There are several taxes applicable to the buyer of a real estate property located in the Principality of Andorra, depending on the parties involved in the purchase-sale transaction.
- Indirect Tax on Property Transfers (ITP): A tax of 4% is applied on the real value of the property subject to the purchase-sale. 3% goes to the Comú (local municipality) where the property is located, and 1% goes to the Government of Andorra.
- General Indirect Tax (IGI): A tax of 4.5% is applied on the real value of the property subject to the purchase-sale.
When do we apply IGI or ITP?
If the seller of the real estate property is a legal entity or an individual with the status of entrepreneur, and the property being sold is used for business activities, the transaction is subject to a 4.5% IGI tax.
In other cases, such as when the seller is an individual not engaged in business activities, or when the property is not used for business purposes by a legal entity or individual entrepreneur, ITP applies.
If you acquire a property intending to rent it out for residential and habitual use (minimum 5 years), there are 1% discounts on both IGI and ITP. The law also provides exemptions, notably including free transfers between relatives up to the 3rd degree of consanguinity.
As the new owner of a property in Andorra, do I need to pay any other taxes?
The Comú (municipality) where the property is located also applies additional taxes to property owners:
- Property Tax on built real estate. Each Comú applies a fixed tax rate per square meter of the property. Therefore, it is important to notify the Comú of your ownership and update the owner’s information.
- Tax on rental income, which taxes the earnings derived from renting out the property. The tax rate varies depending on the Comú (except Canillo, which currently does not apply this tax). Additionally, if you rent out the property, you will also need to declare the rental income under Corporate Income Tax (IS), Personal Income Tax (IRPF), or Non-Resident Income Tax (IRNR), depending on whether you are a legal entity or a resident/non-resident individual.
It is also noteworthy that the new tax on foreign real estate investment may apply to non-resident investors or residents with less than 3 years in the country (among others). More details are explained in the article dated February 13, 2024 (The new tax on foreign real estate investment in Andorra).
If you are considering the acquisition of a real estate property in Andorra, SUMMIT ADVISORS has specialized advisors who will study your case in the best possible way. Feel free to contact us without any obligation.