- Korea and Andorra Promote Economic Exchanges and Cooperation, Marking the 30th Anniversary of the Establishment of Diplomatic Ties between the Two Countries.

- The Number of Korea’s DTAAs with Other Countries in Force Has Reached 97.

1. The Korea-Andorra Double Taxation Avoidance Agreement (“Agreement”) enters into force on April 1, as both countries have completed domestic procedures* required for entry into force after the Agreement was signed on November 3, 2023.

* The Andorran side notified its completion of domestic procedures on September 13, 2024. / The Korean side, having obtained the National Assembly’s consent (on March 13, 2025), notified its completion of domestic procedures on April 1, 2025.

2. A DTAA (Tax Treaty) is a type of treaty concluded to eliminate double taxation which may arise in investments and transactions between two countries, and to prevent tax evasion of multinational enterprises, etc.

3. With this Agreement having come into force, the number of DTAAs that Korea has entered into reached 97. For Andorra, Korea is the first Asian country with which it has concluded a DTAA.

4. The important effects of this Agreement are as follows.

o First, in case of business profit, only what is attributable to the fixed place of business (permanent establishment) such as branch, factory, and office may be taxed in the state wherein such profit arises (the source state).

o Second, dividends, interest, and royalties may be taxed in the source state up to the limited tax rates, which is the highest rate at which the source state may levy tax on the other state’s resident and legal entity. In general, the limited tax rates are 10%* for interest and dividends, and 5% for royalties. Capital gains may be taxed in the source state only in certain cases such as the alienation of immovable property.

* A 5% limited tax rate applies to the dividends between legal entities (one holding at least 10% of the other’s capital) and to the interest paid to a financial institution.

o Third, the benefit of this Agreement is disallowed when the principal purpose of a transaction is to obtain such benefit as low tax rates or tax exemption in the source state.

5. Besides, the Agreement also established a framework for cooperation between the tax authorities, such as a mutual agreement procedure to resolve tax disputes, the exchange of taxation-related information necessary to enforce domestic tax laws of both countries, etc.

6. This year marks the 30th anniversary of the establishment of diplomatic ties between Korea and Andorra. The entry into force of this DTAA is expected to contribute to the expansion of economic exchanges between both countries, as well as provide the momentum for strengthening international tax cooperation.

7. The government of the Republic of Korea will continue to pursue the conclusion of DTAAs in order to create enterprise-friendly environments for overseas expansion, and to facilitate foreign investment and economic exchange with other countries.