Although capital gains in Andorra are regulated by the Personal Income Tax Law (commonly known as “Impost sobre la Renda de les Persones Físiques” or IRPF), exemptions, special rules and the absence of double taxation treaties make the taxation of capital gains more complex than that of simple employment income.

For this reason we have written this guide that aims to clarify once and for all how much tax you should pay as an Andorran resident on each type of capital gains.

Capital Gains on the sale of shares

In the Andorran Personal Income Tax Law, the basic rule is that individuals are taxed at a rate of 10% with an with an exemption of the first €3,000.

That said, capital gains on the sale of shares enjoy other exemptions that make the effective rate much lower and often even 0%. Specifically:

• If you own 25% or less of the company, you pay no capital gains tax on the profits from the sale of those shares.
• If you own more than 25% of the company, you would pay up to 10% on the gain, unless you held the shares for more than 10 years. After 10 years, the capital gain becomes tax-exempt.

In simple terms, if you sell shares in a company where your stake does not exceed 25%, there is a full exemption. If your ownership is more than 25%, the 10% rate applies, unless you have held those shares for 10 years, in which case the gain is 0%.

Practical examples

Imagine you are Andorran tax resident and hold some publicly traded American shares (like Apple or Tesla) and you decide to sell them at a profit. Since your stake in these corporations is certainly below 25%, you generally pay no capital gains tax in Andorra on the sale.

By contrast, if you sold 100% of your Andorran company (assuming you had a large stake of more than 25%) you would pay up to 10% on the capital gain.

However, if you had owned that same company for more than 10 years, you would owe nothing upon sale.

Dividends to non-residents

Dividends paid to non-residents by Andorran companies are not subject to any withholding in Andorra. The non-resident may, however, have to declare them in their country of residence, depending on that country’s rules.

Capital Gains on Real Estate

Real estate capital gains in Andorra used to be taxed under a specific real estate gains tax (known as the “Impost sobre les Plusvàlues en les Transmissions Patrimonials Immobiliàries”), but over time these rules have been harmonized into the Andorran Personal Income Tax Law.

However, the concept of a time-dependent tax bracket still holds. The shorter the holding period, the higher the tax:

• Up to 1 year: 15%
• More than 1 year up to 2 years: 13%
• More than 2 years up to 3 years: 10%
• More than 3 years: The tax rate decreases by 1% for each additional year of ownership.
• After 12 years: 0%

This approach encourages longer-term real estate investment while discouraging speculative flipping.

Double Taxation Treaties

Andorra has a relatively limited network of Double Taxation Treaties (DTT). While treaties with important neighbors like Spain, France, and Portugal are in place (and a few more with countries like Luxembourg, Malta, and the UAE) there are still many jurisdictions without direct tax treaty coverage.

This means that if you sell shares of a foreign company while living in Andorra, that country might withhold capital gains tax at the source if no treaty applies.

Fortunately, many major economies do not levy capital gains tax on non-residents. For instance, the US, the UK, and Germany typically do not charge capital gains taxes on non-resident sellers of public stock.

Also, if there is a withholding abroad, Andorra provides a mechanism for international double tax relief, making sure you don’t pay in Andorra if you’re already paying 10% or more in another country.

Let’s give an example to clarify: imagine that you own 100% of a company in Brazil and sell all your shares while being a tax resident in Andorra.

Since Brazil does not have a DTT with Andorra and retains capital gains from non-residents, it would retain you at source (let’s say 15% of the sale). Also, since you own more than 25% of the company and you have had it for less than 10 years, the sale would also have to pay capital gains taxes in Andorra.

However, thanks to this Andorran mechanism for international double tax relief, since you are already paying 10% or more in Brazil, Andorra would give up on its share.

Regarding the real estate abroad: a DTT usually does not exempt you from paying capital gains tax on real estate located in the other country. For example, if you are an Andorran tax resident but own a property in Marbella, Spain, you will have to pay capital gains tax in Spain when you sell it (even if Spain and Andorra have a treaty), because the right to tax real estate remains with the state where the property is located.

This may also include the sale of shares in companies whose underlying assets are predominantly real estate.

Other taxes

Besides capital gains, Andorra’s tax framework covers the following types of income:

• Interests & bonds: e.g., bond coupons or bank interests, taxed at 10%. There is a small personal exemption of €3,000 on savings income.
• Dividends: from foreign companies are taxed at 10%, while dividends from Andorran companies (for residents) are exempt.
• Cryptocurrencies: profits from crypto trading are generally taxed at 10% (if above the exemption threshold). Gains are integrated into your overall income for PIT calculation.
• CFDs (Contracts for Difference) and other derivatives: taxed at 10%, because these do not constitute ownership of the underlying asset and thus do not qualify for the share-sale exemption.

How to be an Andorran tax resident?

Strictly speaking, administrative residency (the right to live in Andorra) does not automatically mean tax residency (the obligation or advantage of paying taxes in Andorra). Typically, you must live in the country for at least 183 days per year, keep your center of economic interests in Andorra, or comply with specific conditions set by the tax law.

The two most common routes to secure your administrative residence are:

• Active Residency: usually involves establishing or working for an Andorran company. If you set up your own business or get employed by a local firm, you can apply for an active resident permit, which mandates spending at least 183 days in the country. It also requires certain social security contributions and (for self-employed individuals) a refundable deposit in the Andorran Financial Authority.
• Passive Residency: often called the “Andorran Golden Visa” by foreigners, but locally it’s just “residència passiva”. This is reserved for individuals with substantial assets or international income who wish to live in Andorra without working for a local company. The physical stay requirement can be as low as 90 days per year, and it involves a specific minimum investment of around €600,000 in Andorran assets (including a deposit at the Andorran Financial Authority).

Once you qualify and live in Andorra under either route, you can claim tax residency if you meet the standard tests (183 days, center of vital interests, etc.).

Thinking of moving to Andorra?

If you are considering a move to Andorra for its favorable capital gains rules, we recommend reading the report “The definitive guide to living in Andorra”, where you will find the most comprehensive information on taxes, residence permits, and daily life in the Principality.

For any other questions or specialized advice, feel free to get in touch with us. With Andorra’s growing appeal among entrepreneurs, retirees, and digital nomads, we are here to ensure you receive the best guidance tailored to your unique situation.

Sources

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• https://www.bopa.ad/Documents/Detall?doc=CGL_2024_02_21_14_02_59
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