New IGI refund regime: possibility of obtaining refunds at the end of each tax period

The beginning of 2023 brought several tax developments to the Principality of Andorra. Among them, special attention should be given to the legislative amendment approved in February, which directly affects the refund mechanism for General Indirect Tax (IGI) amounts borne by taxpayers.

IGI returns are filed on a monthly, quarterly or semi-annual basis, depending on the taxpayer's turnover. If, when filing the return, the deductible IGI exceeds the IGI charged, the result will be a refundable balance corresponding to the difference between both amounts.

However, under the wording of Article 70 of the IGI Act applicable until then, taxpayers could not request a refund of IGI credits in their favor until 31 January of the following year. Furthermore, considering that the Andorran Tax Administration has a three-month period to process refunds, these amounts could effectively remain unpaid until 30 April of the following year.

In practical terms, even if a taxpayer filed the first-quarter IGI return in April 2022 with a refundable balance, the refund could not be requested until January 2023. In addition, payment might not be made until 30 April 2023, meaning that up to one year could pass from the filing of the return generating the refund entitlement.

This framework often created cash-flow constraints for companies and entrepreneurs, as they were unable to access tax credits in their favor for a prolonged period due solely to a formal legislative limitation.

Aware of the impact that this situation could have on business activity, the Principality of Andorra has amended the system. As from the first quarter of 2023, taxpayers may request the refund of IGI credits arising from each return filed, provided they are fully compliant with their tax obligations.

Following the previous example, if the first-quarter IGI return filed in April 2023 results in a refundable balance, the refund may be obtained no later than 31 July 2023.

From a procedural perspective, in order to benefit from this new regime, and pursuant to the amendments to the IGI Regulations and the Ministerial Order of 29 March 2023, published in the Official Gazette of the Principality of Andorra (BOPA) on 31 March 2023, taxpayers must electronically submit form 001-O, which now forms part of the taxpayer registration records.

With this new regime, Andorra distinguishes itself from countries such as Spain, where the general VAT refund system still requires taxpayers to submit the final tax return of the fiscal year before any refund may be obtained.