Corporate Income Tax in Andorra
Andorra's corporate income tax system is governed by the Corporate Income Tax Law (Llei de l'Impost sobre Societats, LIS). The LIS establishes a comprehensive framework for calculating corporate tax liability, defining taxable income, and providing for exemptions.
Methodology for Calculating Corporate Income Tax
The calculation of corporate income tax in Andorra involves the following steps:
- Determination of Taxable Income: Taxable income is calculated by subtracting allowable deductions from gross income. Gross income includes all revenue earned by the corporation from business activities, investments, and other sources. Deductions include expenses incurred in generating income, such as salaries, rent, and depreciation.
- Application of Tax Rate: The applicable corporate income tax rate is then applied to the taxable income. Andorra has a flat corporate income tax rate of 10%.
Corporate Tax Rates
Andorra's corporate income tax rate is a flat 10%. There are no tiered or graduated tax structures.
Taxable Income
Taxable income for corporations in Andorra includes:
- Business profits
- Investment income
- Capital gains
- Rental income
- Royalties
- Other income from business activities
Exemptions
Certain types of income are exempt from corporate income tax in Andorra, including:
- Dividends received from resident companies
- Capital gains from the sale of shares in resident companies
- Interest income from government bonds
- Income from non-profit organizations
Legal Framework
The legal framework for Andorra's corporate income tax system is primarily governed by the Corporate Income Tax Law (LIS). Key articles of the LIS include:
- Article 4: Defines taxable income
- Article 5: Specifies allowable deductions
- Article 6: Establishes the corporate income tax rate
- Article 7: Provides for exemptions from corporate income tax
Objectives of the Corporate Income Tax System
The objectives of Andorra's corporate income tax system include:
- Generating revenue for the government
- Promoting economic growth and investment
- Ensuring fairness and equity in the tax system
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