Ad Corporate Income Tax

Andorra corporate income tax, 2026

Source-cited draft for working papers. No accountant has signed off this Guide.

1. Who this applies to

Resident legal persons, collective investment institutions and the public entities within article 6 are subject to corporate income tax (IS). Residence exists if any of incorporation under Andorran law, registered office in Andorra or effective management in Andorra is met. Tax covers worldwide income, regardless of payer residence. Civil partnerships, unadministered estates and other transparent arrangements attribute income to participants; a corporate participant includes its share in IS. Individuals use ad-income-tax; foreign entities with an Andorran permanent establishment (PE) use ad-non-resident-income-tax. Law 95/2010, arts 4, 6–7; regulation, art 3.

Article 8 distinguishes fully exempt named public bodies from partially exempt qualifying nonprofit bodies. For partial exemption, classify each receipt: qualifying statutory-purpose income, specified gifts and qualifying reinvested disposal income can be exempt; commercial income and other nonqualifying income remain taxable. Reinvestment spans the year before disposal through the following three years, with the statutory four-year retention/useful-life rule. The separate ancillary-revenue exemption requires nonexempt revenue below EUR 10,000. Partially exempt bodies declare all income, including exempt income. This is not a general exemption for every association or foundation. Arts 8, 57.

This Guide computes ordinary standalone IS, including the core loss, expenditure, participation, PE, IP and authorised holding rules. Tax consolidation, controlled-foreign-company attribution, reorganisations, national-interest-project incentives, banking resolution and sector-specific regimes require their separate statutory schedules; they are outside the worked examples.

2. Rates, bands and thresholds

The old new-company 5%-on-EUR-50,000 incentive is not a current rate. Its former second additional provision was repealed by Law 17/2017. The current second additional provision concerns property gains; the first additional provision concerns the original introduction of IS, not every company's first year. Law and amendment annotations.

3. The base

Reconcile accounts to taxable profit

Start with the accounting result under the applicable accounting framework. Maintain one workpaper per permanent adjustment, timing difference, exempt receipt, relief and loss vintage. Add back an expense only if charged in the starting result. Cash movement alone does not establish deductibility. Arts 9, 19.

Article 13 disallows equity remuneration, booked IS, the specified communal rental and business-location taxes, criminal/administrative fines, late-filing and enforcement surcharges, gambling losses and unlawful costs. An IS accounting credit is correspondingly not taxable income. Specified communal taxes have a separate credit for amounts actually paid; do not leave the expense deducted as well. Director remuneration for the office must be provided in the company's articles. Related-party payments have a separate deduction restriction where the recipient is exempt, outside a comparable income tax or taxed at a nominal rate below 5%, including classification mismatches; test the applicable-treaty presumption. An arm's-length price alone does not remove this restriction. Arts 13, 43 bis.

Classify donations and gratuitous costs separately. The client/supplier relations, customary staff, promotion and income-related costs covered by article 13(1)(f) cannot exceed 1% of the average positive tax base of the current and two prior years, before this limitation. This is not 1% of turnover. Recognised nonprofit donations have their own expense ceiling of 10% of accounting profit. Do not assume that a qualifying donation automatically produces both the maximum expense and the maximum separate credit; document the precise qualifying amount under each provision and apply article 43's floor. New, short-period or loss-history averaging requires a supported treatment rather than an invented three-year denominator. Arts 13(1)(f), 43, 44 bis.

Depreciation, impairment and provisions

Deduct effective depreciation within article 10. The Annex I straight-line useful-life ranges are: buildings 30–40 years; technical installations 8–12; machinery 6–8; tools and other installations 3–5; furniture 4–6; computers 2–5; vehicles 5–8. Choose and evidence the applicable asset classification and useful life. A related-party acquisition cannot automatically depreciate an uplift representing a seller gain that was untaxed or only partly taxed. Intangibles follow their useful life; goodwill and indefinite-life intangibles have the specific annual one-twentieth rules, including the applicable reserve/accounting conditions, rather than an assumed immediate deduction. Art 10 and Annex I.

Bad debts require one of article 11's triggers, including six months overdue, insolvency, prosecution or qualifying litigation. Public, secured, renewed and related-party claims have additional restrictions; a related debtor requires judicial insolvency for this route. Impairments of tangible assets, intangibles, property, participations and listed debt are not generally deductible merely because booked. Track their tax basis and later reversal/disposal treatment. Arts 11, 18.

Provisions require the specific article 12 conditions. Implicit obligations, unsupported restructuring, sales returns and equity remuneration are among the restricted categories. Long-term staff liabilities need the specified externally funded, vested arrangements to qualify. Warranty provisions use the statutory historical claims ratio; recognise a previously disallowed liability when the deductible actual expenditure arises. Preserve the book/tax reversal schedule. Arts 12, 18–19.

Financing, valuation and timing

For entities within article 14, net debt-financing cost is limited to 30% of corrected accounting profit, with the EUR 500,000 minimum deduction, prorated for a short period. Banking/insurance entities, standalone accounting entities and accounting groups with an Andorran-resident parent have the statutory exclusions. Where the limit applies to a group, share the minimum under the statutory allocation rather than giving every company a separate EUR 500,000. Carry disallowed interest for 17 years; unused percentage capacity lasts five years. Extinction has a specific exception, limited for reorganisations or continuation in the same group. Keep these ledgers separate from ordinary tax losses. Art 14.

Use market value for the specified gifts, contributions, distributions, liquidation, exchanges and other noncash transactions. A distributing/liquidating company tests market value against its tax basis; a corporate recipient separately tests the assets received against its cancelled participation basis and any applicable exemption. A government grant is not automatically a gratuitous acquisition for this rule. Related-party valuations also need article 16 evidence, covered in ad-transfer-pricing. Carry-value exceptions for specified reorganisations or other statutory transactions require their own proof. Arts 15–16.

Use accrual and the statutory accounting recognition rules. Late-booked expenses or early-booked income follow the exception only where it does not reduce the tax otherwise payable. Qualifying instalment transactions with more than one year to the final maturity have the proportionate-receipt rule unless the taxpayer elects accrual. Track impairment reversals, reacquisitions and related-group disposal-loss deferral; do not treat a related sale as a final deduction without article 19's conditions. Arts 18–19.

Ordinary exemptions and losses

For article 20 participation income, establish the 5% interest and one-year holding period. Dividends can complete that year afterwards; disposal must meet it at disposal. Apply the indirect-holding, related-holder continuity, underlying-income and foreign-tax tests. The foreign nominal-tax threshold is 5%; an applicable Andorran treaty supplies the stated presumption. For disposal gains, test all holding periods and allocate where only some periods qualify. Andorran property-rich interests, with at least 50% of assets directly or indirectly in relevant Andorran property/rights, are excluded from the disposal exemption. Deductible dividends for the payer, expenses attributable to exempt participation income and participation losses have separate restrictions, including the precise extinction exceptions and dividend adjustments. Art 20.

Foreign PE positive income has the separate article 21 exemption, with the 4% nominal comparable-tax or applicable-treaty condition. PE losses are not generally deductible; cessation has its own exception. The residential rental reduction has the strict price/use conditions in the table and cannot make the base negative. Arts 21, 21 ter.

Use eligible unexpired negative bases over the following 17 years, retaining each generation date, prior use and expiry. Article 22(2)'s restriction requires the specified majority acquisition, prior holding below 25%, and inactivity or changed/additional-activity condition together. Inactivity is the six months before acquisition; the alternative activity test uses the different activity-code group and the statutory two-year turnover comparison above 50%. Majority acquisition alone is not forfeiture. Pre-2024 book adjustments and intangibles retain the relevant transitional rules; do not revive an already expired historic loss or restart its clock merely because current law says 17 years. Arts 22, 43; Law 5/2023, transitional provisions 1–9, final provision 4.

Authorised IP and holding regimes

Article 23's IP relief applies asset by asset to eligible patents, utility models and copyright-protected computer programs. Positive net income is eligible receipts less directly attributable deductible costs. Compute the qualifying creation-cost numerator: own work and permitted subcontracting, with related-party work qualifying only if the related party is resident and performs it in Andorra. Unrelated work abroad has the statutory 25% numerator limitation before uplift. Increase the qualifying numerator by 30%, capped at the denominator of all relevant creation/acquisition costs, including nonqualifying subcontracting. Exclude unrelated general costs from both sides. Reduction = eligible positive net income ×80% × resulting ratio. It is not a general 2% rate on gross royalties. For example, a verified EUR 60,000 qualifying numerator and EUR 100,000 denominator give a 78% uplifted ratio, a EUR 62,400 reduction on EUR 100,000 net income, and EUR 3,760 tax on the EUR 37,600 remainder before other adjustments. The original recomputing control is retained in country research. Art 23(1), (3).

The taxpayer must exploit the rights in its own name, evidence the required activity and asset-level accounts, and satisfy the licensee's economic-use/no-back-deductible-supply condition. Recover earlier negative income before relief on later positive income; later losses after relieved profits have the statutory corresponding restriction. Apply with asset/activity/resources evidence. The six-month decision period runs from receipt or correction; silence is rejection, not deemed approval. Authorised effects start in the application period; substantive changes need the prescribed notification/approval. Art 23(2)–(6).

Article 38's special holding regime requires an Andorran SA/SL, exclusive holding/management object, nominative interests and actual authorisation requested through the census declaration. It applies to the period ending after authorisation and later periods until notified renunciation. Foreign subsidiaries need the distinct nominal-tax threshold of 4%, applicable-treaty presumption or qualifying second-tier income route; domestic subsidiaries must be generally taxed without exemption. Article 20(2)'s property-rich, deductible-dividend, linked-expense and loss limitations still apply. Keep the annual participation/portfolio/dividend note and declare the exemption even where no tax is payable. Do not replace these conditions with the ordinary 5%/one-year regime. Pre-July-2017 holdings under the old authorised regime require the separate Law 6/2018 transition and allocation evidence. Art 38 and third transitional provision of Law 6/2018 reproduced with the law; regulation art 32.

Gross tax, credits, floor and cash balance

Compute tax on the positive base after eligible losses. Article 43 then constrains losses and credits together: settlement cannot fall below 30% of gross tax on the positive base before carried losses. Reduce loss use and/or credits to respect that floor; the simple no-credit 70% maximum loss offset is not a permission to deduct all credits afterwards. Unused qualifying credits retain their six-year carry window; unused losses retain their own original 17-year window. Arts 22, 43.

Article 43 bis credits actual qualifying communal taxes and caps foreign tax at the lesser of qualifying foreign income tax, within any treaty limit, and Andorran tax attributable to that income. Include foreign tax in gross income where required, group by country with PEs separately and retain foreign assessment/payment evidence. Above-cap foreign tax is not automatically a carryforward; distinguish a substantively capped amount from an eligible credit unused because of insufficient liability/floor. Arts 43–43 bis.

Employment credits require incremental average permanent full-time-equivalent staff, registered unemployed at hiring, Andorran contracts and CASS general-regime enrolment. The enhanced EUR 3,500 amount applies to the specified under-25, over-55 or recognised disabled categories. Maintain the incremental average workforce, and the required enhanced-category worker count, during the year following the tax-period close or recapture the credit with interest. Prorate part-time employment; temporary posts do not become permanent FTE credits. The digitalisation credit is 2% of qualifying Annex III project costs. Prior tax-administration certification is required when the deduction base is EUR 1 million or more; this is not a minimum project size. The credit is incompatible with IP relief or another benefit on the same expenditure. Donations have article 44 bis's 20% credit, 10%-of-tax-base ceiling and certificate conditions: money at amount, assets at book value, qualifying free use at the statutory 5% annual book-value/day allocation, excluding fees or free services. Retain certificates for six years after the return deadline, or late filing where applicable. Apply the combined floor to eligible credits. Arts 44, 44 bis; regulation arts 33–34.

Finally deduct ordinary advances and qualifying property advances actually paid. For property income recognised over deferred receipts, match the property advance under article 46's rule. A negative cash balance is refundable; an advance is not another expense. Prior settlement EUR 18,000 produces a EUR 9,000 ordinary advance; current settlement EUR 22,000 then leaves EUR 13,000 payable. Prior settlement EUR 20,000 and paid advance EUR 10,000 against current settlement EUR 6,000 produces EUR 4,000 excess. Original controls for both cases remain in research. Arts 45–46.

4. Deadlines and filing

Register in the tax administration's business/professional census. Keep accounting records, the tax reconciliation, loss/credit vintages, foreign-tax proof and authorisations. Provisional deregistration does not discharge tax liabilities. A tax period cannot exceed twelve months and closes on the specified extinction, migration or transformation events; use the actual closing event/date. Arts 39–40, 47–54.

File and pay using the administration's approved IS self-assessment in the month following six months after period end. Calendar-year 2026 is ordinarily filed and paid in July 2027. Filing in the first six months is permitted but does not accelerate the statutory payment/refund timetable. The ordinary 50% advance is due in September for a calendar-year company; if prior periods are short, complete the twelve-month reference with the specified earlier periods. The first activity year is excluded. The current law supplies this method even before a future annual form is released. Arts 45, 57–58; regulation arts 37, 45.

For Andorran property/equivalent transfers, self-assess the 10% positive-gain advance within thirty days of a private contract or simultaneously with the notarial/public deed. Test statutory exemption and deferred-price conditions and provide the required notary evidence. The additional speculative surcharge is tax on the gain at the table's holding-period rate; new-construction developments have the special 5%-under-two-years rule. Corporate property gains do not inherit the individual's long-holding coefficients. Arts 45 bis–ter, second additional provision; regulation art 38.

Refund review has three months from the filing deadline, or from actual filing if late, before the statutory tax-late-interest consequence for authority delay. If a relief's conditions are later lost, restore the corresponding tax with interest under the recapture provision. Arts 58, 60.

5. Penalties and interest

IS article 64 sets simple-infringement fines of EUR 150–3,000 and defraudation penalties of 50%–150% of the amount, with general-law classification and graduation. Determine the actual offence, culpability, concealment/fraud and prior history; not every correction automatically attracts the maximum. Art 64; General Tax Law 21/2014, arts 125–132.

Voluntary late tax-bearing returns have 2% surcharge below two months, 5% from two through twelve months, and 10% beyond twelve months; a return following the specified formal request attracts 15% if complied with. Apply the separate interest/sanction coordination: the voluntary protection from interest ends after six months, and a prior request changes the treatment. Enforcement surcharges are mutually exclusive 2%, 10% or 20% according to payment/notice stage; the 20% route adds interest, whereas the 2%/10% routes exclude it. Tax late interest for 2026 is 4.05% annually on the statutory base/period, with authority-delay exclusions. Do not invent a daily divisor or apply CASS late-payment rules to IS. General Tax Law, arts 23–25; Budget Law 1/2026, art 17.

6. Cross-border points

Treaty residence and PE attribution need the actual operative treaty and facts. Payments to non-residents must be classified under IRNR rather than applying a generic corporate withholding rate. Domestic exempt dividends and qualifying interest are distinct from taxable royalties and services; see ad-non-resident-income-tax. The ordinary foreign-participation 5% test, foreign-PE 4% test and authorised holding 4% test are different rules. Arts 7, 20–21, 38, 43 bis; IRNR Law 94/2010.

On a residence/effective-management move within article 17, include market value less tax/book basis as prescribed, except assets retained in an Andorran PE with continuing tax values. Close the last resident period at the applicable registry event. The administration's CV0366-2026, issued 10 February 2026 for an Andorra-to-Spain company move, expressly denies article 20's participation exemption for the deemed exit gain on the Spanish subsidiary: an actual share disposal and a deemed migration charge are different taxable events. Preserve the ruling's materially-equivalent-facts and unchanged-law boundary; do not assume qualifying shares make migration tax-free. Arts 17, 39; CV0366-2026, response.

For inbound assets, article 17(c) supplies the market-value entry and remaining-life rules with proof and the first Andorran accounts. The specific foreign-PE fixed-asset transfer rule in 17(d) calculates the market/remaining-tax-value difference; only its stated recognition deferral has prior guarantees and annual-accounts notes and is released on the relevant unrelated disposal. Do not extend that deferral automatically to an entire company migration. Foreign exemption/credit does not shelter the pre-transfer Andorran gain. Art 17(c)–(d).

7. Two worked examples that recompute

Eligible losses, no credits

A EUR 100,000 positive pre-loss base and EUR 90,000 eligible unexpired losses give EUR 10,000 gross pre-loss tax and a EUR 3,000 floor. With no credits, use EUR 70,000 losses, retain EUR 20,000 within its original expiry and pay EUR 3,000 before advances. Ownership/activity restrictions are assumed tested.

oaCopy code
name: Andorra loss relief settlement floor without credits
inputs:
  pre_loss_base: 100000
  available_losses: 90000
  tax_rate: 0.10
  floor_fraction: 0.30
steps:
  pre_loss_tax: pre_loss_base * tax_rate
  liability_floor: pre_loss_tax * floor_fraction
  maximum_loss_use: pre_loss_base * (1 - floor_fraction)
  losses_used: min(available_losses, maximum_loss_use)
  taxable_base: pre_loss_base - losses_used
  settlement_liability: taxable_base * tax_rate
  losses_remaining: available_losses - losses_used
expected:
  pre_loss_tax: 10000
  liability_floor: 3000
  maximum_loss_use: 70000
  losses_used: 70000
  taxable_base: 30000
  settlement_liability: 3000
  losses_remaining: 20000

Permanent adjustments already in accounting profit

EUR 80,000 book profit is after EUR 7,000 IS expense, EUR 2,000 fine and EUR 1,000 specified communal tax. Add back EUR 10,000 for EUR 90,000 taxable base and EUR 9,000 tax. The communal liability is booked but not yet paid, so no actual-paid communal credit arises here. There are no other adjustments, losses, credits or reliefs; the floor does not bind.

oaCopy code
name: Andorra ordinary permanent expense adjustments
inputs:
  accounting_profit: 80000
  booked_corporate_tax: 7000
  administrative_fine: 2000
  specified_communal_tax: 1000
  tax_rate: 0.10
steps:
  permanent_addbacks: booked_corporate_tax + administrative_fine + specified_communal_tax
  taxable_base: accounting_profit + permanent_addbacks
  tax: taxable_base * tax_rate
expected:
  permanent_addbacks: 10000
  taxable_base: 90000
  tax: 9000

8. Ask the client first

• Which entity, residence facts, period dates, start/cessation or migration events and tax registrations apply?
• What do the accounts and asset, debt, provision and related-party schedules show, including amounts actually paid?
• Which participation/PE income, foreign assessments, holding dates and authorisations support exemption or credit?
• What are the generation, use and expiry histories of losses and credits, and the ownership/activity changes?
• Which property transactions, IP costs, qualifying jobs/donations and relief conditions require separate schedules?
• What advances, returns, payment receipts, assessments and notices already exist?

Sources

Not yet confirmed: historic pre-July-2017 holding gain allocations require the actual old authorisation/acquisition workpaper; the precise article 13 client-cost average for a new, short-period or loss-history case and interaction of a particular donation expense with its separate credit require a supported case-specific treatment. No current new-company 5%-on-EUR-50,000 incentive is established. Treaty-by-treaty rates, consolidation/CFC/reorganisation and sector-specific calculations are outside this ordinary standalone method. Portal consolidations are not the official gazette; retain their amendment/application annotations and check the operative act where a historical transition matters.

Contributed by Michael Cutajar.

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General reference only. This document does not constitute tax, legal, or financial advice. Verify figures against the cited primary sources or with a licensed professional before relying on them.

Today's figures and who stands behind this skill

This file is an AI skill (tax rules your AI follows) from OpenAccountants, copied on 2026-10-28. Rates, thresholds and deadlines change. For the current version of this skill, its official sources and the named accountant (if any) who stands behind it, call get_skill with slug ad-corporate-income-tax on the OpenAccountants connector (https://www.openaccountants.com/connect), or read https://www.openaccountants.com/skills/ad-corporate-income-tax. If neither is available, confirm every figure against the official source pages cited above before relying on it.