Since April 1, and until September 30, it is already possible to present the 2022 tax declaration for tax residents in the Principality, through which the administration plans to collect the Personal Income Tax (from now on IRPF). This tax, although it is already widely known by the residents of the south in its homonymous equivalent in Spanish, still raises doubts in Andorra since its implementation in 2015 – a little more than 8 years ago. The objective of this explanation is none other than to shed light on these common issues in order to help those inattentive taxpayers.
What is the objective of the tax declaration campaign and what has to be declared?
As previously mentioned, the objective of the tax declaration campaign is to collect personal income tax through the self-assessments of the tax presented by the natural persons who are tax residents in Andorra. It is important to highlight the fact that, as with the equivalents in neighboring countries, all the person’s worldwide income must be declared, wherever it comes from.
What does not have to be declared?
Income that is expressly exempt according to the Law does not have to be declared. It is necessary to mention in particular one of these exempt income that is quite recurring among tax residents of Andorra: dividends from Andorran companies, which are directly exempt.
Currently, the declaration forms do not provide any section to indicate the exempt income, which will not appear in any case.
Who is required to file the return, and what are the consequences of not filing?
Although it is highly recommended to submit the declaration, even if you are not required to do so, certain residents of Andorra are directly required to do so. In particular, those Andorran tax residents who:
– Obtain gross income of more than €24,000.00 per year attributable to the general base (those from work, economic activities or rental of real estate, for example)
– Obtain gross income of more than €3,000.00 per year attributable to the savings base (dividends of foreign origin, interest or non-exempt capital gains and/or losses)
– Obtain income of any kind from abroad, even if it does not exceed €24,000 per year attributable to the general base or €3,000 per year attributable to the savings base.
– Administrators of an Andorran company, whether they are remunerated for this function or not.
In the event that a person obliged to do so does not present the declaration, a penalty of €250 is foreseen if the result had not implied any payment. However, if the result had been expected to be paid in the administration, a penalty equivalent to between 50% and 150% of the amount to be paid is foreseen – in addition to the unpaid fee.
I have a property rented abroad, and I have already paid taxes in the country where the property is located, do I also have to declare it in Andorra?
Although it is very probable that no additional amount should be paid to the Principality, it is equally obliged to present the declaration, as previously stated. Otherwise, there is a risk of being assessed a penalty for non-filing.
During 2022 I have received certain income that does not fit the definition of income from the general tax base or the savings tax base. On what basis should I impute it in case of doubt?
Some income, particularly financial derivatives, share options and/or other similar income, may have different treatments depending on their source. As the personal income tax figure has only existed in the Principality since 2015, the treatment of certain income has not been provided for by law or by the Administration. Hence, it is especially relevant to have a qualified tax advisor who can determine the classification of the income and duly justify it, in order to avoid potential future reinterpretations by the Andorran tax administration and the eventual damage that would result if the reinterpretation occurs against the interests of the individual.
What consequences are derived from its late submission?
In the event that the declaration is not presented before September 30 and the Administration has not requested it before, surcharges will be applied, that vary between 2% and 10% of the fee to be paid, depending on the time exceeded from the end of the submission period. If the Administration has requested it before, a surcharge of 15% will be applied in any case on the fee that should have been paid.
How can I file the 2022 tax declaration?
It can be submitted both in person at the Tax Department or through the Administration’s tax portal, identifying yourself with the corresponding credentials. Those who have obtained income from economic activities (independent professionals, administrators, etc.) are in any case obliged to submit it electronically.