Income tax in Andorra for the first time

Earlier this month, the state of Andorra announced that it will introduce an income tax for the first time in its history. The small country, situated between Spain and France was made to do so under the pressure from its European neighbors that are struggling with tax evasion and avoidance to pay taxes, as BBC reported. The Prime Minister of Andorra Anthony Marty confirmed that the new law will come into force before the end of June. Until now, the legal and the physical persons in Andorra were not obliged to pay a tax on their income. With the new law that will be accepted, the state will comply with the international tax standards in Europe.

Andorra is a parliamentary principality state, but is represented by two heads of state – the President of the French Republic and the Bishop of Seo de Urhel from Spain. The state has a government since 1986 and is not a member of the European Union, but still uses the euro as its national currency and maintains special, tax-free economic relations with the Union. During their last meeting, the EU finance ministers agreed to start negotiations with Andorra, Switzerland, Liechtenstein, Monaco and San Marino for the exchange of banking information, which is now considered a secret and could not be revealed. The European Commission aims to achieve exchange data policy on bank account holders throughout the European Union in order to prevent tax evasion.