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Hiring in Andorra
Andorra, officially known as the Principality of Andorra, is an independent state located between France and Spain. Tourism sector is the primary flourishing sector in Andorra, whereby it contributes to around 80% of the state’s GDP. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Andorra’s legal and tax regulations. The employment regulations that cover probation period, holidays and termination are stipulated in Andorra’s Labor Code. For instance, employees in Andorra are entitled to a minimum of 30 calendar days of paid annual leave. As the Employer of Record (EOR), Global PEO’s ensure that companies are being compliant with Andorra’s labor code. Residents in Andorra are taxed on their worldwide income; whereas non-residents are taxed on their Andorra sourced income. Global PEO’s further facilitate foreign companies in Andorra by ensuring compliance with tax regulations.
statutory labor requirements
Probation Period
- The probation period must be agreed in writing, both for contracts of indefinite and definite duration and cannot exceed one month.
- On the managerial positions in which the agreed remuneration exceeds three times the minimum salary, the probation period may be up to three months.
Annual Leave
- Employees in Andorra are entitled to a minimum of 30 calendar days of paid annual leave after completing one year of employment with the company.
- Employees who have not worked for one year in the company are entitled to leave calculated on pro rata basis at two and a half days for each month worked.
Public Holidays
- New Year’s (1st January)
- Epiphany (6th January)
- Shrove Monday (24th February)
- Andorran Constitution Day (14th March)
- Good Friday (10th April)
- Easter Monday (13th April)
- Labor Day (1st May)
- Whit Monday (1st June)
- Assumption of Mary (15th August)
- Feast of Our Lady of Meritxell (8th September)
- Feast of the Immaculate Conception (8th December)
- Christmas (25th December)
- St. Stephen's Day (26th December)
Maternity Leave
- Working mothers are entitled to 16 weeks of maternity leave with full pay from the social security for childbearing.
- In case of multiple births, the period is extended in two more weeks by every child.
Work Hours
- Andorra’s working week comprises 40 hours.
- Every employee is entitled to a 30-minute break on every 6-hour-working-period.
Overtime
- Weekly working hours, including overtime, can never surpass a weekly amount of 60 hours.
- The maximum hour’s length per day being 12 hours.
- Annually working hours must be kept under 1800.
- In case of overnight work, the payment increases 20%, if no other agreement with the employer has been agreed upon.
- For general overtime, the following rule applies: -
- 25% surcharge for up to four hours
- 50% for hours ranging between four and eight and
- 75% for any other hour afterwards.
Notice Period
- Employment can be terminated with a ten-day notice period if it’s been less than a year of work for the company
- Notice period is ten days plus one day per every month worked, up to a maximum of thirty days, if there is more than one year of work for the company.
13th / 14th Month Pay
- No
- There is no statutory requirement to pay the 13th or 14th month salary.
- There is no evidence that it is a customary practice to pay end of year bonuses, however other incentives -monetary or otherwise- can be negotiated.
- If employees work on the four days mandatory holidays, their wages must be either tripled or they must be given two days extra days of rest.
income tax
- Residents are subject to personal income tax on their worldwide profits and capital gains
- Nonresident individuals are taxed only on Andorra-source income
- An individual is resident in Andorra if he/she spends more than 183 days in Andorra within a 12-month period or has his/her center of economic and/or vital interests in Andorra
- Taxable income includes employment income, capital gains, moveable and immovable income, and entrepreneurial income
|
Taxable Income |
Rate (%) |
|
Up to EUR 24,000 |
0% |
|
EUR 24,001 to EUR 40,000 |
5% |
|
Over EUR 40,000 |
10% |
deductible expenses
- Income up to EUR 24,000 is exempt
- Relief is granted for dependent and mortgages
- A tax credit is available to resident taxpayers for foreign direct taxes incurred that are similar to the Andorra personal income tax.
- The credit is limited to the lesser of the tax payable in Andorra had the income been obtained there and the actual foreign tax incurred.
-
- The tax credit can be carried forward three tax years
|
Deductible Expenses |
|
immigration
- All foreigners wishing to work in Andorra need work permits.
- These are obtained by employers – whether Andorran individuals or companies – on behalf of employees.
- Self-employment is not allowed until after 10 years' residence or trade in Andorra.
- A resident visa will allow you to live in the country for longer than the 90-day tourist allowance.
- There are two main options available: passive residency and active residency.
- Andorra’s passive residency program offers visas to individuals that wish to become a resident of the country, while performing most of their economic activities outside of it.
- Residency in Andorra allows individuals to legally minimize their tax while maintaining an enviably high standard of living.
- Initially, passive residence permits are given for 2 years.
- This is then renewed for another 2 years, then 3 years, then 10 years.
- After 20 years, you can apply for citizenship.
- For all types of passive residency in Andorra, a mandatory investment of €50,000 must be made into Andorra’s economy.
- For those with their own company, Andorra’s active residency program is known locally as “residència i treball per compte propi” or “compte propi” for short.
- That is, residence and self-employment.
- This type of residency has been coined “Category D” by some local agents, though that is not its official name.
- Active residence via compte propi requires:
- either renting or purchasing a property in Andorra of at least 20m²; you will need to provide a rental contract or property title upon application
- apostilled documents, dated within 3 months; depending on the current requirements (seems to change often) and your personal circumstances, however expect to provide the following:
- police certificate from your country of birth
- police certificate from your current country of residence
- birth certificate or copy of passport
- marriage certificate
- apostilled birth certificate or passport
- foreign investment approval from the government
- a meeting in person at a notary
- company incorporation
- deposit of €3000 share capital in an Andorran bank, this amount then belongs to your company
- a local trading license
- a work permit for the shareholder/s
- medical examination and interview
- registration with CASS, Andorra’s healthcare system
- a €15,000 deposit with INAF
- Those seeking residence under compte propi must own at least 11% of a local company and be a working director of that company.
|
Type of Visa/ Permit |
Documentation |
Validity |
Eligibility |
|
Passive Residence |
|
2 years (renewable) |
|
|
Active Residence (Category D) |
|
|
value added tax (vat)
- In Andorra, the VAT is the lowest anywhere in Europe, with a general rate of 4.5%.
- It is known as “I.G.I.”, short for “impost general indirecte “.
- Exceptions include:
- 1% on certain media like books, magazines and newspapers,
- 1% for food and drink (except alcohol),
- 2.5% on works of art,
- 2.5% on fees charged by tourism operators,
- 9.5% on banking and financial services charges.
- Education, healthcare and medicine are all exempt from the VAT in Andorra.
|
VAT |
|
|
Higher Rate |
9.5% |
|
Standard Rate |
4.5% |
|
Reduced Rate |
2.5% |
|
Reduced Rate |
1% |
|
Exempt |
0% |
withholding tax
Dividends
- No withholding applies on dividends paid to residents or nonresidents
Interest
- No withholding applies on interest paid to a resident company or to a nonresident
- Interest paid to a resident individual is subject to a 10% withholding tax
Royalties
- Royalties paid to a nonresident are subject to a 5% withholding tax
- Royalties paid to a resident individual are subject to a 10% withholding tax
- No withholding tax applies on royalties paid to a resident company
Fees for Technical Services
- Fees for technical services paid to a nonresident, or to a resident individual, for services related to business activities in Andorra are subject to a 10% withholding tax
- No withholding applies on payments to resident companies
|
Type of Payment |
Residents |
Nonresidents |
||
|
Company |
Individual |
Company |
Individual |
|
|
Dividends |
0% |
0% |
0% |
05 |
|
Interest |
0% |
10% |
0% |
0% |
|
Royalties |
0% |
10% |
5% |
5% |
|
Technical Service Fee |
0% |
10% |
10% |
10% |
termination
The contract might be terminated in the following cases:
-
- Expiration of the term or termination of the work for which employee has been agreed upon.
- Mutual agreement of the parties.
- Death or permanent disability of the person worker to carry out the work contracted.
- Death, incapacity or retirement of the employed person.
- When the worker is deprived of freedom by court.
- Declaration of bankruptcy of the employer.
- An objective need to amortize the job places due to economical, technical, organizational or other causes.
- The contract might be terminated by the employer by means of a notice communicated with terms calculated as one day per month worked up to a maximum of 90 days and with the payment of compensation.
- An employee might terminate the contract in the following cases:
-
- During the trial period, without prior notice.
- By means of a ten-day notice, if it’s been less than a year of work for the company, and ten days plus one day per every month worked, up to a maximum of thirty days, if there is more than one year of work for the company.
- Without prior notice if an accident or force majeure makes it impossible to continue to work.
- In case of retirement age, by means of the corresponding communication to the employer with a minimum of three months’ notice.
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, maternity leave, overtime pay
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Probationary Period |
|
Annual Leave |
|
Public Holidays |
|
Maternity Leave |
|
Overtime Pay |
|
Social Security Benefits |
payments and invoicing
- The tax year is the calendar year
- Each individual must file a tax return
- Joint filing is not permitted
- The personal income tax return must be filed and tax paid between 1st April and 30th September for the year following the tax year
- Where there is no loss to tax authorities, penalties may range from EUR 150 to EUR 3000.
- Underpayment penalties range from 50% to 150% of the unpaid tax liability
employee accruals
| Christmas Bonus% | 0% |
| Christmas Bonus Over Vacations % | 0% |
| Severance per Year % | Employees are entitled to 12 days of severance pay after one year of service (3.29% of annual salary) |
| Vacations % | Employees are entitled to 30 days paid annual leave (8.22% of annual salary) |
| Notice % | Employees are entitled to 10 days of notice period for employment of less than 1 year (2.74%). The maximum notce period is of 30 days for employment greater than a year (8.22%) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% | 0% [If you work over the four mandatory holiday you must be paid double or be given two days off] |
| Total percentage of Salary (yearly) | The total employment accruals as a percentage of salary per anum are equal to 14.82% |
employer accruals
Additional information (Country Accruals)
| CASS | 10.50% |
| Vacation | 12.33% |
| Severance | 3.33% |
| Description | employers and employees: levy from 5.5% to 10.5% of salary. Since the average amount is set by the country’s authorities at 14.5% of the income, it is the employer who is obliged to pay the difference of between 4% and 9% of the salary of his employees; |
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | Employees in Andorra are entitled to a minimum of 30 calendar days of paid annual leave after completing one year of employment with the company. | This equals 8.22% (30/365 days) of annual leave. |
| Maternity Leave | Working mothers are entitled to 16 weeks of maternity leave with full pay | This equals 30.7% (16/52 weeks) of annual leave. |
| Overtime | Working hours cannot exceed 60 hours a week. For general overtime, the following rule applies: - • 25% surcharge for up to four hours • 50% for hours ranging between four and eight and • 75% for any other hour afterwards. |
Normal hourly wage is around 24 EUR. Overtime surcharge is 6 EUR (25% of 16 EUR). First 4 hours of overtime equals 24 EUR. Next 4 hours equals 48 EUR. Next 12 hours equals 216 EUR. |
| Social Security Contribution | Social insurance: 8.5% of gross earnings (old age) plus 7% of gross earnings (disability, survivors, sickness, maternity, medical, and work injury benefits). | Total Employer contributions equal 15.5%. |
