Andorra vs Spain: A Comparison of Tax Systems – Fully Expanded and Updated January 2025

When comparing tax systems, Andorra and Spain present vastly different regimes. Andorra’s low-tax environment has long been a draw for individuals and businesses seeking to minimize their tax liabilities. In contrast, Spain’s more complex tax system imposes higher rates but provides extensive public services and benefits. This updated post provides a detailed comparison of the tax systems in Andorra and Spain, covering personal income tax, corporate tax, VAT, capital gains tax, and social security contributions. At Axior Global, our team of tax advisors can help you navigate these systems and make well-informed decisions about relocation, investments, or business operations.  

Tax Overview: Andorra vs Spain

Tax Type	Andorra	Spain
Corporate Tax	10%	25% (standard)
Personal Income Tax	0% to 10%	19% to 47%
Capital Gains Tax	10% (general rate)	19% to 23%
VAT	4.5%	21% (standard); Reduced: 10% – 4%
Wealth Tax	Not applicable	Applies to assets above €700,000
Inheritance Tax	Not applicable	Up to 34%, varies by region
Social Security	22% (6.5% employee, 15.5% employer)	36.25% (6.35% employee, 29.9% employer)

1. Personal Income Tax

Andorra offers one of the most attractive personal income tax systems in Europe, with a progressive rate capped at just 10%. Here’s the breakdown for 2025:

• €0 – €24,000: 0%
• €24,001 – €40,000: 5%
• €40,001 and above: 10%

This system ensures that only high earners pay the maximum rate, while certain types of savings income (interest, dividends) are taxed separately under specific conditions.   Spain has a progressive income tax system with significantly higher rates. For 2025, the brackets are:

• €0 – €12,450: 19%
• €12,451 – €20,200: 24%
• €20,201 – €35,200: 30%
• €35,201 – €60,000: 37%
• €60,001 and above: 47%

Savings income is taxed separately at rates of 19% to 23%, depending on the amount.  

2. Corporate Tax

Andorra’s corporate tax rate is just 10%, making it one of the lowest in Europe. Certain industries, such as international trade and R&D, may qualify for even lower rates or exemptions.   Spain’s corporate tax rate is 25%, though newly created companies may benefit from a reduced rate of 15% during their first two years. The system also provides deductions for R&D activities.  

3. Value Added Tax (VAT)

Andorra applies a low VAT rate of 4.5%, with reduced rates or exemptions for specific goods and services such as books and food.   Spain’s VAT system has a standard rate of 21%, with reduced rates of 10% for certain services and 4% for essentials like bread and milk.  

4. Capital Gains Tax

Capital gains taxation in Andorra applies at a general rate of 10%. However, specific exemptions and reductions apply:

• Real estate sales: Taxed progressively, starting at 15% if sold within the first year, reducing to 0% after 10 years.
• Stock and investment sales: Generally subject to 10% capital gains tax, except in cases of tax-exempt structures or when holding periods meet exemption criteria.
• Short-term speculative investments: A surcharge of 5% may apply for financial instruments sold within two years of acquisition.

In Spain Capital gains are taxed at rates of 19% to 23%, depending on the total amount of the gain. This applies to both property and financial investments.  

5. Social Security Contributions

Andorra’s total contribution is 22% (6.5% paid by employees, 15.5% by employers), covering healthcare, pensions, and unemployment benefits.   Spain’s system imposes contributions of 36.25% (6.35% from employees and 29.9% from employers), funding a wide range of public benefits.  

Conclusion

Andorra’s low tax rates and simplified system make it an attractive destination for individuals and businesses seeking efficiency. Spain, while imposing higher taxes, provides extensive public benefits such as universal healthcare and unemployment support, which may appeal to those prioritizing comprehensive social services. For expert guidance on structuring your finances efficiently in Andorra or Spain, contact Axior Global.