Is Andorra (really) a tax haven? Well, yes, but a bit different from before. Andorra has long been known as one of the most tax-friendly jurisdictions in Europe, thanks to its banking secrecy and zero-tax environment. However, things changed in 2009. 

After mounting pressure from the OECD and European Union, the principality created new tax policies and is now recognized as a “tax-approved jurisdiction.”  Despite these reforms, Andorra still remains one of the lowest tax countries in Europe. 

So, if you’re planning to hire workers in or outside Andorra, it’s important that you’re familiar with the payroll and income tax laws. This helps you budget effectively, attract better talent, and save you from penalties/fines from the Government. In this article, we’ve done the heavy lifting and simplified everything you need to know about Andorra payroll and income tax law. 

What Is Payroll Tax in Andorra?

Payroll taxes are the percentage deducted from the employee’s paycheck and is usually paid to the Government by the employer. This tax differs from country to country, and is used to finance social security, healthcare, unemployment insurance, and other public programs. 

Definition and Purpose of Payroll Tax

Unlike other countries, Andorra doesn’t have a specific “payroll tax.” Instead, every employer is mandated to pay CASS contributions (Cassa Andorrana de Seguretat Social), which are almost equivalent to payroll tax. This fee is calculated based on the employee’s gross salary and used to finance healthcare, maternity, sick leave, and retirement benefits. 

Keep in mind that the CASS contribution is different from the income tax. The government levies Income tax on the employer’s/employee’s income to fund public services and other government-related operations in the country. It can be personal income tax (i.e., levied on an individual’s salary and other sources of income) or business tax for corporations, self-employed workers, etc. In Andorra, employers are required to remove the Personal Income Tax from their employees’ salaries. 

Employer and Employee Responsibilities

According to Andorran law, every active person must pay social security contributions of 22% of their gross monthly salary. Employers are responsible for deducting the CASS contributions from their workers’ salaries every month and paying them directly to the government. 

The best part is that the total amount is split between the worker and the employer. Employees are mandated to allocate 6.5% of their gross monthly salary, while the company contributes the remaining 15.5%. 

For example, if your company pays an employee €5000 per month, the total amount the employee contributes to CASS is €325, while the employer contributes €775. 

Some companies pay a higher share of the total contribution to financially support their employees or attract more attractive compensation packages. While this isn’t legally required, it can help attract top talent in the labor market. 

Employer Payroll Tax Rates in Andorra

CASS is divided into two branches, and the tax payments are equally split between the two: 

General Branch

This social security system covers reimbursement benefits, maternity, paternity, disability, death capital, and orphans’ pensions. For example, if your employee is injured and temporarily unable to work, the general branch ensures they receive a percentage of their salary as compensation during recovery. Also, this fund covers treatment costs for people who don’t have the financial capacity to do so themselves. 

Workers are mandated to allocate only 3% of their gross salary to this cause, while employers contribute 7%. This is a total of 10% payable to the general branch of the CASS. 

Retirement Branch

This is the second branch of the social security system, and it is primarily responsible for pensions for retired workers. For example, if an employee reaches retirement age and meets the required contribution period, they can receive monthly pension payments from the CASS. This fund also covers disability pensions and survivor benefits for spouses or dependents in the event of the contributor’s death. 

Here, employees must allocate 3.5%, while employers cover the remaining 8.5%. This is a total of 12% for the retirement branch. 

Here’s a breakdown of how the payment is made:

CASS BranchEmployee PercentageEmployer’s PercentageTotal Percentage
General Branch3%7%10%
Retirement Branch3.5%8.5%12%
Total CASS6.5%15.5%22%

Overview of Income Tax in Andorra

Residents living in the principality need to pay taxes on their total income, including income earned from sources outside the principality. There are two major income tax options you need to know: 

Personal Income Tax

Like the CASS, Andorra’s personal income tax is simple, transparent, and low-rate. It is also called Impost sobre la Renda de les Persones Fisiques, or IRPF for short. This tax is specifically for Andorran residents or anyone who has stayed in the principality for more than 183 days within 12 months. 

If you or your employee(s) don’t live within the principality, you’ll have to pay the IRNR (Non-resident income tax). We’ll discuss more of this later. 

Generally, personal income tax is 10% of all worldwide income. However, Andorra operates a progressive tax system, meaning the allotted rate depends on your annual income. 

For context, here’s a breakdown of the IRPF rates for employees in 2025: 

Annual Taxable Income (EUR)Tax Rate
Up to €24,0000%
€24,001 – €40,0005%
Above €40,00010%

As you can see, the higher the annual revenue, the higher the tax rate payable to the Andorran Government. For example, if your employee is a resident of the principality and earns a yearly income of €35,000, the first €24,000 is exempted. However, the next €11,000 is taxed at 5% (~ €550/year).

The Non-Resident Income Tax

The non-resident tax in Andorra is called L’impost Sobre La renda des no-residents fiscals (IRNR). As mentioned above, employees who do not live in the principality but earn income from Andorra sources are liable to pay the IRNR. 

This usually applies to foreign contractors or freelancers. The standard IRNR rate is 10%. Like the personal income tax, the company is responsible for deducting and remitting the IRNR tax.  

For example, if you hired a freelance contractor and paid €3000 for the services rendered, the total IRNR tax is €300. The net amount to be paid to the contractor is €2,700. 

Corporate Income Tax

Corporate tax (called Impost de Societats or IS) is the tax imposed on companies’ profits in Andorra. Unlike the CASS, this tax is collected yearly and is one of the most affordable in Europe. This tax applies to: 

  • Businesses registered in Andorra 
  • Enterprises operating under Andorran law 
  • Businesses that recently transferred to Andorra  

The general corporate income is 10% of the company’s net income. However, startups earning up to €50,000 can pay 5%.  

Employee Tax Deductions and Allowances

The Andorran tax system also offers some deductions and allowances to reduce tax strain on the payees. Some of them include:

  • Alimony and child support: Court-ordered alimony and child support payments are deductible if recognized under Andorran law.  
  • Contributions to charitable organizations: Donations made to approved Andorran charitable organizations can be deducted from taxable income. 
  • Educational expenses and scholarships: Some scholarships and academic grants are tax-exempt.  
  • Funds from dividends: Bond interest and dividends are exempt from personal income tax.  
  • Capital gains: Property gains held for over 10 years are tax-exempt. But if you’ve owned your property for less than ten years, you must pay capital gains tax, which ranges from 1% to 15%. 
  • Inheritance: Andorra does not impose an inheritance tax on assets passed down to direct family members.  

Tax Treaties and Withholding Taxes

Some tax treaties offset taxes and withholding in Andorra. These arrangements offset the total tax amount paid by taxed residents. 

Withholding Tax on Foreign Income

Andorra doesn’t impose a withholding tax on foreign income for most individuals and businesses, especially when the income is earned outside the country and the recipient is a tax resident in the principality. 

There are some exemptions, though.

Taxpayer TypeIncome TypeWithholding Tax RateNotes
Resident IndividualsInterest, Royalties, Technical Services10%Applies to each payment; residents only
Resident CompaniesAll TypesExemptNot subject to withholding tax
Non-Resident IndividualsAll TypesExemptNot subject to withholding tax
Non-Resident CountriesRoyalties5%Paid to residents and non-residents
Non-Resident CountriesTechnical Services10%Paid to residents and non-residents

Also, Andorra doesn’t impose branch remittance tax. This means that profits transferred from a branch to its parent country outside the principality are not taxed. This is a huge plus if you own an enterprise or chain business in and outside the principality. 

Double Taxation Agreements

Andorra has tax treaties with 10 countries, which include: 

  • The United Arab Emirates 
  • Malta 
  • Hungary 
  • Cyprus
  • San Marino 
  • France
  • Liechtenstein 
  • Luxembourg 
  • Portugal 
  • Spain

This means if you’re a tax resident in Andorra but receive income from any of these countries, you won’t need to pay taxes again, thanks to the double taxation agreements (DTAs). 

For example, say you have a sister company in Malta that pays you dividends. You’ll be taxed on the income in Malta, but you won’t be taxed again in Andorra on the same income. DTAs promote cross-country investments and trades. 

Andorra Payroll Tax Calculator

Use the Remote People Global Payroll Calculator to calculate payroll expenses for your employees in the principality or abroad.   

How the Calculator Works

The RemotePeople Global Payroll Calculator is simple and easy to use. To calculate the expenses, follow these steps: 

Step 1:  Choose the country and employment type, i.e., either local or expat: 

Remote People Payroll Calculator, Step 1

Step 2: Input the employee’s gross salary in the local currency (€) and the calculation period. The calculation period can be monthly or annually: 

Remote People Payroll Calculator, Step 2

Step 3: Click calculate, and the tool automatically gives you a detailed breakdown of your net salary, tax deductions, and employee costs in real time! 

Remote People Payroll Calculator, Step 3

Simplify Payroll and Tax Compliance in Andorra

Andorra has a simple payroll and tax compliance that makes it easy for companies to manage employee compensation and meet statutory obligations with minimal burden. 

Employees are required to register with the Andorran Social Security System (CASS) on behalf of their workers and withhold social contributions from their salaries every month. They’re also responsible for calculating and withholding personal income tax from their workers based on their income brackets. 

You can use the RemotePeople Global Payroll Calculator to calculate taxes and generate payslips, or consult a tax expert for guidance on Andorra taxation laws.

Frequently Asked Questions

The personal income tax in Andorra is capped at 10% for an annual income over €40,000, with the first €24,000 fully tax exempt and a 5% rate on income between €24,001 and €40,000. 

 

Also, the corporate tax for businesses in Andorra is 10%. Startups or companies with a net income of €50,000 can pay 5%. 

Andorra ranks as one of Europe's countries with the lowest tax rate. This includes personal income, corporate, and value-added tax. Also, every resident is tax-exempt for the first €24,000. 

To become a tax resident in Andorra, you need to: 

  • Be employed in an Andorran company 
  • Be 18 years of age and above 
  • Have a clean criminal record 
  • Own at least 10% shares in a registered Andorran company 
  • Spend more than 183 days in the principality during a calendar year
  • Be married to a citizen