

Tax Rates

Compelling enough, Andorra has relatively lower tax rates compared to many countries around the world. Individual and corporate income tax is about 10 percent, while the maximum income tax rate for individuals is also 10 percent.

Taxation of Cryptocurrencies in Andorra in 2024: A Thorough Understanding of Local Tax Laws Paying heed to regulatory changes involves understanding the subject of cryptocurrencies and their taxation. Investors and business people who deal in cryptocurrencies in Andorra are encouraged to consult with tax advisors and accountants in order to optimize tax liabilities and comply with tax legislation. In this respect, it is expected that such a situation will further contribute to Andorra continuing its work on cryptocurrency tax policy, increasing its status as an attractive jurisdiction for the innovative financial sector.

Table with the main tax rates in Andorra

These rates reflect Andorra’s tax policy aimed at attracting investment and supporting economic growth. The absence of VAT and relatively low tax rates make Andorra attractive to businesses and investors from all over the world.

If you wish to benefit from low tax rates in Andorra and also ensure that your crypto business complies with applicable rules, our highly qualified and experienced legal consultants here at Regulated United Europe (RUE) will be pleased to assist you. We very well understand and closely monitor local and international taxation rules applicable to cryptocurrency businesses, and strive to ensure that our clients not only comply with local regulations but also operate in a tax-efficient way. Moreover, we’re more than happy to help you with the formation of a new Andorran crypto company, crypto licensing, and financial accounting. Book a personalised consultation now to receive comprehensive legal advice which will set the stage for your success.

Also, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.