Tax updates 2025 in Andorra: main changes in the budget

Discover how the 2025 Budget in Andorra introduces tax reforms that benefit both individuals and businesses. With the approval of the 2025 Budget, Andorra has introduced slight reforms in its tax legislation (Llei 4/2025, del 30 de gener, del pressupost per l’exercici del 2025). Below is a summary of the main updates included in this budget, organized according to their impact on individuals and companies.

Tax reforms for individuals: IRPF and deductions

Expansion of the deduction for patronage in Personal Income Tax (IRPF)

The 2025 Budget modifies section 1 of article 48 bis of Llei 5/2014 on Personal Income Tax (IRPF), previously amended by Llei 5/2023. This change expands the list of entities to which donations can be made with the right to a 20% deduction on the donation’s value.

The newly added beneficiary entities are the Andorran Red Cross and the Catholic church.

Before this modification, the tax benefit only applied to donations made to the Government, foundations regulated by Llei 11/2008, and non-profit associations of cultural, sports, social or environmental nature regulated by Llei 20/2023.

Tax reforms for companies

1. Expansion of tax exemptions

The 2025 Budget introduces changes to Llei 95/2010 on Corporate Tax, specifically in article 8, section 1. This reform expands the list of public entities that are totally or partially exempt from paying Corporate Tax (IS), adding two additional institutions:

• Fons Andorrà de Garantia d’Automòbils
• Oficina Andorrana d’Entitats d’Assegurança d’Automòbils

This reform broadens the list of public entities benefiting from tax exemptions, reinforcing consistency in the application of tax benefits to institutions that perform functions of general interest.

2. New tax deductions in corporate tax

In the scope of Corporate Tax, modifications have been introduced regarding deductions for donations and expenses in sponsorship or patronage (changes to articles 44 bis and 44 ter of Llei 95/2010). These modifications extend the list of beneficiary entities, now also including the Andorran Red Cross and the Catholic church, in addition to those already recognized.

• Donations: Taxpayers can deduct 20% of the value of donations made to the mentioned entities, in accordance with article 44 bis of Llei 95/2010, from their Corporate Tax liability.
• Sponsorship and Patronage: Taxpayers can deduct 10% of the amount or value of investments made under contracts with the mentioned entities, with a limit of €100,000, also applicable to Corporate Tax liability.

Other key reforms in the 2025 Budget

1. Exemption from filing annual accounts

• Individual entrepreneurs:

All individual entrepreneurs whose annual income does not exceed €150,000 will be exempt from the obligation to file annual accounts, as established by modifications to Llei 30/2007 on business accounting. This exemption applies from the fiscal year starting January 1, 2024, and extends until the fiscal year beginning January 1, 2025.

From the fiscal year starting in January 2026, the exemption will only be maintained for individual entrepreneurs who, in addition to meeting the income threshold, opt for the objective income determination regime (objective estimation regime).

• Administrators of commercial companies:

As an exceptional measure, administrators, as natural persons, of commercial companies will be exempt from the obligation to file annual financial statements if their annual income is below €150,000.

These measures aim to simplify the administrative burden for both small individual entrepreneurs and administrators of commercial companies, improving operational efficiency and allowing them to focus on business development.

2. Financial operations: regulation of legal and late payment interest

The calculation and application of legal and late payment interest in cases of default have been updated under the 2025 Budget, ensuring greater transparency and proportionality in managing tax debts and payments to suppliers:

• Legal Interest: Set at 3.25% for 2025. If the government delays payments to suppliers, late payment interest will be automatically applied.
• Late Payment Interest: Set at 4.06% for 2025. From this year onward, it will be reviewed annually based on economic indicators and applied proportionally to outstanding amounts.

Conclusion: tax reforms of Andorra's 2025 Budget

The 2025 Budget of Andorra introduces tax reforms aimed at modernizing the tax system, promoting social contributions, and reducing administrative burdens. Changes such as the expansion of tax exemptions, revised tax deductions, exemption from annual account filing, and the update of legal and late payment interest rates offer both companies and individuals a more accessible and efficient regulatory framework.

It is essential for economic actors to carefully evaluate the impact of these modifications to maximize the opportunities offered by this new tax framework. These measures are not only intended to optimize tax collection but also to foster balanced and sustainable economic growth in Andorra.

This information is provided solely for informational purposes and does not constitute a recommendation or legal advice. It is based on the current regulations at the time of its drafting.

At Carlota Pastora Advocats, we would be delighted to answer your questions regarding the tax changes introduced by the 2025 Andorran Budget, as well as their impact on businesses and individuals. We can help you understand the regulatory changes and optimize your tax planning within the new legal framework.