Andorra transfer pricing

Who this applies to

Article 16 of Law 95/2010 requires related-party transactions to use normal market value: the value independent parties would agree in free competition. The provision is not limited to international transactions. Begin with the relationship test, then the actual transaction and its pricing evidence. A related-party invoice alone does not establish a market value. Article 16(1)–(3)

This is a source-cited 2026 working-paper draft; no accountant has signed it off. The current legal-portal consolidations expressly lack official legal status. This method covers ordinary controlled transactions, financing proof, advance-pricing agreements and statutory CbCR. Actual treaty dispute cases, a complete live exchange-relationship matrix and electronic schema are separate specialist checks; they do not suspend the ordinary market-value obligation.

Rates, bands and thresholds

These are relationship tests, not rates of tax or exemptions from pricing documentation.

Relationship	Test	Year	Primary source
Shareholder/participant and entity	At least 15%; at least 3% for securities admitted to trading on a secondary market	2026	Article 16(2)
Entity indirectly participating in another	At least 25% of capital or net assets	2026	Article 16(1)(d)
Common owners or specified family holders in two entities	Direct or indirect participation of at least 25% of capital or net assets	2026	Article 16(1)(f)
Directors, including de facto directors	Separate relationship category; do not impose the shareholder threshold on it	2026	Article 16(1)(b)
Family relationships specified in the law	Spouses and blood relatives through the third degree, direct or collateral line	2026	Article 16(1)(c), (f)
Group entities	Direct/indirect control; majority voting rights establish the stated presumption	2026	Article 16(1)(e), (2)
Resident entity and foreign PE; non-resident entity and Andorran PE	Express relationship categories	2026	Article 16(1)(g)–(h)

The opening test also addresses common direct/indirect participation in management, control or capital. Review the complete relationship, not only a percentage. Do not use the 25% indirect/common-ownership tests as a universal threshold. Article 16(1)–(2)

The base

For each controlled transaction, establish what was supplied, by whom, to whom, the contractual terms and the market evidence supporting the value. The finance ministry can check and correct values. Its administrative valuation binds it for the other related parties and must not create combined income exceeding that actually arising from the transaction. This domestic rule does not itself prove that another country will grant a corresponding adjustment. Article 16(3)–(4); Regulation, Article 7

Execute the market-value workpaper

1. Draw the ownership/control/family chart at the transaction date. Apply each distinct relationship test, including de facto directors, group control and head-office/PE links. Keep evidence even where a percentage test is not met: common management/control can still be relevant under the opening test. Article 16(1)–(2)
2. Reconcile the actual transaction to contracts, invoices, asset movements, hours, cash and both parties' ledgers. Describe functions performed, assets used, risks borne, economic purpose and contractual versus actual conduct. Regulation article 7 requires the information needed to determine market value; article 8's detailed application categories provide an evidence framework, without turning every application document into a universal annual filing. Regulation, Articles 7–8
3. Identify an independent comparison matching the actual supply and terms. Start with reliable internal sales/loans to independent parties where available; otherwise document the external transactions, date, geography, currency, volume, functions and risks. Record each comparability adjustment and why it can be measured. Do not simply call a group price, cost percentage, database median or CbCR profit a market price. The legal requirement is independent-party market value; no universal statutory service markup or interest safe harbour is established. Article 16(3); Regulation, Article 8(3)
4. If comparing a service charge through a supported cost-plus approach, reconcile the eligible cost pool, exclude costs not supplied to the recipient, apply the evidenced allocation key, then the independently supported markup to the matching costs. A direct comparable price, resale-margin or profit-based comparison can instead be used where supported by the actual economics; those are workpaper approaches, not a claim that this statute prescribes a fixed method hierarchy. Show why the chosen method measures this transaction better than the available alternatives, and reject a result where the necessary comparable evidence is missing. Article 16(3); Regulation, Article 8(3)(b)
5. Compute supported consideration minus booked consideration in the same units/period. For the supplier, underpricing generally creates an upward income reconciliation; for a recipient, amounts above supported value are not established deductions. Separate valuation from actual service receipt, legal deductibility, withholding, IGI and foreign corresponding relief. Preserve both sides' tax-year/valuation bridge and avoid counting the same correction twice. The ministry's binding-value/no-combined-excess rule is domestic, not a promise by a foreign authority. Article 16(3)–(6); Regulation, Article 7
6. Test finance costs again under articles 13–14: recipient tax/mismatch restrictions and, where applicable, the net-finance limitation can disallow an arm's-length amount. The ordinary limit is 30% corrected profit with the EUR 500,000 minimum, subject to its exclusions, group and short-period rules; use ad-corporate-income-tax for the full deduction/loss/credit calculation. A pricing adjustment is not simply 10% of every invoice. Articles 13–14, 16(6)

Services and allocation evidence

The taxpayer must supply necessary group documentation, related-party contracts and other information enabling market value to be determined. For related-party employment remuneration, the regulation identifies market value with the remuneration's CASS contribution base; do not extend this special employment rule to management-service invoices or royalties. Regulation, Article 7(4)–(5)

As a practical workpaper, reconcile the charge to the service supplied and the ledger, identify the beneficiaries, explain the allocation key and record the evidence for the selected pricing method. These are preparation steps to support market value, not a claim that the law prescribes a universal markup. Separate unsupported shareholder charges or duplicated costs for further analysis; neither an internal cost schedule nor a group policy proves deductibility by itself.

Financing

Finance costs incurred by a resident entity on direct or indirect transactions with related resident individuals or related non-resident persons/entities are non-deductible unless the taxpayer proves financing terms comparable to those between independent parties. Record currency, amount, term, security, repayment, borrower credit risk and contemporaneous comparable terms. A market interest rate alone does not answer all financing conditions or other deduction restrictions. Article 16(6)

The examples below show pricing arithmetic only. The selected prices and rates are assumed supported facts, not statutory safe harbours, benchmarks supplied by this Guide or proof of a full tax deduction.

Deadlines and filing

An advance-pricing request is made before the transactions and contains the proposed valuation, facts, circumstances and method. It must reflect that all related participants know of and accept the request. For a group, include the organisational/legal/operating structure, relevant entities and flows, functions/risks, intangibles, pricing policy, cost-sharing/service agreements, relevant existing agreements/disputes and annual report. Taxpayer documentation identifies counterparties and transactions, explains the method and resulting value, and supports shared-service allocation. These detailed requirements apply to the advance-pricing application; they must not be presented as a verified universal annual master-file/local-file submission obligation. Regulation, Article 8

The ministry must notify acceptance or rejection of starting/applying the procedure within six months of receipt or required correction. The law and regulation provide deemed acceptance where no express decision occurs within that period and a reasoned valuation proposal accompanied the request. Preserve receipt, correction and notification evidence; do not infer approval from an informal enquiry or an incomplete file. Law, Article 16(5); Regulation, Article 8(5)

The agreement records the covered transactions, method, applicable periods and effective date. The law permits specified current/prior-period effect, provided those prior transactions have not already been adjusted by the ministry. Do not assume a fixed maximum term or automatic retrospective coverage. Significant economic changes require modification or cancellation under the law. Law, Article 16(5); Regulation, Articles 9–12

With the tax declaration, an approved-agreement holder submits a report identifying covered transactions and values, relevant economic changes and similar transactions with their prices. Calendar this with the entity's applicable tax return; no separate universal annual TP filing date is asserted here. Regulation, Article 11

Penalties and interest

Pricing adjustments and failure to prove comparable financing terms affect the tax base immediately. IS article 64 sets simple-offence fines of EUR 150–3,000 and defraudation sanctions of 50%–150%, with statutory classification/graduation; an adjustment alone does not prove culpable evasion. Articles 16(4), (6), 64

For the information offence referred to by CbCR article 16 bis(8), General Tax Law article 128(2)(c) provides EUR 1,000 for the first failure to supply the required information and EUR 3,000 for second or later failures. Apply the actual information duty, request/history and offence, rather than inventing a per-document TP tariff. Other offences and agreement/payment reductions follow articles 125–132. General Tax Law 21/2014, Articles 127(2)(c), 128(2)(c), 132.

Voluntary late tax-bearing filings have the statutory 2%, 5%, 10% or post-request 15% surcharge route; distinguish the six-month interest coordination and enforcement 2%/10%/20% stage rules. Tax late interest for 2026 is 4.05% annually on the statutory base and period; an information-only failure is not automatically a tax-bearing late return. Use the actual assessment/payment dates. General Tax Law, Articles 23–25; Budget Law 1/2026, Article 17.

Cross-border points

Andorran PEs and foreign head offices are included in the related-party rules. IRNR Article 16 also refers non-resident controlled transactions to the corporate-tax provision. Reconcile any pricing adjustment with source classification, withholding and PE attribution; pricing alone does not determine treaty relief. IRNR, Article 16

Country-by-country reporting (CbCR)

Test the multinational group using consolidated revenue for the immediately preceding fiscal year, not the Andorran subsidiary's turnover. A group with revenue below EUR 750 million, or the specified local-currency equivalent determined at January 2015, is excluded. Exactly EUR 750 million does not satisfy the below-threshold exclusion. The definition covers cross-jurisdiction entities and an enterprise with a foreign PE; consolidation scope and the constituent-entity definition must also be checked. Article 16 quater(a)–(d)

An Andorran-resident ultimate parent of an in-scope group files the report. An Andorran-resident constituent entity that is not the ultimate parent has a local filing obligation if one of these statutory conditions applies:

• The ultimate parent's jurisdiction does not require CbCR.
• An international agreement is in force with that jurisdiction, but a qualifying competent-authority agreement with Andorra is not in force at the report deadline.
• The ministry has notified the Andorran entity of systemic failure in the ultimate parent's jurisdiction.

If multiple Andorran entities are affected, the group can designate one to file and notify that the filing fulfils their obligations. Do not infer exchange eligibility merely from an ordinary tax treaty or a country appearing on an international list. Article 16 bis(1)–(2)

Surrogate-parent filing removes the local filing obligation only if the statutory package is satisfied: timely filing with equivalent report content, an equivalent reporting obligation in the surrogate jurisdiction, a qualifying agreement with Andorra effective at the deadline, the required absence of notified systemic failure, notification of surrogate status in that jurisdiction, and the Andorran notification. Obtain evidence for each condition rather than accepting a statement that another group entity filed. Live exchange relationships and failure notices have not been No accountant verification is on record for this version. Article 16 bis(3)

The report is due within 12 months after the last day of the group's reporting fiscal year and is filed electronically using the approved model. A 31 December 2026 year-end therefore gives a statutory report deadline of 31 December 2027, subject to any separately verified extension/non-working-day rule. The notification has a different timetable: disclose ultimate/surrogate-parent status, or the reporting entity's identity and tax residence, during the corporate-tax return filing period. The regulation also requires every company to state in its tax return whether it is subject to the report obligation. Article 16 bis(4)–(7); Regulation, Articles 13–14

Prepare jurisdiction totals for revenue, profit/loss before tax, tax paid and accrued, stated capital, accumulated earnings, employees and the specified tangible-asset measure. The regulation uses average employees during the period and excludes cash/cash equivalents and investment properties from the specified tangible assets. Identify each constituent entity, tax identifier, residence, incorporation jurisdiction and principal activities. Reconcile the reporting perimeter and source accounts before uploading; this draft does not certify the live electronic schema. Article 16 bis(6); Regulation, Article 14

Failure to meet these information duties is the offence referred to Article 127(2)(c) of Law 21/2014; the current EUR 1,000/EUR 3,000 information sanctions are described above. The ministry uses CbCR for risk assessment and cannot base transfer-pricing adjustments on the report. Reporting or exemption from reporting does not replace transaction-level pricing evidence. Articles 16 bis(8), 16 ter

Worked examples that recompute

1. Underpriced service charge

Assume a documented controlled service of 400 hours. A valid comparable, adjusted for actual terms, supports EUR 100 per hour. Only EUR 32,000 was recorded as supplier revenue. The supported charge is EUR 40,000 and the supplier's revenue shortfall is EUR 8,000. This example does not establish the recipient's deduction, foreign corresponding adjustment or any VAT result.

name: Andorra controlled service price reconciliation
inputs:
  hours: 400
  supported_hourly_price: 100
  recorded_revenue: 32000
steps:
  market_charge: hours * supported_hourly_price
  revenue_shortfall: market_charge - recorded_revenue
expected:
  market_charge: 40000
  revenue_shortfall: 8000

2. Financing amount reconciliation

Assume a EUR 200,000 loan outstanding for a full year, with independently supported comparable terms and a 4% simple annual rate. The booked finance expense is EUR 12,000. The supported interest amount is EUR 8,000, leaving EUR 4,000 above that amount. This is a pricing comparison; Article 16(6)'s proof requirement and every other deduction condition still apply. Four percent is an example assumption, not an Andorran safe harbour.

name: Andorra related financing pricing comparison
inputs:
  principal: 200000
  supported_rate: 0.04
  years: 1
  booked_interest: 12000
steps:
  supported_interest: principal * supported_rate * years
  excess_over_supported: booked_interest - supported_interest
expected:
  supported_interest: 8000
  excess_over_supported: 4000

Ask the client first

• Who owns, controls or directs each party, including indirect holdings and relevant family links?
• What transactions occurred, under which agreements, and how do they reconcile to the ledger?
• What independent comparables and adjustments support the selected terms?
• For financing, who is the lender, where are they resident, and what evidence supports all loan terms?
• Is an advance agreement in place, what periods does it cover, and have circumstances changed?
• Are a foreign adjustment, treaty dispute or separate CbCR obligation involved?

Sources

Primary source and provisions used	URL	Read on
Law 95/2010 current consolidation, arts 13–14, 16, 16 bis/ter/quater, 64	https://www.portaljuridicandorra.ad/L2010095	2026-10-27
Corporate-tax regulation, arts 7–14	https://www.portaljuridicandorra.ad/R20231229C	2026-10-27
IRNR Law 94/2010, art 16	https://www.portaljuridicandorra.ad/L2010094	2026-10-27
General Tax Law 21/2014, arts 23–25, 125–132	https://www.portaljuridicandorra.ad/L2014021	2026-10-27
Budget Law 1/2026, art 17	https://www.portaljuridicandorra.ad/L2026001	2026-10-27
Corporate-law version register, current consolidation and amendment provenance; consolidation lacks official legal status	https://www.portaljuridicandorra.ad/L2010095_F	2026-10-27

Not yet confirmed: a universal minimum transaction threshold, fixed markup/interest safe harbour, mandatory general annual master/local-file submission date or maximum agreement term is not established by these provisions. A real group's CbCR exemption needs the actual qualifying exchange relationship, reporting receipts and any systemic-failure notices effective at its deadline; no complete live matrix or electronic filing schema is certified here. A foreign corresponding adjustment or treaty dispute needs the operative treaty and actual competent-authority procedure; domestic binding valuation alone does not grant foreign relief. These specialist checks do not prevent the ordinary related-party workpaper above.

Contributed by Michael Cutajar.