Tax Residency in Andorra
1. Criteria for Determining Tax Residency in Andorra
According to Article 10 of the Andorran Personal Income Tax Law, an individual is considered a tax resident in Andorra if they meet any of the following criteria:
- Physical presence in Andorra for more than 183 days in a calendar year.
- Establishment of their habitual residence in Andorra.
- Exercise of their main economic activity in Andorra.
The rationale behind these criteria is to ensure that individuals with significant ties to Andorra, either through physical presence or economic activity, are subject to taxation on their worldwide income.
2. Impact of International Tax Treaties on Tax Residency Criteria
Andorra has entered into several tax treaties with other countries to prevent double taxation and promote cross-border trade and investment. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
For instance, under the Andorra-Spain tax treaty, an individual is considered a resident of Andorra if they have their permanent home in Andorra. This treaty also includes tie-breaker rules for individuals considered residents of both Andorra and Spain under each country's domestic law.
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between Andorra and the treaty partner country to facilitate tax compliance and enhance economic cooperation.
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