Keys to the new regulatory framework
Andorra remains one of the most attractive destinations in Europe for those seeking to optimize their taxation, gain quality of life and protect their assets. The great attraction that Andorra represents, however, has caused the country to redefine its growth model with more demanding regulations on immigration, residency and foreign real estate investment.
If you are thinking of moving to Andorra, obtaining a passive residence or launching a self-employed project, you need to have a good understanding of this new framework and, above all, make strategic decisions so as not to miss opportunities or take unnecessary risks.
The Government of Andorra has presented a legislative project that reinforces immigration control, tightens the conditions for access to certain residence permits and increases the tax burden on foreign real estate investment. All of this, with the stated objective of ensuring sustainable growth, preserving the housing market and protecting the country’s social and territorial balance.
Passive residence in Andorra
Residence without lucrative activity (known as passive residence) is one of the most common ways for those who want to live in Andorra from their income, investments or professional activity outside the country. With the new regulatory proposal, this modality is tightened in several key aspects:
Increase in the minimum investment requirement
- The required investment increases from €600,000 to €800,000.
- This investment must be made in assets located in Andorra, which may include real estate, shares in Andorran companies or other regulated assets.
In addition, it introduces the possibility of investing, for a maximum of 36 months, in debt instruments or financial products issued by entities resident in Andorra, after which it will be necessary to redirect the investment to other domestic assets.
Deposit with the Andorran Financial Authority (AFA)
Until now, the applicant for passive residence had to make a deposit of €50,000 (plus €12,000 for each dependant) with the AFA, fully refundable upon cancellation of the residence.
With the new project:
- Of the initial €50,000, €30,000 will become a definitive, i.e., non-refundable, payment in favor of the State.
- Of the €12,000 for each dependant, €6,000 will also be non-refundable.
This amount is intended to finance public health, education, security, transportation and infrastructure policies, in line with the idea that new residents contribute directly to the maintenance of public services.
Residence and self-employment
Residence and self-employment is the option for those who want to establish themselves in Andorra by exercising an economic activity directly. The most important new features are:
Extension of the reservation of authorization to qualified professionals
The reserve system already in place for other self-employed workers is extended to regulated professionals (lawyers, doctors, engineers, etc.):
These professionals have three months to prove that they meet all the requirements (professional practice authorization, membership in a professional association, registration with the corresponding professional association, etc.).
Deposit with the AFA with non-refundable portion
As in the passive residence:
- Of the €50,000 deposit required from self-employed persons, €30,000 becomes a definitive income for the State, with no right to a refund.
In addition, the project foresees that non-EU workers can only change their professional sector after several years of residence (around the third renewal, i.e. after 5 years), thus reinforcing the control over access to the labor market.
Tax on foreign real estate investment
Foreign real estate investment is one of the traditional drivers of the Andorran economy, but it has also put pressure on the housing market. To correct this effect, the tax on these operations is increased.
New tax rates
According to the project:
- 6 % of the real value of the investment when it is destined to the construction or acquisition of a single dwelling (apartment, apartment or single-family house), with a maximum of three parking spaces and storage room.
- 10% for all other foreign real estate investments that exceed these limits or involve the acquisition of several properties.
In practice, these figures represent a significant increase over previous rates, which ranged between 3%, 5% and 10% depending on the number of properties acquired.
Frequently Asked Questions
How much do I have to invest now to obtain passive residency in Andorra?
With the new draft legislation, the minimum investment required for non-profit residences is increased to €800,000. How much of the deposit with the AFA is non-refundable?
For passive residences and self-employed:
- Of the €50,000 deposit, €30,000 becomes a definitive income for the State.
- Of the €12,000 for each dependant, €6,000 is also non-refundable.
The remainder retains the nature of a deposit and can be recovered if the residence is cancelled in compliance with the legal conditions.
How does the new tax on foreign real estate investment affect me?
If you invest as a non-resident in real estate in Andorra:
- For the first home (and up to three parking spaces and storage room), the expected rate is 6% of the value of the investment.
- For additional investments or investments exceeding these limits, the rate is 10%.
What changes for residency and self-employment?
In addition to the partially non-refundable deposit, the reservation of authorization is extended to qualified professionals, who must demonstrate within a specific period of time that they meet requirements such as membership and authorization to practice.
Is it still interesting to reside or invest in Andorra with these new conditions?
Yes, Andorra remains fiscally competitive and offers a stable framework, with moderate tax rates, no wealth and inheritance taxes in many cases, and a high quality of life.
What happens if I have already started the procedures or submitted my application?
Residency and foreign real estate investment applications filed prior to the entry into force of the new law will continue to be governed by the previous regulations.
If you are in an intermediate situation, for example, you have reserved a property but have not yet submitted the application, it is crucial to review your case immediately to see which regime may apply.
If you want to relocate, invest or start a business in Andorra, having an expert guide is key to make safe decisions in the new regulatory context. At WIT we help you to define the best strategy for residence, investment or business, with a clear and professional support from the first day. Contact WIT and take the next step towards your project in Andorra with total confidence.
