Much has been written about whether the Principality of Andorra is a tax haven or not: Media outlets, YouTubers, journalists, and talk-show hosts often express opinions on the matter and, unfortunately, many inaccuracies persist.

In this article we take an in-depth look at the topic, exploring historical perceptions, international standards, and recent reforms that have reshaped Andorra’s tax landscape.

What is exactly a tax haven?

In popular opinion, a tax haven is thought to be a jurisdiction with low or zero taxes. However, the modern definition is more nuanced. Today, the term “tax haven” is used to describe jurisdictions that lack transparency in the exchange of financial and tax information.

A country that does not share information with other tax authorities or lacks double taxation avoidance agreements with robust information exchange clauses may be labeled as a tax haven, irrespective of its tax burden.

Both the OECD and the European Union now focus on criteria such as transparency, cooperation, and adherence to internationally agreed standards rather than solely on low tax rates. For instance, countries like Panama or Fiji are often cited not for low taxes but because they do not provide automatic exchange of information.

A brief look at Andorra’s past

For decades, Andorra was included on various national and international tax haven lists. Its reputation largely stemmed from strict banking secrecy laws and a lack of effective exchange of tax information with other countries. This environment allowed wealthy individuals and businesses to conceal assets without the tax authorities of their home countries being notified.

Historically, these features helped fuel economic growth through private capital; however, they also led to significant criticism and diplomatic pressure. Over time, international bodies such as the OECD began to target such jurisdictions, prompting Andorra to rethink its approach.

A turning point

Under mounting pressure from the international community, Andorra embarked on a series of reforms to shed its tax haven image.

In May 2009, the OECD removed Andorra from its list of non-cooperative jurisdictions, thanks to the principality’s commitment to transparency and the effective exchange of tax information. This was a landmark decision that signaled a change in the country’s international standing.

Further reforms followed. Andorra embraced the Base Erosion and Profit Shifting (BEPS) framework, and on December 4, 2018, ECOFIN agreed to leave Andorra off the list of non-cooperative jurisdictions for good.

Key measures included:

• Adoption of nilateral tax information exchange agreements: Andorra signed multiple agreements with EU countries and other major economies, ensuring that tax authorities can request and receive information when needed.
• Implementation of the Common Reporting Standard (CRS): by agreeing to the CRS of the OECD, Andorra now automatically exchanges financial account information with participating countries.
• Modernization of its tax system: the principality introduced a flat personal income tax rate of 10% in 2015, revamped its corporate tax framework, and replaced older indirect tax figures with the General Indirect Tax (IGI), which is set at a competitive rate of 4.5%.

Modern taxation in Andorra

Today, Andorra is recognized as a “tax-approved jurisdiction” rather than a tax haven. Its tax system now balances low rates with strict regulatory oversight and transparency.

Personal Income Tax

Introduced on January 1, 2015, Andorra’s personal income tax is designed to be competitive while ensuring fiscal responsibility: income up to €24,000 is tax-free; income between €24,000 and €40,000 is taxed at 5%, and any income above €40,000 is taxed at 10%.

This progressive yet low-tax structure has been a key factor in shifting perceptions about the principality.

Corporate Tax

The corporate tax rate in Andorra, known as the Impost de Societats (IS), is capped at 10%. For new companies and startups, there are further reductions during the first few years. These measures encourage entrepreneurship and investment, helping to diversify the economy beyond its traditional reliance on banking secrecy.

Indirect Taxation (IGI)

Replacing a variety of older indirect tax figures, the IGI was introduced on January 1, 2013, and has a general rate of 4.5%.

With special rates applied to essential goods, transportation, and banking services, the IGI contributes to a tax system that is both business-friendly and aligned with international standards.

Capital Gains Tax

Andorra also applies a capital gains tax on some cases when selling shares and in property transfers. The property transfer tax rate decreases over time as the holding period increases, with significant relief available if the proceeds are reinvested in another property. This policy aims to balance revenue collection with incentives for long-term investment.

To find out more we recommend that you read our article on capital gains taxes in Andorra.

International recognition

One of the most important factors contributing to Andorra’s improved reputation is its full compliance with international transparency standards. Both the OECD and the European Union now recognize Andorra as a jurisdiction that meets the criteria for fairness and openness.

For example:

• OECD commitment: in 2009, the OECD removed Andorra from its blacklist of non-cooperative tax havens following concrete
  reforms. Andorra’s adherence to the BEPS framework further cemented its status as a responsible member of the international tax community.
• EU Perspective: most EU member states now classify Andorra as a tax-approved jurisdiction. Although some Latin American countries still
  label it as a tax haven for political or economic reasons, this view carries no legal or practical implications in Europe.

Andorra’s participation in the Common Reporting Standard (CRS) is also a major milestone. Through automatic exchange of information, Andorra now shares detailed financial data with other jurisdictions. This has greatly reduced the ability of individuals and companies to hide assets offshore.

When comparing Andorra with other jurisdictions that have historically been labeled as tax havens, the differences become clear:

• Banking secrecy: countries such as Panama and Fiji continue to be criticized for their lack of transparency. In contrast, Andorra has dismantled its strict banking secrecy regime.
• Tax information exchange: many former tax havens have been reluctant to sign international agreements that require the automatic exchange of tax data. Andorra’s extensive network of bilateral agreements ensures that tax authorities have access to relevant financial information.
• Tax rates and structures: while low tax rates remain attractive, they are not the sole criterion for a tax haven. The modern Andorran system offers low rates combined with transparency and regulatory cooperation, a combination that most high-tax jurisdictions cannot match.

Controversies

Despite these reforms, some voices, especially from certain Latin American countries and critical international NGOs, still consider Andorra a tax haven. Critics argue that the country’s relatively low tax rates and attractive incentives for foreign investors continue to give it tax haven characteristics.

The restrictive Intermon Oxfam list, for instance, continues to label Andorra as a tax haven. Nonetheless, these designations carry no legal weight with the OECD or EU, both of which officially recognize Andorra’s compliance with modern transparency standards.

It is important to note that the transformation of Andorra’s tax system is an ongoing process. Continued vigilance and periodic reviews by international bodies ensure that the principality remains in line with global best practices.

Thinking of moving to Andorra?

In summary, Andorra is no longer considered a tax haven by the OECD, the European Union, or most international bodies. Today, Andorra combines low tax rates with full transparency and cooperation, earning it recognition as a responsible, tax-approved jurisdiction.

For individuals and businesses looking to change their tax residence, the modern Andorran system offers stability, transparency, and clear benefits.

If you are interested in changing your tax residence or need further information, we recommend downloading “The Definitive Guide to Living in Andorra” or contacting us.

Sources

• https://www.oecd.org/tax/transparency/
• https://en.wikipedia.org/wiki/Taxation_in_Andorra
• https://www.govtech.com/dc/articles/Tax-Havens-Narrowed-to-Three.html
• https://en.wikipedia.org/wiki/European_Union_tax_haven_blacklist
• https://en.wikipedia.org/wiki/Common_Reporting_Standard
• https://en.wikipedia.org/wiki/Global_Forum_on_Transparency_and_Exchange_of_Information_for_Tax_Purposes