International double taxation arises when two different countries seek to tax the same income.
A typical example is a company resident in one State that earns profits in another country, or an individual who is tax resident in one country but receives salaries, dividends, or rental income from abroad.
Without any corrective mechanism, that income could be taxed twice, increasing the cost of cross-border operations and discouraging investment.
What are double taxation treaties?
Double taxation treaties (DTTs) are bilateral agreements between States that set clear rules on:
- Where each type of income should be taxed (employment, business, dividends, interest, royalties, real estate, etc.).
- How double taxation is eliminated, usually through an exemption or a tax credit for the tax paid abroad.
In practice, DTTs allocate taxing rights between the two countries and require the State of residence to ensure the taxpayer does not pay twice on the same income. In addition, they increasingly include anti-abuse clauses and cooperation mechanisms between tax administrations.
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Andorra’s treaty policy
In Andorra, the signing of double taxation treaties is one of the pillars of its international “normalisation”. It represents a shift from being perceived as an opaque jurisdiction to consolidating its position as a cooperative, transparent State aligned with OECD standards.
Since the adoption of the new tax framework (with a 10% corporate income tax and a general VAT (IGI) rate of 4.5%), the Principality has pursued an active DTT negotiation policy. Initially, priority was given to countries with which economic and financial ties were strongest, and the network was later expanded to other strategic jurisdictions.
Andorra has now signed more than twenty treaties with countries such as Spain, France, Portugal, the Netherlands, Luxembourg, Belgium, Hungary, the Czech Republic, Croatia, Romania, Iceland, Latvia, Lithuania, Malta, Cyprus, Liechtenstein, San Marino, Monaco, Montenegro, South Korea, and the United Arab Emirates, among others.
New partners will continue to be added to this list: in January, the United Kingdom (UK) joins the treaty network, further enhancing the Principality’s attractiveness for British investors and residents.
The result is an environment in which international investment can be structured with greater legal certainty and a highly competitive overall tax burden.
Transparency and automatic exchange of information (CRS)
Double taxation treaties are complemented by another key pillar: tax transparency and the exchange of information.
Andorra has been a cooperative State in transparency matters since 2009, but the major step forward came with Law 19/2016 of 30 November, which incorporated the Common Reporting Standard (CRS) into domestic law. This system requires Andorran financial institutions to identify account holders and beneficial owners who are not tax residents in Andorra and to transmit the relevant information annually (balances, interest, dividends, capital gains) to the Andorran Tax Administration, which then automatically forwards it to the corresponding countries.
The first effective exchange of information took place in 2018, using data from the 2017 tax year. Since then, CRS has been applied on a recurring basis and has become the central international instrument in the fight against tax evasion.
All of this shows that Andorra’s “normalisation” is not merely formal: the country has moved away from the model of an opaque financial centre and has embraced a position fully aligned with global standards of good governance and tax legality.
Practical advantages for businesses and investors
The combination of DTTs + transparency + moderate tax rates has very concrete effects for companies and individuals operating with Andorra:
- Lower overall tax burden: thanks to treaties, many withholding taxes at source on dividends, interest, or royalties are reduced or eliminated, and double taxation on the same profits is avoided.
- Legal certainty and predictability: taxpayers know in advance in which country each type of income will be taxed and what mechanisms exist to prevent double taxation, which facilitates medium- and long-term planning.
If this is combined with a 10% corporate income tax, a 4.5% VAT (IGI), and the absence of wealth taxes, Andorra positions itself as one of the most competitive jurisdictions in the world—while also remaining cooperative and fully integrated into the international community.
