Resident status to live in Andorra with Molines Patrimonis

Are you planning to expatriate and settle in Andorra? To live in the Principality you will need to obtain Andorran resident status. There are two types of residence in Andorra, active and passive, and each one is subject to different rules.

Residence in Andorra: the different possibilities

If you want to obtain residency in Andorra, you should know that there are two main types of residency: active residency and passive residency. Here we provide you with information that you should take into account about these two types of residence permits. There are also other types of residency that are granted to people who can justify a particular talent or a certain prestige (cultural, scientific, etc.), such as artists or, for example, elite athletes.

The main types of residence in Andorra

There are two main types of residence in Andorra: active tax residence, for people who work in Andorra or who have a business project that they want to carry out in the country, and passive residence for people who, despite not working in Andorra, want to invest and reside in the Principality. Here we explain the conditions for obtaining both types of residence.

Active residence: working in the Principat

Active tax residency is granted to people who work in Andorra, and there are two ways to obtain it.

Carrying out a professional activity in Andorra

If you have a job offer from an Andorran company and to work in Andorra, you have the right to apply for active residence in Andorra.

Create a company in Andorran territory

If you have a business project in the Principality, you can obtain active residency. To become an active resident in Andorra, your business activity must meet the following conditions:

The employer must have at least one employee
The company’s headquarters must be located in one of the 7 parishes that make up the Andorran territory.
A certain percentage of the production of services or goods (in certain cases up to 85%) must be dedicated to the Andorran foreign market (not only to the local market),
Beneficiaries of the professional tax residence permit in Andorra must deposit a minimum of €15,000 with the Andorran Financial Authority (AFA, formerly INAF). In the event of non-renewal of the residence permit, this amount will be refunded.

Conditions for obtaining Andorran active residence

If you justify a professional activity or the creation of a company in Andorra, you can obtain the status of active resident. The procedures must be carried out at the Ministry of the Interior, the conditions that must be respected are the following:

Live, at least, 183 actual days per year in the Principality of Andorra
Be over 18 years old
Provide proof of no criminal record
Have a contract/work promise with an Andorran company
Create a company and own more than 10% of the shares
Undergo a medical examination,
Proceed to establish your tax domicile in Andorra.

Andorran passive residence: investing in the Pyrenean country

Passive resident status in Andorra is granted to people who do not work in Andorra but who want to reside in the Principality.

Conditions for obtaining Andorran passive residence

To obtain passive residence authorization in Andorra, you must provide different information and documents:

Provide proof of no criminal record
Passport and civil status certificate
Health, retirement and disability insurance certificate
For those over 60 years of age, a health insurance certificate
Certify an income at least 4 times higher than the average income in the country.

Please note that all foreign documents must be apostille! The passive residence permit is also subject to the following conditions:

Be over 18 years old
Live a minimum of 90 real days per year in the Principality of Andorra
Have an official address
Provide a bank document proving the non-remunerated deposit of €50,000 to the AFA (Andorran Financial Authority), plus the deposit of €10,000 for each family member.
Undergo a medical examination at the immigration service
Justify an income higher than 300% of the minimum annual wage in Andorra
Obligation to invest at least €400,000 in the Principality of Andorra. This investment can take various forms (the mandatory non-remunerated deposits to the AFA are deducted from this amount).

The different passive resident statuses

People who do not have an employment contract or do not plan to create their own company can also apply for passive residence in Andorra. There are 3 categories of passive residence: A, B and C.

Passive resident in Andorra category A: for people who live in Andorra without having a professional activity.
Passive resident in Andorra category B: for people who have income generated by an international activity and not a local activity.
Passive resident in Andorra category C: for people of recognized international prestige (athletes, researchers and artists).

Taxation of Andorran residents

There are many reasons why foreigners want to obtain residency in Andorra: the natural environment, the ski resorts, its unique thermal-leisure center in Europe, etc. But the tax system is also an incentive for foreign investors. Indeed, Andorran taxes are among the lowest in the world, from 0 to 10% maximum.

The main taxes for future Andorran residents

General Indirect Tax (IGI)

Introduced in 2013, the IGI is a tax on consumer goods and the provision of services, similar in many respects to the Spanish VAT. Its general rate is 4.5%, one of the lowest rates in continental Europe.

Personal Income Tax (IRPF)

Introduced in 2015, it is the tax levied on income received by individuals. The tax rate is as follows:

Less than €24,000 in annual income: 0% tax rate
Between €24,000 and €40,000 of annual income: tax rate of 5%.
Annual income of more than €40,000: tax rate of 10%.

The personal income tax rate, which cannot exceed 10%, is among the lowest income taxes on the European continent!
It taxes the income of all individuals:

Income generated by the exercise of a profession or an activity that includes the sum of remuneration, wages and bonuses
Income related to the exploitation of real estate, particularly rental property
Income that comes from certain activities such as commercial, professional or administrative activities
Income resulting from property or movable rights, and also from bank interest

Donations, inheritances, income resulting from the transfer of real estate and acquisitions free of charge are not subject to personal income tax. People who reside in Andorra for more than 183 days during a calendar year and those who carry out an economic activity or have economic interests that allow them to make profits in the Principality are subject to personal income tax. The personal income tax return must be submitted between 1 April and 30 September of the calendar year following the corresponding settlement period.

Other taxes of the Principat

To obtain an active residence permit, you must carry out a professional activity or create a company in the Principality. If you want to create your own company, you will be subject to Corporate Tax (IS). Introduced in 2012, IS taxes the profits made by companies, and its tax rate does not exceed 10%. There is also the local tax of Foc i Lloc, collected annually by the Municipality where you reside. All individuals between the ages of 18 and 65 are subject to this local tax. Each of the seven parishes in the country has the power to set the amount of Foc i Lloc. Finally, the 7 parishes that make up the Principality also directly collect communal taxes for the establishment of businesses and offices.

Capital Gains Tax

Capital Gains for tax residents in Andorra

This tax, introduced in 2006, applies to sales of real estate whose acquisition is less than 10 years. In simplified terms, we will say that, at the time of sale, an average of 5% of the capital gain is withheld. If there is no capital gain in the end or the sale is not subject to this tax, the amount withheld is refunded within 3 to 6 months. During this period of time, the Andorran authorities verify compliance with the legislation and control the value of the declared asset. If the real estate has been in the hands of the same person for a minimum of 10 years, the purchase and sale operation is not subject to the tax.

What about Andorran nationality?

Es pot adquirir la nacionalitat andorrana després de 20 anys de residència ininterrompuda al Principat. Però l’obtenció de la nacionalitat no és automàtica. A més dels 20 anys de residència s’haurà de sotmetre a un examen de cultura general de país en català, l’idioma oficial. Un cop obtinguda la nacionalitat andorrana, les autoritats li demanaran que renunciï a la seva nacionalitat d’origen ja que la Constitució d’Andorra no permet la doble nacionalitat.