Participation exemption in Andorra: conditions, exclusions and a worked example
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The short answer
Dividends and capital gains on shareholdings are fully exempt from corporate income tax in Andorra if the holding reaches 5 % for 12 months and the subsidiary bears at least 50 % of the general rate. Capital losses are not deductible.
The text
The participation exemption regime is set out in Article 20 of Llei 95/2010 (corporate income tax), rewritten by Article 13 of Llei 5/2023. It covers dividends and capital gains on disposal of shareholdings.
The three cumulative conditions
| Condition | Value |
|---|---|
| Percentage held | at least 5 %verified on 12/10/2026 |
| Uninterrupted holding period before the dividend falls due | 12 monthsverified on 12/10/2026 |
| Tax borne by the non-resident subsidiary | at least 50 %verified on 12/10/2026 of the general Andorran rate |
The third condition is deemed met for subsidiaries located in a country linked to Andorra by a convention. An Andorran subsidiary, for its part, must be subject to the general rate.
The exclusions to know about
- Capital gains on companies whose assets consist of 50 %verified on 12/10/2026 or more of real estate located in Andorra.
- Dividends that are deductible for the payer.
- Expenses relating to exempt shareholdings: not deductible.
- Capital losses on disposal: not deductible.
- Burden of proof: it is for the taxpayer to demonstrate that the conditions are met. Build a file (share register, date of acquisition, evidence of the subsidiary's tax).
Worked example
An Andorran holding company has held 20% of a subsidiary in a treaty country for more than a year. The subsidiary pays it 100,000 euros of dividends. Subject to withholding taxes in the subsidiary's country, these 100,000 euros are exempt from corporate income tax in Andorra. Without the exemption, they would be taxed at 10 %verified on 09/10/2026, that is 10,000 euros.
If the same holding company holds a share below the threshold, or for less than the required period, the full exemption does not apply and the general rules come into play.
Withholding taxes with France
For dividends paid by a French company to an Andorran company, the convention caps the withholding at 5 %verified on 12/10/2026 if the recipient holds at least 10 %verified on 12/10/2026 of the capital, and at 15 %verified on 12/10/2026 in other cases. For interest: 5 %verified on 12/10/2026. For royalties: 5 %verified on 12/10/2026. The convention's anti-abuse clauses (principal purpose test) may deny these reduced rates if the structure has no economic justification. See the France–Andorra convention.
Test your case
The holding simulator checks the three conditions and calculates the Andorran tax avoided. See also holding company or standalone SL and the evidence file.
And on the way out to the shareholder?
A distribution from the holding company to an Andorran resident is exempt from IRPF (Art. 5 j Llei 5/2014). A non-resident shareholder is exempt from IRNR on Andorran capital income, but remains taxed in their country of residence. A French shareholder remains taxable in France: dividends from an Andorran company.
Back to the main guide: holding company in Andorra.
Work out your own case
Free simulators, built on the official values of this page.
- Andorran holding simulator: exemption of dividends from shareholdingsDoes your dividend meet the exemption conditions? Tax avoided and net amount kept.Open
- Cost of an employee and corporate tax in Andorra: calculatorEmployer contributions, net pay before tax and a company's corporate tax.Open
- Quiz: which residency status in Andorra?A few questions, a clear lead towards the right status.Open
Frequently asked questions
What are the conditions for the participation exemption?
A holding of at least 5 %, held without interruption for 12 months before the dividend falls due, and a non-resident subsidiary taxed at no less than 50 % of the general Andorran rate.
Does an Andorran subsidiary qualify for the exemption?
Yes, if it is subject to the general rate of corporate income tax.
Are capital losses on disposal deductible?
No, for shareholdings whose capital gains would be exempt.
Who has to prove that the conditions are met?
The taxpayer. You must keep the evidence of the holding, its duration and the subsidiary's tax.
What withholding tax applies to French dividends paid to an Andorran company?
The convention caps the withholding at 5 % if the recipient holds at least 10 % of the capital, 15 % otherwise, subject to the anti-abuse clauses.
Going further
- Holding company in Andorra: complete guide (taxation, exemption, setup, risks on the French side)
- Andorran holding company and the French tax authorities: 123 bis, 209 B, 238 A and effective management
- France–Andorra tax treaty: what it really provides
- Corporate Income Tax in Andorra: Rate, Regimes and Conditions
Official sources
This information is general and is not personalised legal, tax or financial advice. It is verified as of the date shown and may change.