Korea-Andorra Double Taxation Avoidance Agreement Entered into Force

The Korea-Andorra Double Taxation Avoidance Agreement (“Agreement”) entered into force on April 1, 2025, following the completion of domestic procedures by both countries after the Agreement was signed on November 3, 2023.

Below is a summary of the key provisions of the Agreement.

· With respect to business profit, taxation in the source country is permitted only for profit attributable to a permanent establishment, such as a branch, factory, or office situated in that country.

· Dividends, interest, and royalties may be taxed in the source country within the limits of the agreed withholding tax rates. These reduced rates represent the maximum tax rates the source country may impose on residents or corporations of the other contracting state: 10% for dividends and interest, and 5% for royalties.

* However, a reduced rate of 5% applies to dividend income between corporations where the recipient holds at least 10% of the payer’s shares, and to interest income received by financial institutions.

· Capital gains from the transfer of immovable property may be taxed in the source country.

· The benefits of this Agreement shall be denied if the principal purpose of a transaction is to obtain such benefits as reduced tax rates or tax exemptions in the source country.

· In addition, the Agreement established a framework for cooperation between the tax authorities of the two countries, including a mutual agreement procedure for resolving tax disputes and the exchange of tax information necessary for the implementation of the Agreement or the enforcement of domestic tax laws.