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What are the dividends of a company? Dividends are understood as the result of a company’s profit, i.e. the money to be distributed among the company’s shareholders or partners. These dividends are usually distributed once a year, although sometimes they can be distributed more frequently by appealing to an advance.
Unlike the salary, dividends do not have a fixed annual amount, but will depend on the company’s results. In this case, it is usually the most succulent part for the employers, since it is through this mechanism that most of the profits are usually obtained. This is why Andorra’s attractive tax model for dividends is so interesting.
Taxation of dividends in Andorra
The taxation of the profits of a company, according to the current legislation, will only be done once if the person is resident in Andorra. Therefore, the total exemption from paying these taxes will mean that the company will pay a maximum of 10% corporate income tax (the lowest in Europe!) and once distributed, the beneficiary of such amount will not have to pay income tax again on such capital gain. Therefore, from a hypothetical initial balance of €100,000, a net gain of €90,000 would be obtained.
Remember that in order to collect dividends in Andorra, you must create a company in the country. If you want to know more, do not miss this article.
Taxes for non-residents
In cases where the company is based in Andorra, but the administrators or partners have their tax residence in another country, the individual resident abroad must pay the corresponding income tax in each case, since this point is not included in the various agreements to avoid double taxation (CDI), which Andorra has, among which are Spain, France, Portugal, Cyprus and Malta, although many more are currently under study.
Other taxes
Beyond dividends, there are other taxes or contributions that directly or indirectly affect the development of the company. Some of them are:
- IGI (VAT, IVA): indirect tax on goods and services, whether it is the purchase of products, of a real estate or an invoice to a supplier. The rate is 4.5%, substantially lower than in the rest of Europe, where in most cases it exceeds 20% of the cost.
- Corporate tax: payable only in the case of having a company in Andorra, the maximum tax rate to be applied is 10%. To learn more about the taxes payable in Andorra, we invite you to consult this article.
Frequently asked questions
Is it possible to have a salary and receive dividends from the same company?
Yes, it is possible and in fact recommended for tax purposes (up to a maximum of 40,000 euros gross per year). For more details and accounting advice, contact the experts.
Is there any way to incorporate a company without paying the 15,000?
Yes, through the titled profession. See our article for full details or schedule a call with experts in the field. The qualified profession is that type of residence which allows you to establish yourself in the Principality as a liberal professional provided that you have a specific university degree (engineering, architecture, economics, psychology…). The liberal professional will be able to invoice without the need to create a company, although, if he/she wishes, he/she will be able to create one once he/she is a resident. The fact of not having to go through the process of foreign investment, will mean not having to pay the deposit of 15,000 euros to the Andorran Financial Authority (AFA) and shorten by one month the indicative period of incorporation of a company.
Is it possible to distribute dividends more than once a year?
Yes, it is possible, although it will have to be supervised and organized by your Andorran management company. If you would like more information about recurrent accounting advisory services, please write to us to arrange an appointment.
Will I receive dividends if I have a business (comerç)?
No, dividends are only distributed when a company exists. In case you have a business (comerç) in Andorra, your profits will be taxed in the form of personal income tax and not through the corporate tax.
Among how many people can dividends be distributed?
Dividends can be distributed among as many people as are shareholders of the Andorran company. However, you must take into account that in order to obtain self-employed residence through the creation of a new Andorran company, the total number of partners may not exceed four persons (in order to comply with the entry criteria of having more than 21% of the Andorran company).
What expenses can be deducted from the company?
Dividends only distribute profits, so you can deduct items such as employee salaries, rent of premises and contributions.
I want to incorporate my company in Andorra, what is the process?
Contact us to arrange an appointment, in which we will analyze the feasibility of setting up your company in Andorra (depending on your business and individual needs) and we will explain the specific requirements to obtain your residence permit (documentation, deadlines, costs). From that moment, you will be able to count about 4 months until the date of obtaining your card, although in many occasions the term is shorter.