A first attempt was made with those youtubers who started the path of "emigration for tax reasons" to Andorra (here we analyze the taxation as non-residents in Spain). It looks like the small principality has found a certain vain. The next category they are focusing upon are the gamers dedicated to the so-called eSports.
As a matter of facts, their Minister of Economy has announced: "We pursue the goal of diversifying the economic model, very dependent on tourism and mature sectors such as trade and construction, and one of the sectors that we believe can help us within this digital economy are the eSports".
Tax policy for eSports in Andorra
Leaving aside the possible specific tax incentives for the sector that Andorra (or any other country if the case may be) can develop, the fact is that Andorra has a very attractive effective taxation (here below is a summary of the Andorran tax system).
However, this case is similar to the one we already outlined, related to youtubers; being a resident in one territory does not exempt you from paying taxes as a non-resident in other countries, if your economic interests are located there. As far as gamers are concerned, if the taxpayers have competitions in other countries for which they receive income, depending on the double taxation agreement between Andorra and that country, then payment of taxes may apply; and there may not be any compensation for the total amount paid in Andorra, due to its low rates. Let's take an example, for easy reference:
Example of taxation of a gamer dedicated to eSports in Andorra
An Andorran resident gamer receives income in country A of 10,000 euros. The agreement between Andorra and A stipulates that the income generated in A must be taxed at 24% (through withholdings). The personal income tax rate in Andorra is 10%. How much tax will the gamer have to pay?
In country A, he will be taxed as a non-resident at 24%, on 10,000 euros, 2,400 euros. When filing his income tax return in Andorra, he will be taxed at 10% of his income generated worldwide. This includes those obtained in country A, total 10,000 euros for 10%, 1,000 euros. On those 1,000 euros, depending on the agreement, the most common scenarios are the following:
Compensating the amount paid as non-resident WITH THE LIMIT of what would have had to be paid for that income in Andorra. In this case, only 10% could be compensated, 1,000 euros of the amount that was paid abroad. Total taxation 2,400 euros in A and 0 euros in Andorra.
Declare the exempt income in Andorra for being taxed in A. This would make a total taxation of 2,400 euros in A and 0 euros in Andorra.
Previous study of tax planning
Subsequently, gamer, youtuber, or anyone who wants to change residence to save part of the tax bill, must mirror on the main sources of income they have and where they are located. A "Tax Planning Study" a priori can help to clarify whether the tax savings are worthwhile or not. Certainly, if the sources of income come from other territories than Andorra (or any low tax country where one has decided to reside) there may be savings. But the results may not be as significant as it seems, at a first glance.
If you are a gamer related to eSports in Andorra, or in case you need advice about a similar case, just reach out for us. Carrillo Asesores’ Tax Advisory Department will be pleased to support you!
