Andorra operates a modern tax system that includes personal income tax, corporate tax, and indirect taxes, alongside a comprehensive social security system. For employers and employees, the primary considerations revolve around contributions to the Cassa Andorrana de Seguretat Social (CASS) and the application of Personal Income Tax (Impost sobre la Renda de les Persones Físiques - IRPF). Understanding these obligations is crucial for compliant employment practices within the Principality. The system is designed to be competitive internationally while funding essential social services and public administration.
Employer Social Security and Payroll Tax Obligations
Employers in Andorra are primarily responsible for contributing to the Cassa Andorrana de Seguretat Social (CASS), which covers health, maternity, paternity, and retirement benefits. Contributions are calculated based on the employee's gross salary. There are two branches within CASS: the general branch (health and maternity/paternity) and the retirement branch.
Contribution rates for 2025 are expected to follow the current structure, with rates applied to the employee's gross salary up to a certain maximum contribution base. Both the employer and the employee contribute, with the employer paying the larger portion.
| CASS Branch | Employer Rate | Employee Rate | Total Rate |
|---|---|---|---|
| General (Health) | 10.5% | 3% | 13.5% |
| Retirement | 6.5% | 4% | 10.5% |
| Total CASS | 17% | 7% | 24% |
Note: These rates are based on current legislation and are expected to apply for 2025, subject to any legislative changes.
The contribution base is generally the employee's gross salary, with a maximum limit. For 2025, this maximum base is anticipated to be set annually by the government. Contributions are typically paid monthly. There are no separate municipal or regional payroll taxes in Andorra; CASS is the main social security contribution system.
Income Tax Withholding Requirements
Employers are required to withhold Personal Income Tax (IRPF) from their employees' salaries. The amount of IRPF to be withheld depends on the employee's total annual income and applicable deductions and allowances. Andorra's IRPF system is progressive, with tax rates increasing with income.
The IRPF rates and brackets for 2025 are expected to be as follows:
| Annual Taxable Income (EUR) | Tax Rate |
|---|---|
| Up to 24,000 | 0% |
| From 24,001 to 40,000 | 5% |
| Above 40,000 | 10% |
Employers calculate the monthly withholding amount based on the employee's projected annual income, taking into account standard deductions and any specific allowances the employee has declared. The withholding is a payment on account of the employee's final annual tax liability.
Employee Tax Deductions and Allowances
Employees in Andorra can benefit from various deductions and allowances that reduce their taxable income for IRPF purposes. These include:
- General Personal Allowance: A basic allowance available to all taxpayers.
- Allowance for Dependents: Additional allowances for children and other dependent family members.
- Allowance for Ascendants: Allowances for dependent parents or grandparents.
- Allowance for Disability: Specific allowances for taxpayers or their dependents with disabilities.
- Deductions for Housing: Deductions related to primary residence, such as mortgage interest or rent under certain conditions.
- Deductions for Education: Deductions for educational expenses for dependents.
- Deductions for Alimony and Child Support: Payments made under court order.
- Deductions for Donations: Donations to qualifying entities.
- Deductions for Investments: Certain investments may qualify for deductions.
The specific amounts for these allowances and the conditions for applying deductions are set annually by tax legislation and should be considered by employers when calculating monthly IRPF withholding, based on information provided by the employee.
Tax Compliance and Reporting Deadlines
Employers must adhere to specific deadlines for CASS contributions and IRPF withholding and reporting.
- CASS Contributions: Monthly contributions are typically due by the last day of the month following the month the salaries were paid.
- IRPF Withholding: The amounts withheld from employee salaries must be paid to the tax authorities monthly or quarterly, depending on the employer's size and total withholding amount. The specific deadlines are usually set within the first 20 days of the month following the payment period.
- Annual Reporting: Employers are required to submit an annual declaration summarizing the total salaries paid and IRPF withheld for each employee during the previous calendar year. This declaration is crucial for employees to file their annual IRPF returns. The deadline for this annual report is typically in the first few months of the year (e.g., by the end of February or March) following the tax year.
Accurate record-keeping of salaries, withholdings, and contributions is essential for compliance.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers residing and working in Andorra are generally subject to the same CASS and IRPF rules as Andorran nationals. Their tax residency status will determine their full tax obligations. Individuals who spend more than 183 days in Andorra in a calendar year are typically considered tax residents.
For foreign companies employing individuals in Andorra, establishing a legal presence or using an Employer of Record (EOR) service is necessary to handle local payroll, CASS contributions, and IRPF withholding compliantly. A foreign company without a permanent establishment in Andorra cannot directly employ staff and manage local payroll obligations.
Non-resident individuals earning income from work performed in Andorra may be subject to a specific non-resident income tax, often applied as a flat rate on gross income, although this is less common for standard employment relationships compared to services provided by non-residents. Using an EOR ensures that the correct tax and social security treatment is applied based on the worker's status and local regulations.
