Personal Income Tax 2025: greater support for families and housing in a campaign with notable changes

The Personal Income Tax (IRPF) filing campaign for the 2025 tax year is now under way. From 1 April to 30 September, most tax residents in the Principality of Andorra are required to submit their tax return. This year, the process includes significant changes stemming from Law 5/2025, aimed at promoting sustainable growth and strengthening the right to housing.

Family tax allowances: increases and new support measures

One of the main developments concerns family tax allowances, which have seen a notable increase. Specifically, the tax allowance for dependent children under 25 rises from €750 to €1,000 per year per child, provided they live with the taxpayer or are financially dependent on them. This increase also applies to dependent relatives (ascendants) over 65, as well as to comparable situations, such as guardianship or similar care arrangements.

In addition, in cases involving disability or dependency, these allowances are increased by 50%, reaching up to €1,500.

A further noteworthy development is the introduction of a new tax allowance of up to €300 for higher education tuition fees (a measure not previously in place) aimed at easing the financial burden on families.

As is customary, these allowances are apportioned among taxpayers entitled to apply them.

Housing: a central pillar of the tax reform

Housing has become the main focus of this year’s tax reform. The tax allowance for investment in a primary residence remains at 50% of the amounts paid — including principal repayments, interest and associated costs — but the annual cap has been increased significantly, rising from €1,000 to €5,000.

At the same time, a new equivalent allowance has been introduced for investments in affordable rental housing, under similar conditions. This measure aims to encourage the supply of rental properties in a context of significant pressure on Andorra’s housing market.

In addition, a further incentive has been introduced for property owners who make homes available for residential rental. In such cases, deductible expenses linked to rental income may be increased by 10%, provided certain requirements are met: the rent must not exceed €9 per square metre or €1,250 per month.

However, this benefit does not apply where the rental activity is considered a business activity, which is the case when six or more properties are rented out or when annual income exceeds €100,000.

Financial investments: no changes, but key aspects to consider

As regards the taxation of financial investments, there are no changes compared with previous years. However, it remains particularly important to apply double taxation agreements (DTAs) correctly. Otherwise, taxpayers may be subject to higher withholding taxes than those provided for under the applicable treaties, especially on foreign-source income such as dividends.

This excess tax is not deductible in Andorra, which reduces the overall return on the investment. A common example is Spain, where dividend withholding tax can be reduced from 19% to 15% if the applicable treaty is correctly applied.

In addition, for investments in foreign currency, the administrative criterion remains unchanged: returns must be calculated in euros, applying the exchange rate at the time of both investment and disposal. While this is not a new rule, it is particularly relevant in practice, as it means that currency movements form part of the taxable result of the transaction.

This treatment may have different implications depending on the type of asset. For taxable instruments, such as bonds, exchange rate fluctuations may have a direct tax impact. By contrast, for assets generating exempt income — such as certain capital gains on shares where the holding is not substantial — the effect is neutral.

An increasingly demanding tax environment

Overall, the new features of the 2025 Personal Income Tax reinforce support for families and introduce clear measures to facilitate access to housing, one of the country’s main current concerns. Nevertheless, tax regulations continue to evolve and become more complex.

In this context, filing a tax return is no longer merely an administrative formality, but an exercise that requires knowledge and planning. For many taxpayers, seeking specialised advice is no longer optional, but essential to optimise their tax position and avoid potentially costly errors.

^{Diari d’Andorra April the 23rd 2026}