In recent years, the Andorran fiscal system has evolved towards a model that is more stable and transparent, and that is aligned with international standards. In 2024, the fiscal burden in Andorra was 27.5% of the GDP. This was an increase that was due to the introduction of new types of tax and higher fiscal revenue from economic activity. Nevertheless, Andorra still has one of the lowest fiscal burdens in Europe.
Table of contents:
- Andorra’s fiscal burden increased by 1.6 points in 2024
Total taxes increased by 13.4%, while GDP increased by 6.6%
Retail tax collection
How is the fiscal burden calculated in Andorra?
Comparison with the neighbouring countries Spain and France
What are the benefits of a lower fiscal burden?
A fact that confirms Andorra’s competitive advantage
Andorra’s fiscal burden increased by 1.6 points in 2024
The Andorran Department of Statistics has released the data for that year. According to the report and the accrual principle, the country’s fiscal burden is now 27.5%, compared with the 25.9% recorded in 2023. This represents an increase of 1.6 percentage points in only one year.
The Minister of Finance has explained that this increase was not due to a rise in taxation rates. The main factor was the introduction of a new tax on foreign investment in property in February 2024. You can find details of this tax in our article. Other contributing factors included increased revenue from taxes on tobacco, adjusted to maintain the differential with respect to neighbouring countries, and increased revenue from corporate income tax and capital gains tax.
Total taxes increased by 13.4%, while GDP increased by 6.6%
During the 2024 financial year, fiscal revenues in Andorra grew by 13.4%, and GDP increased by 6.6%, reflecting the healthy pace of economic activity. Indirect taxation continues to be the main component of the fiscal burden in Andorra, accounting for 36.5% — in line with the 2023 figures.
Direct taxes accounted for 26.2% of the total, which was an increase of 1.3% compared to the previous year. Social security contributions accounted for 37.4% of the total, an increase of 1.4% compared to 2023.
Retail tax collection
The increase in the fiscal burden in Andorra in 2024 was primarily due to increases in the most important types of tax. According to a report by the Government Statistics Department, taxes on production and imports — including the IGI — were 14% higher than those of the previous year.
Income and wealth taxes, including personal income tax, grew by a particularly significant 19.1%. Finally, social security contributions grew by a solid 9.1%, in line with the dynamism of the employment market and the increase in the tax base.
How is the fiscal burden calculated in Andorra?
It is obtained by dividing the total revenue from taxes and social security contributions by the GDP for the same year. This indicator reflects the impact of taxation on the country’s economy.
In Andorra, the calculation is based on three categories:
- The collection of income and wealth taxes, such as personal income tax and corporate tax.
- Taxes on production and imports, such as the IGI (similar to VAT), customs duties and excise taxes.
- Social security contributions to the CASS, paid by both companies and workers.
This calculation is based on the accrual principle, whereby income is recorded when it is declared rather than when it is collected.
Comparison with the neighbouring countries Spain and France
Although Andorra’s fiscal burden increased in 2024, it remains below the European average. In Spain, this indicator stands at 39% of GDP, while in France it exceeds 45%, which is one of the highest percentages in Europe, according to Eurostat data.
This difference is due not only to lower tax rates, but also to a simpler tax structure. This continues to be one of the main reasons why many companies and investors consider Andorra an efficient location in which to set up their businesses.
What are the benefits of a lower fiscal burden?
Although Andorra’s tax burden increased in 2024, this did not lead to higher tax rates. These figures confirm the strength of the economy and the effectiveness of the taxation system. This environment continues to offer low taxation, transparency and alignment with international standards. The key to optimising the impact of taxation from day one is to have the support of local experts.
The following advantages of having a lower fiscal burden than in neighbouring countries stand out:
• Higher profitability for companies
When the fiscal burden is low, companies are able to retain a larger share of their profits. This enables them to re-invest, expand or increase their employees’ pay without paying an excessive proportion in taxation.
• More attractive for foreign investment
This is important for investors seeking fiscal efficiency without relinquishing a secure, internationally recognised legal environment.
• Greater flexibility in financial planning
Companies can adjust their cost structures, margins and prices more easily without being limited by taxation.
A fact that confirms Andorra’s competitive advantage
Andorra has a thriving economy and a robust public management system that remains sustainable without resorting to increases in taxation.
For businesses already operating in Andorra or considering setting up there, it is crucial to understand the real impact of each type of tax regime. At Advantia Assessors, we provide companies and investors with the local knowledge that they need to make informed decisions. If you would like us to analyse your situation, please get in touch.