Taxation: declaration of withholding tax on saving income

Agreements with the European Union regarding the taxation of savings income in the form of interest payments

Taxation of saving

Agreements between the Principality of Andorra and the European Community on tax matters

At its meeting on 21 February 2005, the General Council of the Principality of Andorra ratified the agreement between the Principality of Andorra and the European Community regarding the establishment of measures equivalent to those provided for in Directive 2003/48/EC on the taxation of savings income in the form of interest payments.

At its meeting on 21 February 2005, the General Council of the Principality of Andorra ratified the agreement between the Principality of Andorra and the European Community regarding the establishment of measures equivalent to those provided for in Directive 2003/48/EC on the taxation of savings income in the form of interest payments. Subsequently, at the meeting on 13 June 2005, a law was passed to implement the terms of that agreement. On 20 June 2007, a decree was published modifying Form 420: “Statement of withholding tax on savings income” in the annex to Law 11/2005 mentioned above.

This law establishes the obligation to withhold taxes on interest payments made in the Principality of Andorra to the effective beneficiaries, natural persons residing in a member state of the European Union. The withholding rate was 15% during the first three years; 20% from 1 July 2008 to 1 July 2011, and 35% starting on 1 July 2011.

“Law 11/2005 establishes the obligation to withhold taxes on interest payments made by paying agents in the Principality of Andorra to the effective beneficiaries, natural persons residing in a member state of the European Union.”

75% of the amount collected by the Government of Andorra stemming from the withholding obligation is transferred to the countries of the European Union where the effective beneficiaries reside. The income derived from pension and insurance contracts falls outside the scope of the Agreement.

On 14 May 2013, ECOFIN approved a mandate to review the savings taxation agreements with Liechtenstein, Monaco, San Marino, Switzerland and Andorra. In October of the same year, the Principality of Andorra agreed to negotiate the Agreement with the European Community.

This agreement was modified by a new one signed on 12 February 2016 between the European Union and Andorra on the automatic exchange of tax information. Consequently, as of 1 January 2017, taxes are no longer withheld at origin on interest payments made by paying agents in Andorra to the effective beneficiaries.