According to the Paying Taxes analysis carried out by the World Bank as part of a larger study called Doing Business, Andorra’s tax system has been ranked 20th among a list of 190 assessed countries. The principality received a good rating in the field of taxation, above Switzerland and below Canada.
Assessment of the tax system
The method used by the Paying Taxes indicator is based on the assessment of the total taxes that companies must pay as well as measures of the administrative burdens in the different countries studied. Based on a fictional average company with 60 employees and the same characteristics, four main assumptions are used by the study:
- The total tax payments
- The average time invested by the company to meet its tax obligations
- The number of payments the company has to make
- Other postfiling index indicators, i.e. all the procedures that are subsequent to the filing of taxes
The study drew the following conclusions:
– The tax burden in Andorra is 26.5%, compared to averages of 40.5% for all countries and 38.9% for those in the European Union and the EFTA zone.
– The total number of hours required by an Andorran company to comply with tax obligations is 135 on average. A figure that is well below the overall average of 234 hours and lower than that of the other EU and EFTA countries at 161 hours.
– The average number of payments made stands at 23. In Andorra, this figure is only 10, which is very similar to the other European countries.
– Andorra achieved a score of 77.4 out of 100 in the postfiling indicators, which is above the overall average score of 60.9 but lower than that of the other EU and EFTA countries. According to the Andorran government, attention must be paid to improving this point and the subsequent payment processes, which will require the involvement of all town councils.
According to the World Bank study, Andorra has a competitive tax system that ranks above the average of the other countries analysed. This means investing in Andorra has more advantages than doing so in other countries.