Capital Gains Taxation in Andorra
In Andorra, capital gains taxation is governed by the Income Tax Law (Llei de l'Impost sobre la Renda de les Persones Físiques, LIRPF). Capital gains are defined as the profits obtained from the transfer of assets or rights, regardless of their nature or denomination. This includes the sale of real estate, stocks, bonds, and other financial instruments.
The taxable capital gain is calculated as the difference between the selling price and the acquisition cost of the asset. Adjustments or deductions are allowed for expenses related to the sale, such as brokerage fees and legal fees. Improvements made to the asset during ownership can also be deducted from the selling price to determine the taxable gain.
Capital gains are taxed at a flat rate of 10%. However, there are certain exemptions and deductions that may apply, such as:
- Gains from the sale of a principal residence are exempt from tax.
- Gains from the sale of assets held for more than 10 years are taxed at a reduced rate of 5%.
- Gains from the sale of shares in Andorran companies are exempt from tax if the shares have been held for more than 5 years.
The legal framework for capital gains taxation in Andorra is outlined in the following articles of the LIRPF:
- Article 13: Definition of capital gains
- Article 14: Calculation of taxable capital gains
- Article 15: Tax rates for capital gains
- Article 16: Exemptions and deductions for capital gains
The rationale behind the capital gains tax system in Andorra is to generate revenue for the government while also encouraging investment and economic growth. The flat tax rate of 10% is relatively low compared to other countries, and the exemptions and deductions provide incentives for long-term investment.
If you are considering investing in Andorra, it is important to be aware of the capital gains tax implications. By understanding the legal framework and the applicable tax rates, you can make informed decisions about your investments and minimize your tax liability.
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