In 2021, Andorra plans to extend the list of countries it has signed a double taxation agreement (DTA) with. These treaties are essential to avoiding double taxation on the same basis in the company’s country of origin and the country where the economic activity takes place.
New treaties to avoid double taxation
Several EU states, such as the Netherlands, Belgium and Hungary, are interested in signing a double taxation agreement with Andorra. At present, it has signed agreements with 8 countries, including Spain, France and Portugal.
The principality joined the International Monetary Fund in October 2020, and has already opened negotiations with the countries from its group to secure more advantageous tax treaties. Andorra is part of the group led by Belgium and the Netherlands, the fourth largest in the IMF.
Negotiations began with these two countries three years ago, and with Hungary in early 2020. However, the signing of these agreements has been delayed due to the coronavirus pandemic.
Other interested countries
In theory, negotiations should begin with Italy and Austria in 2021. With regard to the latter, it would be of particular interest if Germany would also agree to sign the double taxation agreement (it has so far refused to do so). One of the reasons for the lack of interest from the Germans is that they consider the economic activity to be insufficient. Andorra, however, claims that it would improve the transparency and approval of tax procedures.
Advantages of the double taxation agreement
This type of agreement is important for attracting new foreign investors who would like to establish themselves in the country or set up new businesses. On the one hand, they will avoid being taxed twice and, on the other, it makes it easier to start and run a business.
Refer to our previous article to find out which taxes apply under the double taxation treaty.