Financial Planning in Andorra

Andorra sits in the Pyrenees between France and Spain — a tiny co-principality of 468 square kilometres, co-governed by the Bishop of Urgell (Spain) and the President of France, with a population of approximately 77,000. It uses the euro, speaks Catalan as its official language (though Spanish, French, and Portuguese are widely spoken), and has developed from a ski resort and duty-free shopping destination into a genuine — if compact — European tax planning jurisdiction. For individuals willing to commit to a lifestyle that balances Pyrenean living with Eurozonal connectivity, Andorra offers one of the most attractive tax environments within Europe.

The Tax Environment

Andorra introduced a formal income tax in 2015 — previously there was no income tax at all. The current structure is:

• 0% on income up to €24,000 per annum
• 5% on income between €24,000 and €40,000 per annum
• 10% on income above €40,000 per annum

The maximum income tax rate is therefore 10% — significantly lower than France (45%), Spain (47% regional rates in some areas), and most other European countries. There is no wealth tax, no payroll tax on employees above social security contributions, and no gift tax.

Capital Gains Tax

Andorra's capital gains tax regime has a notable time-based element:

• Gains on assets held fewer than three years are taxable at 10%.
• Gains on assets held three to ten years benefit from a tapering relief, reducing the taxable gain progressively.
• Gains on assets held more than ten years are taxed at 0%.

For long-term investors — particularly those holding real estate, shares in closely held companies, or investment portfolios over extended periods — this zero-CGT outcome after ten years is highly valuable. A family business held in Andorra for over a decade and subsequently sold would generate no CGT in Andorra.

Inheritance and Gift Tax

Andorra imposes no inheritance or succession tax for direct descendants. Transfers from parents to children, whether on death or by way of gift, are entirely free of Andorran succession duty. For lateral transfers (siblings, more distant relatives, non-relatives), rates apply but are low by European standards.

For internationally mobile families with multigenerational wealth transfer objectives, the Andorran combination of low income tax, time-based CGT relief, and zero IHT for direct family is genuinely compelling.

Residency Options

Andorra offers two principal residency categories for non-EU individuals (Andorra is not an EU or EEA member):

Passive Residency (Residència Passiva)

Passive residency is available to individuals who do not intend to work in Andorra. Requirements include:

• A minimum investment of €600,000 in qualifying Andorran assets — real estate, a qualifying Andorran business, Andorran government bonds, or certain investment funds. (Decree 76/2024 raised the threshold from €400,000 to €600,000 with effect from July 2024.)
• Within that total, a refundable deposit of €47,500 must be lodged with the Andorran Financial Authority (AFA), with the balance (around €552,500) allocated to the qualifying investment categories.
• A minimum physical presence of 90 days per year in Andorra.
• A clean criminal record and proof of sufficient financial means.

The passive residency permit is initially issued for two years and is renewable. After 20 years of passive residency, an individual may apply for Andorran nationality.

Active Residency (Residència Activa)

Active residency is for individuals who work in Andorra — whether as employees of an Andorran company or as self-employed persons. It requires an Andorran employment contract or evidence of self-employment activity in Andorra. For entrepreneurs wishing to manage an Andorra-based business, active residency via company establishment is the relevant route.

The 90-Day Minimum Rule

Andorran residency requires only 90 days per year of physical presence — significantly lower than the 183-day thresholds required by most countries' tax residency tests. This creates theoretical flexibility, but it must be approached cautiously: spending the remaining 275 days in France, Spain, or the UK may result in those countries claiming tax residency on the basis of their own domestic rules. A Spanish national spending 200 days per year in Spain and 90 days in Andorra would almost certainly be tax resident in Spain, not Andorra.

The France and Spain Proximity Issue

The most important practical risk for Andorran residents is inadvertently maintaining tax residence in France or Spain due to time spent there. Both countries apply the 183-day test, but both also apply tie-breaker tests based on centre of vital interests, principal home, and habitual abode.

Andorra has a Double Taxation Agreement (DTA) with Spain (in force since 2015) and a DTA with France (in force since 1 July 2015). These DTAs provide tie-breaker rules for determining residency where an individual has connections to both Andorra and the treaty partner country. The existence of these treaties is important: without them, double taxation could arise with no formal resolution mechanism. However, the treaties do not eliminate the risk — individuals must ensure their factual circumstances genuinely support Andorran tax residency and not Spanish or French residency.

UK nationals moving to Andorra must satisfy HMRC's Statutory Residence Test to cease being UK tax resident, managing UK connections and day-counts carefully.

The Banking Sector

Andorra's banking sector is concentrated among a small number of well-capitalised institutions supervised by the Autoritat Financera Andorrana (AFA):

• Crèdit Andorrà (Credit Andorra) — the largest Andorran bank; provides private banking, wealth management, and digital banking services.
• BancSabadell d'Andorra — the Andorran subsidiary of Spain's Banc Sabadell; provides retail and private banking.
• Mora Banc — a family-owned bank focused on private banking and wealth management.
• AndBank — provides private banking and fund administration; has international operations in several countries.

Andorran banks are FATCA-compliant and CRS participants. Accounts held at Andorran financial institutions are reported under CRS to the relevant home-country authorities. The Andorran banking sector is well-capitalised and has historically been conservative in its risk management.

Minimum thresholds for private banking relationships at Andorran banks are generally lower than at Swiss or Channel Island private banks, making Andorra accessible for individuals with, say, €500,000 to €5 million in investable assets as well as ultra-HNW individuals.

The Andorran Economy and Lifestyle

Andorra's economy is driven by tourism (approximately 8–10 million visitors per year, versus a resident population of 77,000), retail/duty-free shopping (no VAT equivalent on tobacco and alcohol; prices significantly below France and Spain), and a growing financial services sector.

The Grandvalira ski resort is one of Europe's largest — 210 kilometres of pistes, world-class snowmaking infrastructure, and an international ski competition calendar. For families who ski, the lifestyle proposition is obvious. The summer season offers mountain biking, hiking, and outdoor pursuits of a high standard.

The capital, Andorra la Vella, is a compact, modern commercial centre — not architecturally distinguished, but functional and well-organised. The principality has invested in cultural amenities, with the Caldea spa (one of Europe's largest thermal spas), galleries, and cultural events. Residents generally describe Andorra as a place where life is calm, safe, and uncomplicated — with Paris, Barcelona, and Toulouse all within three to four hours by car.

International schooling is available through the Lycée Comte de Foix (French baccalaureate curriculum), the British College of Andorra (A-levels, IGCSE), and the Spanish state curriculum schools. The standard is regarded as adequate for most families.

Healthcare is provided through CASS (Caixa Andorrana de Seguretat Social), the national health insurance system. Private health insurance is recommended for non-contributing residents. For complex procedures, residents typically use hospitals in Barcelona (three hours by road) or Toulouse (three hours by road).

Property Market

Property in Andorra is available to foreign buyers without restriction. Freehold ownership is standard. The market is dominated by apartments and chalets, with prices averaging €3,000–6,000 per square metre across the principality — significantly cheaper than Monaco, the French Riviera, or Geneva. Prime ski-in/ski-out properties in Grandvalira-accessible locations trade at a premium. Rental yields from ski accommodation are attractive for buy-to-let investors.

There is a 2% property transfer tax on residential property purchases and a 4% tax on commercial property transfers. No annual property tax is charged in Andorra — unlike France or Spain, which levy ongoing property taxes.

Compliance

Andorra participates fully in CRS and is FATCA-compliant. The AFA maintains beneficial ownership registers and cooperates with international tax information requests. The era of Andorra as an opaque offshore centre is firmly over; the current environment is transparent and properly regulated.

Important: Tax laws change, and individual circumstances vary significantly. Nothing in this guide constitutes tax, legal, or financial advice. The interaction between Andorran residency and Spanish, French, and UK tax obligations is complex and fact-specific. You should seek independent professional advice tailored to your circumstances before making any financial or residency decisions. The value of investments can fall as well as rise; rules change, and past tax efficiency is not a guide to future performance.

How Global Investments can help

Global Investments advises internationally mobile HNW individuals considering Andorra as a European base. We can connect you with Andorran-based bankers, tax advisers, residency specialists, and property advisers, as well as coordinate planning with UK and other home-country specialists. Contact us to arrange an initial discussion.