Andorra VAT Rate (IGI)

VAT in Andorra, the indirect tax called Impost General Indirecte (IGI) is usually called painless, as that fee ends up dissolved in the price system, having a perception of the product cost is the total amount. However, in Andorra indirect taxation is quite low, although due to the process of tax harmonization, the fiscal framework in Andorra is similar to systems in surrounding countries and respects international standards, but with much lower rates. Read this guide to discover all details about Andorran indirect taxation (tax equivalent to VAT in the UK, IVA in Spain, or TVA in France).

What is IGI in Andorra (VAT)?

IGI is the acronym used in Andorra for VAT. IGI stands for General Indirect Tax (Impost General Indirecte). Tax is levied on the supply of goods and services carried out in Andorran territory by businessmen or professionals for consideration, on a regular or occasional basis, in course of economic activity, as well as on imports. In other words consumption. For this purpose, it is understood by:

• Economic activity: those involving the arrangement on one’s own account of material and human factors of production or of any of these factors of production, for the purpose of intervening in the production or distribution of goods or in the rendering of services. The activity of leasing goods is considered an economic activity.
• Professional entrepreneurs: individuals or legal entities that carry out economic activities are not considered to be entrepreneurs with respect to this tax (unless they expressly state their intention to be so). This translates into the situations of making deliveries of goods and services exceeding the annual amount of €40,000 or carrying out agricultural and livestock activities exceeding the annual amount of €150,000.

The IGI in Andorra replaced:

• Indirect goods tax (IMI)
• Fee for electricity and telephone consumption
• Notarial public faith service rate
• Indirect tax on the provision of banking and financial services (ISI banking and financial)
• Indirect tax on the provision of business and professional services (ISI)
• Indirect tax on domestic production (IPI)
• Indirect tax on commercial activities (IAC)

IGI did not replace:

• Indirect tax on the provision of insurance services

VAT/IGI Structure and Tax Rate

In regards to the structure of IGI, tax is divided into brackets, led by the general rate of 4.5%. In addition to these, there are the following rates:

What are the applicable IGI tax rates?

General rate: 4.5%

Super-reduced rate: 0% Applicable to:

• Health or hospital care provided by public entities
• The benefit of assistance to individuals reimbursable by CASS
• Provision of social assistance by professionals in agreement with CASS
• Education, teaching, daycare services
• Private lessons taught by individuals (school or university syllabus)
• Services related to sport or physical education provided by public or non-profit organizations
• Services related to the cultural field provided by public or non-profit organizations
• Transport by ambulance
• Housing leases
• Medicines reimbursable by CASS
• Transfers of homes exempt from the tax on real estate patrimonial transfers, due to the acquisition of the first home
• Deliveries of stamps and stamped effects of legal tender, for an amount not exceeding their face value
• Gold investments

Reduced rate: 1% Applicable to:

• Food for human consumption (except alcoholic beverages) or animal, live animals, seeds, plants
• Water suitable for human or animal food or for irrigation
• Books, newspapers, and magazines that do not contain only and fundamentally advertising

Special rate: 2.5% Applicable to:

• Transport of people and their marketing, except for cable transport
• Provision of services listed below when they are not carried out by public or parapublic administrations, public law entities, or non-profit cultural or social entities or establishments:
  – Libraries, archives, and documentation centers.
  – Visits to fairs, museums, art galleries, art galleries, monuments, historic sites, botanical gardens, zoos and natural parks, and other protected natural spaces with similar characteristics.
  – Theatrical, musical, choreographic, audiovisual, and cinematographic performances.
  – The organization of exhibitions and similar events in the educational, cultural, or social field.
• Goods of objects of art, of collection or of antiquity, according to the general nomenclature of products and in accordance with what foresees regulations.

Increased tax rate: 9.5% Applicable to:

• Banking and financial services.

VAT Liquidation and Simplified Regime

For the liquidation of IGI tax, as the businessman or the professional bears IGI, when acquires goods or services and then passes it on at the time of the sale of goods or when he renders services, both amounts are simply subtracted, thus resulting in IGI to be paid by the professional (IGI of goods sold – IGI of goods acquired).

This is done by means of a periodic declaration to the Andorran tax authorities so that the result obtained is the amount of IGI to be paid and credited to the tax authorities or the amount of IGI to be refunded by the tax authorities. The periodicity of this declaration depends on the annual turnover of the immediately preceding year, and in the case of imports of goods, the tax is settled in the manner provided by the corresponding customs legislation.

An interesting thing to note about IGI in Andorra is the special simplified liquidation regime. It can be voluntarily applied by businessmen or professionals when the amount of the supplies of goods and services performed does not exceed the annual figure of €100,000 and once this regime has been opted for, it will be maintained for a minimum period of three years.

Under this regime, the tax liability is determined by subtracting an estimated input IGI from the IGI charged in the tax assessment period. This estimated IGI is based on percentages applied on the annual income figure and varies according to the type of economic activity; commercial activities 3% and the rest 1.5%. The rest of the procedure is the same, that is to say, periodically a declaration is made and the amount resulting from the subtraction is paid (or collected).

Taxpayers must submit IGI declaration periodically based on the annual turnover for the set of activities carried out in the previous year:

• <250,000 euros, half-yearly presentation: July and January.
• <To 3,600,000 euros, quarterly presentation: April, July, October, and January.
• In other cases, monthly presentation.

In the case of imports of goods, the tax is paid in the manner provided for by the relevant customs legislation.

Who Pays IGI? Repercussion and Transfer of the Tax

According to the Andorran tax system, IGI is applied to consumer goods but is paid by the suppliers of the good or service (businessmen, self-employed, etc.), taxpayers pass on the tax in full to the users for whom they carry out the taxed operation, although it is basically the same thing since it means an additional cost for the supplier and a surcharge for the claimant. The latter is obliged to bear it as long as the transfer of the tax is in accordance with the provisions of the Andorran Law.

The transfer of the tax is made by means of an invoice or substitute document, and the amount charged is recorded separately from the tax base, even in the case of prices fixed administratively, indicating the tax rate applied. In the case of imports of goods, the tax is transferred by means of the corresponding document issued by Andorra Customs.

Other Indirect Taxes

As mentioned at the beginning of the article, Andorra not only has the general indirect tax as a consumption tax or final good. Andorra introduced also the following taxes:

• Real estate transfer tax (ITP) (2000). This tax is levied on the transfer of all types of real estate as well as on the constitution and transfer of real rights over real estate, although there are many exemptions. It is levied at 4%, of which 1% is imposed by the government and 3% by the commons on the real value of the property transferred or of the right that is constituted or assigned.
• Tax on the provision of insurance services (2002). Applied to insurance companies when they carry out operations subject to the tax. A rate of 4% is applied to the total amount of the premium or quota to be paid by the policyholder.
• Excise tax (2008). Tax applied to certain products: alcohol, tobacco, and hydrocarbons. These taxes apply to the importation and manufacture (domestic market) of these products and are therefore paid by persons importing or manufacturing alcohol, tobacco, or hydrocarbons. As an example, the tax is €0.02 per pack of tobacco, €25 per hectoliter of pure alcohol (neither beer nor wine), and €0.285 per liter of diesel.