ANDORRA Law and Practice Contributed by: Elena Redondo, Albert Hinojosa and Marc Ambrós, Cases & Lacambra
tificate must be requested by the promoter of the construction project.
94/2010, de l’impost sobre la renda dels no-res- idents fiscals – IRNR), for the positive difference between the real value of the transferred assets and their acquisition value. At the time of trans - fer, the buyer must apply a withholding tax of 5% of the sale price and advance this payment to the Andorran government if the seller is a non- resident. Then, if the withholding is less than the effective taxation with respect to the law, the seller could request the Andorran government to undo the difference, and the Andorran tax authorities would then refund this amount within six months from the requested date. A withholding tax of 10% is also levied on rental income obtained by foreign investors from prop - erty located in Andorran territory. To determine the taxable base of rental income, the IRNR law allows a deduction of 20% of gross income. Consequently, the withholding tax will be appli - cable to 80% of the gross income. 8.5 Tax Benefits Regarding corporate income tax ( impost sobre societats ), the company can deduct the amor - tisation of the construction according to the amortisation plan adopted by the company and regulated by law. Also, in relation to corporate income tax, there is the possibility of reducing the positive taxable income by up to 15% through the contribution of housing to the National Housing Institute, to promote public policies for access to housing. Finally, there is also the possibility of reducing the corporate income tax base by an amount equal to 5% of the income from the rental of housing located in the Principality of Andorra, when the income obtained is less than EUR8 per square metre.
8. Tax 8.1 VAT and Sales Tax
According to Andorra Law, IGI applies to real estate transactions at 4.5%. The seller has an obligation to pass on IGI to the buyer if the seller is considered by law to be a legal person or indi - vidual carrying out habitual business activities. Otherwise, Transfer Tax ( Impost sobre Transmis- sions Patrimonials Immobiliàries ) should be paid by the purchaser at a rate of 4% over the total amount of the transaction. 8.2 Mitigation of Tax Liability There is no exemption for indirect tax, even for collective investment vehicles. The only special regime that includes real estate transactions without being subject to indirect tax is that of corporate reorganisation operations (mergers, divisions, transfers of assets and exchanges of shares). 8.3 Municipal Taxes Municipal tax rules apply to commercial or busi - ness premises. However, there are exemptions, depending on the business sector of the com - pany and the activity carried out in the relevant business premises. There are also local taxes related to the owner - ship of property depending on the size of the plot over which that property it distributed. In addition, there are also local taxes levied on income from the rental of real estate. 8.4 Income Tax Withholding for Foreign Investors Real estate capital gains of non-residents are taxed by the Non-Residents Income Tax (Llei
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