Andorra is known as a small country, located between Spain and France, but it has also stood out for its interesting tax regime. Among its particularities is its Value Added Tax (VAT) system, implemented through the General Indirect Tax (IGI). In this article, we will analyze the features and functioning of VAT in Andorra and how it affects both businesses and consumers.
Feb 22, 2024
The General Indirect Tax (IGI) is the main indirect tax in Andorra, established since the year 2013, after adopting the international regulations required by the European Union. This tax, similar to VAT in other countries, aims to tax the final consumption of goods and services carried out by various economic agents within the Andorran domestic market.
Although it shares many similarities with VAT in general terms, the IGI has certain specificities that make it unique compared to the model applied in other countries like Spain or France. Among the main aspects that differentiate the IGI from VAT, we can mention:
Lower tax rates
Refund to non-resident tourists in certain cases
Specific treatment for certain productive sectors
Inclusion of figures like authorized operators
One of the most striking aspects of the tax system in Andorra is the system of rates applied to goods and services. The rates are much lower compared to its neighbors, which has made the country known for being an attractive destination for shopping or commercial operations.
The IGI rates in Andorra are divided into four categories:
General type: is the levy that applies to the majority of products and services and has a rate of 4.5%.
Reduced type: corresponds to a 1% levy and applies to the sale of food, prescription drugs, school supplies and books, among others.
Super-reduced type: this rate constitutes the 0% levy and is applied in certain specific cases such as newspapers, public transport, or vocational training, among others.
Increased type: this levy mainly applies to products considered harmful such as tobacco, electronics, and fossil fuels, reaching a value of 9.5% to 15% depending on the product or service in question.
Just as happens with the VAT regime in other countries, Andorra also considers certain exemptions to the IGI in order to promote certain economic activities or to protect the sale and consumption of goods and services considered essential. Some of these exemptions include:
Medical and hospital services
Rental of housing for residential use
Financial services and insurance
Public or private education
Services related to art and culture
Operations inherent to non-profit institutions
Another interesting aspect of the Andorran tax system is that it allows non-resident tourists to request a refund of the money paid for the IGI concept. To access this refund, a series of conditions established by the Andorran tax authorities must be met:
The purchases made must exceed 90.15 euros during the visit to the country.
The goods purchased must be taken out of the country within 30 days from the purchase date.
The applicant must be over 16 years old and have residence outside of Andorra.
Corresponding fiscal documentation (Tax Free forms, and detailed purchase reports) provided by the participating shops in this refund system must be obtained.
There is a specific list of products excluded from the refund system, such as food, alcoholic beverages, medications or goods whose size prevents transportation out of the country. To obtain more information on this matter and to carry out the procedures correctly, it is advisable to inform oneself in advance by using official Andorran channels.
To better understand how the IGI in Andorra works and what difference it may represent compared to other countries, it is helpful to look at some practical examples:
Let's imagine we want to buy a laptop in Spain and later in Andorra. In Spain, the tax rate on this type of product is 21% (VAT), while in Andorra it would be 4.5% (IGI). If the base price (without taxes) of the product is 1000 euros, in Spain we would be paying 1210 euros for that same product, whereas in Andorra the final cost would be 1045 euros.
For a company or self-employed individual carrying out commercial operations both within and outside of Andorra, it is necessary to periodically present the corresponding declarations to the Tax Administration to keep up to date with their tax responsibilities. In addition, in case of exports, these will be exempt from IGI, as they are considered sales outside the territory for the purpose of consumption.
In conclusion, as we've seen in this article, Andorra has a tax system that offers interesting opportunities for both tourists and businesspeople. The regulations related to IGI and its application seek to promote economic growth and energize the local market, offering attractive benefits to those who comply with the regulations established by their competent tax authorities.
