On 28 May 2026, the Principality of Andorra and the Republic of Austria signed in Vienna an agreement to eliminate double taxation (DTA) with respect to taxes on income and on capital, as well as for the prevention of tax evasion and tax avoidance.
The Agreement lays down rules to avoid or correct situations of double taxation, determining, for each category of income or capital item, which State may exercise taxing rights and under what conditions.
1. Taxes covered by the Double Taxation Agreement
The Double Taxation Agreement applies to the following taxes in each Contracting State:
- In Andorra: corporate income tax (impost sobre societats), personal income tax (impost sobre la renda de les persones físiques), non-resident income tax (impost sobre la renda dels no-residents fiscals).
- In Austria: income tax (Einkommensteuer), corporate income tax (Körperschaftsteuer), land tax (Grundsteuer), tax on agricultural and forestry undertakings (Abgabe von land- und forstwirtschaftlichen Betrieben), tax on the value of undeveloped land (Abgabe vom Bodenwert bei unbebauten Grundstücken).
2. Tax residence rules in the Double Taxation Agreement
A resident means any person who, under the laws of a State, is liable to tax therein by reason of domicile, residence, place of management or any other criterion of a similar nature.
Where the same taxpayer is considered tax resident in both Andorra and Austria, the agreement establishes, through its treaty tie-breaker criteria, the taxpayer’s place of residence in order to avoid double taxation.
Under Article 4 of this agreement, an individual shall be deemed to be a resident of one of the Contracting States according to the following criteria:
- in the place where that person has a permanent home available;
- or, failing that, in the place of the centre of vital interests (closer personal and economic relations);
- or, failing that, in the place of habitual abode;
- or, failing that, in the State of which the person is a national;
- or, ultimately, by agreement between the competent authorities.
On the other hand, where a person other than an individual is a resident of both States, the determining criterion is the place of effective management, that is, the place from which the actual management of the entity is effectively exercised. In case of doubt, the competent authorities shall endeavour to determine it by mutual agreement.
3. Allocation of taxing rights in the DTA
The DTA determines the place of taxation according to the category of income:
| Income category or capital item | Rule on taxing rights |
| Income from immovable property | Taxable in the State where the immovable property is situated. Under Article 6, such income may be taxed in that State, without prejudice to any taxation that may apply in the State of residence and to the application of the methods for the elimination of double taxation (Art. 6). |
| Business profits | Taxable in the State of residence of the enterprise, unless the enterprise carries on business in the other State through a permanent establishment situated therein. In that case, the profits attributable to that permanent establishment may be taxed in the other State (Art. 7). |
| International shipping and air transport | Taxable in the State of residence of the enterprise operating them (Art. 8). |
| Dividends | Taxable in the State of residence of the beneficial owner and also in the source State. However, there is an exemption at source where the beneficial owner is a company —other than a partnership— that directly holds at least 10% of the capital for 365 days. In all other cases, the withholding tax in the source State may not exceed 15% of the gross amount (Art. 10). |
| Interest | Taxable only in the State of residence of the beneficial owner (Art. 11). |
| Royalties | Taxable in the State of residence of the beneficial owner and also in the source State, with a maximum limit of 5% of the gross amount where the recipient is the beneficial owner (Art. 12). |
| Capital gains from immovable property | Gains derived from immovable property are taxable in the State where such property is situated. Gains derived from shares, participations or comparable rights whose value derives, directly or indirectly, by more than 50% from immovable property situated in that State during the 365 days preceding the alienation may also be taxed in that State (Art. 13). |
| Other capital gains | Taxable in the State of residence of the alienator, except for the specific rules applicable to immovable property, movable property forming part of the business property of a permanent establishment, ships or aircraft in international traffic and participations with an immovable-property component (Art. 13). |
| Employment income | Taxable in the State where the employment is exercised. However, it is taxable only in the State of residence if the stay does not exceed 183 days, the remuneration is paid by an employer not resident in the State where the employment is exercised and it is not borne by a permanent establishment situated in that State (Art. 14). |
| Directors and supervisory functions | Taxable in the State of residence of the company of which the person is a member, taking into account the clarification in the Protocol on supervisory functions (Art. 15 and Protocol). |
| Entertainers and sportspersons | Taxable in the State where the personal activity is performed. The Agreement provides for an exception for certain activities financed wholly or mainly by public funds or by institutions recognised as non-profit entities, in which case the income is taxable only in the State of residence (Art. 16). |
| Pensions | Pensions and similar remuneration derived from past employment are generally taxable only in the State of residence of the recipient. Certain benefits paid under the social security legislation of a State may be taxed in that State (Art. 17). |
| Government service | Specific rules depending on the paying State, the place where the services are performed, the residence and the nationality of the recipient (Art. 18). |
| Students or trainees | Certain payments received for maintenance, education or training are not taxable in the State of stay where they arise from sources situated outside that State. Remuneration from employment directly related to the studies or training is also not taxable in the State of stay if the time limits provided for in the Agreement are met (Art. 19). |
| Other income | Residual rule of taxation in the State of residence, without prejudice to the exceptions provided for in the Agreement, including the connection with a permanent establishment and the specific treatment of certain maintenance rights (Art. 20). |
| Capital or net worth | Capital represented by immovable property is taxable in the State where such property is situated; movable property forming part of the business property of a permanent establishment is taxable in the State where that permanent establishment is situated; capital represented by ships or aircraft in international traffic and movable property pertaining to their operation is taxable only in the State of residence of the enterprise operating them; all other elements of capital are generally taxable in the State of residence of their owner (Art. 21). |
4. Methods for the elimination of double taxation
Where both States have taxing rights over the same income or capital item, the agreement provides mechanisms to eliminate double taxation (Art. 22):
- In Andorra: double taxation is eliminated through the tax credit method: Andorra deducts from Andorran tax the tax paid in Austria. The credit may not exceed the Andorran tax corresponding to that income or capital item.
- In Austria: double taxation is eliminated through a combination of tax credit and exemption, depending on the category of income or capital.
The Agreement also incorporates various legal certainty and administrative cooperation tools. In particular, it provides for a non-discrimination clause, a mutual agreement procedure —with mandatory and binding arbitration under certain conditions— and an exchange of information clause between competent authorities (Arts. 23, 24 and 25).
Finally, the Agreement includes an anti-abuse clause based on the principal purpose test (Art. 27). Under this rule, the benefits of the Agreement shall not be granted where, having regard to all relevant facts and circumstances, it is reasonable to conclude that one of the principal purposes of an arrangement or transaction was to obtain those benefits, unless granting them would be in accordance with the object and purpose of the relevant provisions of the Agreement.
Carlota Pastora Business Law Firm & Wealth Planning remains at your disposal to answer your questions and assist you in the interpretation and application of this DTA.
This article provides a general overview of the tax agreement signed between Andorra and Austria. It does not constitute a recommendation or personalised tax advice. Each situation is unique and requires a case-by-case analysis.
It should be recalled that the entry into force of the Agreement is subject to the completion of the internal procedures of both States and to the corresponding notifications. Before adopting tax decisions, its entry into force and the date from which it will have effect should be verified.
