Andorra

Background

In 2012, the Transfer Pricing Regulations were established through Article 16 of the Income Tax Law. The Transfer Pricing Regulations apply to taxpayers for fiscal years beginning on or after January 1, 2012.

Related Parties

The Andorran tax regulation specifically states the following regarding related parties:

An entity and its shareholders (for unlisted entities, when their shareholding is 15% or more; for listed entities, equal to 3% or more).
An entity and its board members, as well as relatives of board members up to the third degree of kinship.
An entity owning an indirect shareholding or a shareholding of 25% or more of another entity.
Two entities of one group; and
An entity and its permanent establishments.

Transfer Pricing Methods

According to the Transfer Pricing Guidelines, one of the following five methods below may be used to determine the market value of related party transactions:

Comparable Uncontrolled Price Method.
Cost Plus Method.
Resale Price Method.
Profit Split Method.
Transactional Net Margin Method.

If any of the methods above cannot be used, the taxpayer may apply other valuation methods under the Arm’s Length Principle.

Transfer Pricing Documentation

The Transfer Pricing Regulation does not establish documentation requirements for Andorran taxpayers, although the latter refers to the Arm’s Length Principle as a standard for controlled transactions.

Transfer Pricing Penalties

The Andorran tax authority is in the process of applying penalties to adapt to the new tax regime.

Source: Andorran Financial Authority

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