In recent years, fiscal pressure has increased dramatically in many countries. With tax rates rising everywhere, more high net worth individuals and professionals are looking for ways to secure their finances.

In this context, Andorra has emerged as one of the most attractive alternatives.This guide explains what our small but lovely country offers, the unique advantages of its lifestyle, its attractive taxation system, and the various residency options available.

Whether you are a digital entrepreneur, an investor or a retiree, understanding Andorra’s benefits can help you make an informed decision about relocating.

But what is Andorra?

Andorra is a small principality nestled in the Pyrenees between Spain and France. Despite its modest size, it has a rich blend of modern amenities, a secure environment and natural beauty. The country is particularly renowned for its ski resorts and mountain sports, making it a paradise for outdoor enthusiasts.

Life in Andorra is marked by a peaceful pace and a strong sense of community. Our country is proud to offer a high standard of living with excellent healthcare and education systems.

And although you may think that so many benefits must be inaccessible, the truth is that teal estate prices and the cost of living are very competitive compared to other affluent nations such as the United States, United Kingdom, Norway, Monaco, and Switzerland, while remaining comparable to major Spanish capitals.

Advantages

• Low criminality creates a safe and secure living environment.
• The country is a paradise for snow and mountain sports enthusiasts, with world-class ski resorts and outdoor activities available year-round.
• Stunning landscapes and breathtaking natural scenery provide a high quality of life.
• Andorra is well connected to Spain and France; major airports are only a few hours away, making international travel convenient.
• Non-EU citizens benefit from the right to move freely in Spain, France, and Portugal once residency is obtained.
• A good healthcare and education system ensures that families have access to essential services.
• The cost of living and real estate is much lower than in richer countries, yet comparable to Spanish capitals.
• Andorra’s attractive taxation system (which is detailed later) provides significant fiscal benefits.

Disadvantages

• For those who crave a vibrant cultural and nightlife scene, Andorra may feel too quiet; however, the bustling city life of Barcelona is just a short drive away.
• Obtaining residency in Andorra can be challenging due to its strict requirements and limited quota.

Taxation benefits

One of the main attractions of Andorra is its highly favorable taxation regime. The principality offers a personal income tax rate that peaks at only 10%, with generous exceptions for those earning less than €40,000 a year.

Corporate taxes is also topped at 10%, and even the general indirect tax (similar to VAT) is 4,5%, significantly lower than in many neighboring countries.

Another great advantage is that dividends and capital gains are not taxed in many cases: for example, if you own an Andorran company and you pay out dividends after paying the 10% corporate tax, you do not have to pay tax again.

For more information, read our articles on dividend tax in Andorra and on capital gains.

These tax benefits make Andorra an appealing option for those who can work remotely.

Is Andorra a tax haven?

Main article: Andorra Tax Haven

Despite its low tax rates, Andorra is not considered a traditional tax haven.

Over the years, the principality has made significant efforts to improve transparency and adhere to international tax standards. Reforms have been introduced to eliminate banking secrecy, and Andorra has been working closely with global institutions to ensure compliance with international regulations.

These measures have helped Andorra shed much of the negative image associated with tax havens. Today, Andorra is recognized for its commitment to transparency and its modern, well-regulated fiscal framework, making it a legitimate choice for those seeking to optimize their tax situation.

Getting the residency

Relocating to Andorra requires obtaining the appropriate residency permit. It is important to note that Andorra is not a member of the European Union. Even EU citizens must apply for and be granted a resident permit to live in the principality.

The residency process is designed to ensure that only those who meet specific financial and personal requirements are granted access.

There are several types of residency permits available in Andorra. The main options include:

• Active Residency: for individuals who intend to work in Andorra, either as employees or as self-employed entrepreneurs. This type of residency requires a commitment to spend at least 183 days per year in the country and involves certain economic activity requirements.
• Passive Residency: often compared to a “Golden Visa,” this permit is ideal for retirees, investors, and high net worth individuals who live on passive income or income generated abroad. While it requires a lower minimum physical presence (typically around 90 days per year), it comes with investment requirements and a deposit that serves as a financial guarantee.
• Digital Nomad Visa: a newer option for those who work remotely for companies or clients outside of Andorra. This permit is designed for modern professionals who do not need to engage with the local labor market directly.
• Family Reunification: if a family member already resides in Andorra, it is possible to apply for residency under the family reunification category. This option facilitates the process for spouses, children, or dependent relatives.
• Residency for Health Reasons: in cases where individuals need to relocate for medical or health-related support, this special permit can be obtained. It is designed to help those who require access to Andorra’s high-quality healthcare services.

The active and passive residency permits are the most commonly for those interested in benefiting from Andorra’s low taxation: while active residency requires individuals to invest in the local economy and often involves setting up or being employed by an Andorran company, passive residency requires a significant financial commitment.

Broadly speaking, active residence is for those who work for others or themselves, while passive residence is designed for rentiers with a certain purchasing power.

Keeping the tax residency

Once you obtain an administraive residency permit in Andorra, maintaining tax residency is essential to continue enjoying the favorable tax rates. Tax residency in Andorra is determined by several factors, including the number of days you spend in the country and the location of your economic and personal interests.

Although some permits, like passive residency, may have a minimum stay requirement of 90 days, it is important to note that to secure the tax resident status, you must ensure that your main economic interests remain in Andorra. This means that if you are spending significant time abroad, you risk losing your status as an Andorran tax resident.

To preserve your tax residency, it is advisable to avoid spending more than 183 days per year in any other country. Keeping your center of economic and personal interests in Andorra is key. Regular visits, maintaining a local bank account, and having strong family and social ties within the principality will help reinforce your tax residency status.

Thinking of moving to Andorra?

If you are considering a move to a country where fiscal pressure is lower and your quality of life can improve dramatically, Andorra might be the ideal choice for you. With its combination of stunning natural beauty, a safe environment, competitive living costs, and one of the most attractive taxation systems in Europe, is now the place to be.

However, relocating to Andorra involves careful planning and a thorough understanding of both residency requirements and tax regulations. We recommend consulting with a local expert who can guide you through the process and ensure that all legal and financial criteria are met.

If you have any questions or need personalized advice, do not hesitate to contact us.

Sources

• https://www.consellgeneral.ad/ca/arxiu/arxiu-de-lleis-i-textos-aprovats-en-legislatures-anteriors/vi-legislatura-2011-2015/copy_of_lleis-aprovades/llei-5-2014-del-24-d2019abril-de-l2019impost-sobre-la-renda-de-les-persones-fisiques
• https://www.bopa.ad/Documents/Detall?doc=CGL_2024_02_21_14_02_59
• https://www.bopa.ad/bopa/034148/Pagines/CGL20221219_11_51_10.aspx
• https://practiceguides.chambers.com/practice-guides/comparison/924/13885/22025-22032-22040-22045-22049-22052-22057-22060-22064-22067