Andorra Residency: Tax Benefits and Financial Planning

Introduction

Andorra, the small principality nestled in the Pyrenees mountains between France and Spain, has undergone a remarkable transformation over the past decade. Long known primarily as a skiing and duty-free shopping destination, Andorra has evolved into a credible, well-regulated jurisdiction for internationally mobile HNW individuals seeking European residency with a competitive tax environment.

Andorra introduced personal income tax only in 2015 — and even then at a maximum rate of 10%, far below the rates that apply in neighbouring France (up to 45%) and Spain (up to 47%). Combined with no inheritance tax, no wealth tax, and a straightforward residency process, Andorra has attracted a growing community of business owners, investors, athletes, and digital entrepreneurs.

This guide covers Andorra's tax environment, the residency application process (passive and active categories), the lifestyle and infrastructure realities, and the financial planning considerations for individuals considering the move. Always seek regulated legal and tax advice before making any decisions. Rules change.

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Andorra's Tax Environment

Personal Income Tax (IRPF — Impost sobre la Renda de les Persones Físiques)

Andorra introduced a personal income tax system in 2015. The rates as of 2026:

• First EUR 24,000 of taxable income: 0%
• Income from EUR 24,000 to EUR 40,000: 5%
• Income above EUR 40,000: 10%

(Note: Andorra uses the Euro as its currency; income thresholds are denominated in EUR.)

The maximum marginal rate of 10% applies to most categories of income, including employment income, self-employment income, and rental income.

Investment income: Capital gains and investment income are subject to a separate savings income tax at 10% flat (after a EUR 3,000 exemption). Dividends, interest, and capital gains from financial assets are taxed at this rate.

Exemptions: The first EUR 24,000 of salary income is exempt. Business income from activities outside Andorra may qualify for a participation exemption on dividends and capital gains from qualifying shareholdings.

No Inheritance Tax

Andorra does not levy inheritance tax. Transfers of wealth on death — including to non-relatives — are not subject to inheritance or estate tax in Andorra. This is a significant advantage for HNW families relative to French and Spanish tax regimes.

No Wealth Tax

There is no annual wealth tax in Andorra.

Corporate Tax

Corporate income tax in Andorra is levied at 10% on net profits. A participation exemption applies to dividends and capital gains from qualifying subsidiaries (100% exemption for qualifying participations), making Andorra an effective holding company location for international business owners.

VAT Equivalent

Andorra has its own equivalent of VAT — the Impost General Indirecte (IGI) — at a standard rate of 4.5%, significantly lower than the 20% rate in France or 21% in Spain.

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Residency Categories

1. Passive Residency (Residència Sense Activitat Lucrativa)

Passive residency is available to individuals who wish to live in Andorra but do not intend to work or conduct business there. Requirements:

• Minimum stay: at least 90 days per year in Andorra (a low threshold relative to most residency programmes).
• Investment requirement: following the Omnibus 2 Law (approved by the Andorran Parliament on 22 January 2026), passive residents must invest a minimum of EUR 1,000,000 in qualifying Andorran assets (real estate, Andorran financial instruments, shares in Andorran companies, or Andorran collective investment funds). Where real estate is used, each property unit acquired must exceed EUR 800,000. The total requirement can be reduced to EUR 400,000 by investing in the Andorran Housing Fund (Fons d'Habitatge).
• AFA payment: in addition to the investment, applicants must make a non-refundable payment to the Andorran Financial Authority (AFA) of EUR 50,000, plus EUR 12,000 for each dependant. This payment is separate from, and does not count towards, the investment threshold.
• Bank account: open an account with an Andorran bank.
• Rental or owned accommodation in Andorra.
• Clean criminal record from all countries of prior residence.
• Health insurance: valid in Andorra (CASS, the Andorran social security, or private insurance).

Passive residency is ideal for investors, retirees, and individuals who derive income from sources outside Andorra (investment portfolios, rental income from foreign properties, royalties).

2. Active Residency (Residència per a Inversors or Residència per a Treballadors per Compte Propi)

Active residency is for individuals who wish to establish a business or work in Andorra:

• Business owner/investor: establish or acquire a controlling shareholding (at least 34%) in an Andorran company with genuine business operations in Andorra. There is no fixed minimum investment equivalent to the passive route; the requirement is a genuine, operating Andorran business, together with the standard AFA deposit applicable to active residents.
• Employed worker: obtain an Andorran employment contract. Subject to quota restrictions on non-EU nationals.
• Self-employed professional (autònom): register as a self-employed professional in Andorra.

Active residents can work and conduct business in Andorra and can also access Andorran professional and financial services markets.

3. Digital Nomad / Telecommuter Residency

Andorra introduced a telecommuter residency category for digital nomads and remote workers earning income entirely outside Andorra. Requirements are broadly similar to passive residency but without the large investment requirement that applies to the passive route. This category is aimed at professionals who work remotely for non-Andorran employers or clients.

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The Residency Application Process

Applications are submitted to the Immigration Department (Servei d'Immigració) of the Andorran Government. The process typically takes 2–4 months:

1. Secure rental agreement or begin real estate purchase.
2. Open Andorran bank account.
3. Submit application: passport, clean criminal record certificate, proof of financial means, accommodation evidence, health insurance proof.
4. Attend in person for biometric data.
5. Receive temporary residence permit (valid 2 years, renewable).
6. After 5 years: apply for permanent residency or Andorran nationality (20 years required for citizenship).

Minimum Presence

Passive residents must spend at least 90 days per year in Andorra. Importantly, Andorra does not prescribe a maximum number of days outside — but your former country of residence may require you to spend fewer than a set number of days there (e.g., the UK's 183-day rule under the Statutory Residence Test).

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Tax Exit Considerations

Leaving Spain

Spain is Andorra's largest source of new residents. Spanish nationals and long-term Spanish residents face specific exit tax challenges:

• Exit tax (impuesto de salida): Spain levies an exit tax on unrealised capital gains on significant shareholdings (those exceeding EUR 4 million in market value) when a Spanish tax resident ceases Spanish residence.
• Centre of vital interests: Spain may continue to assert tax residence if the individual's family, business, or social centre remains in Spain. Spanish authorities scrutinise Andorra-based Spanish nationals closely given the jurisdiction's proximity and historical fiscal tourism.
• Tax treaty: Spain and Andorra signed a double taxation treaty in 2015, providing formal rules for resolving residence disputes and allocating taxing rights.

Spanish nationals moving to Andorra should begin the process with specialist Spanish tax advice and allow sufficient time to properly sever Spanish tax residence before establishing Andorran residence.

Leaving France

Similarly, France and Andorra signed a double taxation treaty in 2013. French nationals must properly sever French tax residence; the French "extended residence" rules can attribute income to France for up to 5 years after departure in certain circumstances.

Leaving the UK

UK nationals must ensure non-UK residence under the SRT. The 90-day minimum presence in Andorra is a low bar; to be confident of UK non-residence, most UK nationals should spend considerably more time in Andorra. Since 6 April 2025, UK inheritance tax is based on long-term residence rather than domicile: a person who has been UK-resident for at least 10 of the previous 20 tax years remains within the scope of UK IHT on their worldwide estate, and a "tail" continues to apply for several years after leaving the UK. Severing exposure to UK IHT therefore requires a sustained period of non-residence, not merely a change of domicile.

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Lifestyle and Infrastructure

Andorra covers approximately 468 square kilometres, with a population of around 80,000. Key lifestyle considerations:

• Language: Catalan is the official language; French and Spanish are widely spoken. English is common in business contexts.
• Healthcare: high-quality public healthcare system (CASS). Andorra La Vella has modern private clinics; major medical needs are served by hospitals in Barcelona or Toulouse.
• Education: Andorran schools, French lycées, and Spanish schools operate in parallel. International schools are available. Many residents send children to boarding schools in the UK or Spain.
• Connectivity: Andorra has no airport; the nearest airports are Barcelona (3 hours), Toulouse (2 hours), and Girona (2 hours). A helicopter service operates to Barcelona. Road access is excellent in summer; winter driving requires care.
• Banking: Andorra has a small but well-regulated banking sector (BPA, Creand, MoraBanc, Andbank). Andorran banks are CRS participants and maintain high AML/KYC standards.
• Climate: alpine — warm summers, cold winters with excellent skiing.

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Financial Planning in Andorra

With a 10% maximum income tax rate and 10% savings tax:

• Portfolio management: rebalancing a large investment portfolio incurs 10% capital gains tax on gains above EUR 3,000 — significantly lower than UK (18–24%), France (30%), or Spain (19–28%) rates.
• Business owners: Andorran corporate tax of 10% with a broad participation exemption makes Andorra an effective holding company base for international business owners who can genuinely manage their businesses from Andorra.
• Pension income: pension distributions from foreign pensions (UK SIPP, QROPS, Swiss pillar 2) are generally subject to Andorran income tax at the relevant rate — but typically well below the rate in the retiree's former country.

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How Global Investments Can Help

Global Investments advises internationally mobile clients — particularly those with Spanish, French, and UK tax backgrounds — on Andorra residency as part of a broader international financial planning strategy. We can help you assess whether Andorra is the right fit for your circumstances, coordinate the tax exit process in your former country of residence, and structure your ongoing affairs to make the most of Andorra's fiscal environment.

We work with qualified Andorran lawyers and tax advisers and can introduce clients to established banking and professional service providers in the principality.

Contact Global Investments for a confidential discussion. Seek regulated legal and tax advice specific to your circumstances before making any decisions. Rules change; this guide reflects the position as of 2026.