Andorra has stood out as an attractive destination for international investors, largely due to its favorable tax environment. However, with the recent implementation of Law 3/2024 and Decree 76/2024, a new progressive tax on foreign real estate investment has been established. This tax aims to control speculation and promote a more accessible rental market for residents.
Below, we outline the main features and updates of this tax, as well as the opportunities that still exist for foreign investors.
How does the new tax work?
The tax on foreign real estate investment is progressive and is based on the number of properties acquired by the investor:
- 3% for the purchase of the first property.
- 5% for the acquisition of two to five properties.
- 8% if between six and nine properties are acquired.
- 10% for the purchase of ten or more properties, or for urban development projects.
This tax affects both non-resident individuals and legal entities, as well as those with significant foreign ownership. Additionally, investors must register in the foreign investment registry before formalizing any real estate transaction.
Tax incentives for rental market investments
One of the most attractive features of Law 3/2024 is the 90% tax reduction for investments intended for long-term rentals. This measure has been implemented to increase the supply of affordable housing in the local market.
To benefit from this reduction, the investor must keep the property in a rental regime for at least 10 years. If the property is sold or used for another purpose before the end of this period, the investor will have to return the reduction, along with the corresponding interest.
Modifications to the Foreign Investment Law
Law 3/2024 also introduces several important modifications to the general foreign investment regulations. Among the main new developments, the following stand out:
- Prior authorization: Real estate investments now require an authorization process that shifts from a system of positive silence to negative silence, meaning that if no response is received within two months, the authorization is considered denied.
- Administrative fee: A fee of €300 is introduced for the processing of authorization requests.
Tax exemptions
There are several exemptions that allow for the avoidance of the tax in certain cases, such as acquisitions due to inheritance or transfers of properties between family members. Properties acquired through the execution of security rights are also exempt.
Is Andorra still attractive for investors?
Despite this new tax, Andorra remains highly attractive to investors. With a corporate tax rate of 10% and an IGI (VAT) of only 4.5%, the country offers one of the most competitive tax regimes in Europe. Additionally, double taxation agreements ensure that investors do not pay taxes on the same income in their home country.
Law 3/2024 and Decree 76/2024 introduce a more regulated framework for foreign real estate investment in Andorra. While the new tax adds a fiscal burden, the bonuses for long-term rentals and the country’s general tax regime continue to offer interesting opportunities for long-term investors.
If you are considering investing in Andorra, at WIT Andorra we can help you navigate the new regulations and maximize the opportunities for your investment.
Contact us for a personalized consultation and discover how we can help you make the most of your investments under the new tax regime. We are here to help you optimize your tax strategy and ensure that your decisions are the best they can be!
