Residence in Andorra: the various possibilities
If you’d like to set up residence in Andorra, you should know that there are two main types in our country: active residence and passive residence. Here we give you the information you need to know about these two types of residence status. There are also other types of residence permits which may be granted to people who can prove they have a special talent or a certain prestige (cultural, scientific, etc.), such as artists and elite athletes.
Main types of residence in Andorra
There are two main types of residence in Andorra: active tax residence, for people who work in our country or who have a business project which they wish to carry out here; and passive residence, for people who do not work in Andorra but wish to invest and reside in the Principality. Below you’ll find the requirements for obtaining these two types of residence permits.
Active residence: working in Andorra
Active tax residence status is granted to people who work in Andorra. There are two main ways to obtain it.
Exercising a professional activity in Andorra
If you have an employment offer from an Andorran company and wish to work in our country, you can apply for active residence status here.
Organizing a company in Andorra
If you have a business project to be carried out in our country, you can obtain active residence status as well. To become an active resident in Andorra, your business activity should comply with the following conditions:
- The business operator should employ at least one person.
- The registered headquarters of the company should be located in one of the 7 municipalities of Andorra.
- A certain percentage of the production of services or goods (in some cases up to 85%) should go to Andorra’s foreign market (that is to say, not only to the domestic market).
- The holders of an Andorran professional tax residence permit should deposit a minimum of 15,000€ with the Andorran Financial Authority (AFA, formerly called INAF). In the event that the residence permit is not renewed, this amount will be refunded.
Requirements for obtaining active resident status in Andorra
If you can prove that you intend to carry out a professional activity or to organize a company in Andorra, you can obtain an active residence permit. The respective formalities should be performed at the Andorran Ministry of the Interior. As appropriate, you should:
- effectively live at least 183 days a year in the Principality of Andorra.
- be at least 18 years old.
- provide documentary proof of not having a criminal record.
- have an employment contract or a promise of employment from an Andorran company.
- organize a company and hold over 10% of its shares.
- have an official medical examination.
- establish your tax residence in Andorra.
Passive resident status in Andorra: investing in the Principality
Passive resident status in Andorra is granted to people who wish to reside in the Principality without working here.
Requirements for obtaining passive resident status in Andorra
In order to obtain a passive residence permit in Andorra, you should provide the following required information and documents:
- Proof that you do not have a criminal record.
- Passport and civil status certificate.
- Certificate of health, retirement and disability insurance.
- If you are over 60 years of age, a health insurance certificate.
- Certification of an income that is at least 4 times higher than the average Andorran income.
Note that all foreign documents should bear an apostille.
To obtain a passive residence permit, you should also:
- be at least 18 years old.
- effectively live at least 90 days a year in the Principality of Andorra.
- have an official address.
- provide a bank document proving the unremunerated deposit of a sum of 50,000€ with the AFA (Andorran Financial Authority), plus the deposit of an additional 10,000€ for each member of your family.
- have a medical examination at the Andorran immigration service.
- prove an income that is equal to at least 300% of the annual minimum wage in Andorra.
- comply with the obligation to invest a minimum of 400,000€ in the Principality of Andorra. This investment may take various forms (the unremunerated compulsory deposits with the AFA will be deducted from this amount).
Different types of passive resident status
People who do not have an employment contract or who do not plan to organize a company may still request a passive residence permit in Andorra. This form of residence permit exists in 3 categories: A, B and C.
- Category A passive residence permit: for people who live in Andorra without exercising any professional activity.
- Category B passive residence permit: for people who have income from an international activity but do not have any local activity in Andorra.
- Category C passive residence permit: for people of acknowledged international prestige (athletes, researchers, artists...).
Taxation of Andorran residents
There are many reasons for which foreign nationals may wish to obtain a residence permit in Andorra: our country’s natural environment, our ski resorts, our thermal-recreational centre which is unique in all Europe, etc. Andorra’s tax system, however, is also an incentive for foreign investors. Indeed, Andorra’s taxes are among the lowest worldwide, ranging from 0% to a maximum of 10%.
Main taxes for future Andorran residents
Indirect General Tax (IGI)
Established in 2013, the IGI is a tax on consumer goods and the provision of services which is similar in many respects to VAT. The general rate is 4.5%, one of the lowest on the European continent.
Personal Income Tax (IRPF)
Established in 2015, this is the tax on the income obtained by natural persons. The applicable rates of this tax are as follows:
- Under 24,000€ in yearly income: 0%
- Between 24,000€ and 40,000€ in yearly income: 5%
- Yearly income over 40,000€: 10%
The tax rate of the IRPF, which cannot exceed 10%, is among the lowest income tax rates on the European continent!
It applies to the income of all natural persons, as follows:
- Income from the exercise of a profession or activity, including the sum total of remunerations, wages and bonuses.
- Income from the operation of real estate properties, especially including leased and rented properties.
- Income from certain activities such as commercial, professional or administration activities.
- Income from securities and security rights to movable property, as well as bank interests.
Donations, inheritances and income from the assignment of real estate property and from gratuitous acquisitions are not taxed by the IRPF.
People who reside in Andorra for more than 183 days during a calendar year and those who exercise an economic activity or who have economic interests which allow them to obtain profits in Andorra are subject to the IRPF.
The IRPF tax return should be submitted between 1 April and 30 September of the calendar year immediately following the respective tax settlement period.
Other taxes in Andorra
In order to obtain active residence status, a person should exercise a professional activity or organize a company in Andorra. If you wish to organize a company, it will be subject to the Impost sobre les societats (IS), or Corporation Tax. Established in 2012, the IS applies to the profits made by companies and its tax rate does not exceed 10%.
Another tax charge is the local tax called Foc i Lloc, or Poll Tax, which is charged yearly by the municipality where one resides. All natural persons between the ages of 18 and 65 years are subject to this local tax charge. Each of the country’s seven municipalities is authorized to set the amount of this charge.
Lastly, the seven municipalities of Andorra also collect directly the municipal tax charges for the establishment of shops and offices.
Capital Gains Tax
Capital gains of Andorran tax residents
Established in 2006, the Capital Gains Tax applies to the sale of real estate properties purchased less than 10 years previously. In simplified terms, this means that, at the time of a sale, an average withholding of 5% is made on the amount of the capital gains obtained. If it finally turns out that there are no capital gains or that the sale is not subject to this tax, the amount withheld will be refunded within a period of 3 to 6 months.
During this period of time, the Andorran authorities verify compliance with the law and check the declared value of the property. If the property has been possessed by the same person for at least 10 years, the purchase and sale transaction is not subject to the tax.
What about Andorran nationality?
Andorran nationality may be obtained after 20 years of uninterrupted residence in the country. Andorran nationality is not obtained automatically, however. In addition to 20 years of residence, the applicant for Andorran nationality should take an examination on the general culture of the country in Catalan, Andorra’s official language. Once you have obtained Andorran nationality, the authorities will request you to renounce your previous nationality since the Andorran Constitution does not allow dual nationality.