Being a tax resident in Andorra means paying taxes in a country with low tax rates and high transparency standards. In this article, we'll explain what it means to be a tax resident here, the types of residency, the criteria for obtaining it, and the tax benefits it offers.
Mar 24, 2025
Being a tax resident in Andorra means paying taxes in the country, with significant tax benefits such as low income taxes and the absence of wealth, inheritance, and donation taxes, along with taking advantage of double taxation agreements.
There are two main types of residency permits in Andorra: active, which allows one to work and run businesses, and passive, for those who live on passive income without needing to work in the country, complying with international OECD standards.
To maintain tax residency, individuals must meet requirements such as residing at least 90 days a year in Andorra and demonstrating a center of economic and social interests in the country.
Being a tax resident in Andorra means you have to pay taxes in this country, regardless of your administrative residence. This distinction is key to understanding the tax and legal implications of living in Andorra.
Tax residency in Andorra is characterized by low taxation, attracting many residents worldwide. Additionally, Andorra complies with international OECD standards, ensuring a transparent and reliable tax environment. This international compliance is an advantage for those seeking stability and confidence in their tax situation, especially those interested in tax residency in Andorra.
However, being a tax resident in Andorra comes with significant responsibilities. The Andorran financial authority conducts rigorous checks to ensure that residents meet their tax obligations. This includes workers and self-employed individuals, who must be aware of their tax responsibilities.
The determination of tax residency in Andorra is based on regulations that comply with international standards and the criteria of double taxation agreements. These agreements help avoid double taxation, making Andorra an even more attractive place to settle.
Andorra mainly offers two types of residency permits: active and passive. Each of these types has specific subcategories tailored to different needs and personal situations. Choosing the right type of residency permit is crucial to ensure all requirements are met and tax benefits are maximized.
Active residency allows residents to work in Andorra, either through an employment contract or as owners of a local business. On the other hand, passive residency is for those who do not wish to work but must meet certain investment and minimum stay requirements.
It's essential to consult experts to decide on the right type of permit and to know the specific requirements that apply to each category. Every situation is unique, and having professional guidance like Papers can make a difference in the process of obtaining tax residency in Andorra.
Active residency is the most sought after, especially for those who wish to work or set up businesses in Andorra. This type of residency allows individuals to live and work permanently in the country, offering great flexibility and growth opportunities.
To obtain active residency, several requirements must be met. Among them, one must establish a local business before applying for residency, which demonstrates a serious commitment to the country's economic development. This option is highly demanded, especially by professionals and entrepreneurs seeking to take advantage of the tax benefits and the quality of life that Andorra offers.
Additionally, self-employed active residency grants the right to work for the company one has created in Andorra. This is especially attractive to entrepreneurs and freelancers who want to establish themselves in a fiscally favorable environment with a high quality of life.
Passive residency in Andorra is ideal for those who live off passive income through investments. This type of residency does not require the individual to work in Andorra, making it attractive to retirees or people with substantial income from external sources.
Passive residents must effectively live in Andorra at least 90 days a year to maintain their tax residency status. This requirement is more flexible compared to active residency, allowing passive residents to enjoy greater freedom of movement.
Passive residencies have specific categories. These include scientific, cultural, and sports interests. Additionally, for certain categories, a 600,000 euros investment is not required; instead, a 50,000 euros bond must be presented. These options are often chosen mainly by retirees moving to the Principality in search of a peaceful and fiscally favorable environment.
To be considered a tax resident in Andorra, it is necessary to be present in the country for more than 183 days a year. This is one of the most important criteria and is counted from the first year of residency, not from the complete calendar year, considering double taxation agreements.
In addition to the time of stay, tax residents must demonstrate a center of economic and social interests in Andorra. This includes family and work ties that reflect a genuine commitment to the country. This criterion ensures that tax residents actively contribute to the Andorran community.
Those who reside less than 183 days must meet additional criteria to obtain tax residency. These criteria may include demonstrating sufficient economic means and other specific conditions set by the authorities. It's crucial to be well-informed and comply with all requirements to avoid future complications.
Tax residents in Andorra enjoy a tax system that benefits both individuals and companies. This attractive system is one of the main reasons why many choose to settle in this small but prosperous country.
One of the greatest advantages is the absence of wealth, inheritance, and donation taxes. This makes Andorra a very attractive destination for those looking to optimize their tax situation and protect their wealth.
Additionally, the tax system in Andorra is designed to be transparent and fair, complying with international OECD standards and ensuring that tax residents can plan their finances efficiently.
The income tax in Andorra is one of the lowest in Europe, with a maximum percentage of 10%. This tax rate applies to incomes over 40,000 euros, while incomes between 24,001 and 40,000 euros are subject to a 5% rate.
For non-tax residents, the income tax is also set at 10% of the wages received. This ensures that everyone who generates income in Andorra fairly contributes to the tax system.
Active residents in Andorra must contribute to Social Security or pay income taxes, ensuring that all workers contribute to the country's welfare. For example, for a salary of 30,000 euros, the income tax rises to 300 euros, which is still quite low compared to other countries.
This tiered tax system based on income allows people and families to plan their finances more effectively and make the most of the tax advantages that Andorra offers.
Corporate tax in Andorra is equally attractive, ranging from 0% to 10%. This general tax rate of 10% is much lower than in many other European countries, making Andorra an ideal place to establish and operate businesses.
Companies in Andorra can also benefit from various corporate tax exemptions. These exemptions are designed to promote investment and economic growth, attracting entrepreneurs from all over the world.
This favorable business environment not only benefits companies but also contributes to the overall economic development of the country, creating a thriving and dynamic business ecosystem.
Besides low income and corporate taxes, Andorra offers other significant tax benefits. For example, dividend distribution is tax-exempt, which is a big plus for investors.
Andorra also applies a reduced VAT rate of 1% on essential services such as healthcare and education. These tax exemptions and reductions make Andorra a very attractive place to live and do business, offering a fiscally favorable and accessible environment for its residents.
The process for applying for tax residency in Andorra is relatively straightforward, but it requires submitting several specific documents. Among them, bank statements proving sufficient economic means to stay in the country must be presented.
Furthermore, it's essential to have health insurance covering all needs during the application process. This insurance ensures that the applicant can cover any medical eventuality during their stay in Andorra.
The application can be submitted online or in person at the Andorra migration department office. The estimated time to process applications may vary, generally taking between two and six months. Having professional guidance can facilitate these procedures and ensure that all necessary requirements are met.
Living in Andorra has a cost of living that, although not the lowest in Europe, is still quite reasonable considering the quality of life it offers. For a single person, the estimated monthly cost of living in Andorra can range between 1,200 and 1,400 euros. This includes expenses such as:
rent
utilities
transport
food
This provides an overview of the expenses that can be expected when residing in this country.
For a family of four, the approximate cost is 2,446.8 euros per month. Renting a one-bedroom apartment in the center of Andorra can cost around 800 euros a month, while utilities, like electricity, water, and gas, usually cost around 30 to 40 euros a month for a single person.
Transportation costs are also affordable, with an urban bus ticket costing 1.85 euros and a monthly pass costing 42.5 euros. Gasoline in Andorra is relatively inexpensive, ranging between 1 and 1.2 euros per liter.
Furthermore, food can cost between 150 and 200 euros per month for a person who prepares all their meals at home. Restaurant prices vary, with economical options starting at 10-12 euros per dish.
To maintain tax residency in Andorra, it's crucial to meet certain additional conditions. A digital nomad or entrepreneur, for instance, must reside at least 90 days a year in Andorra. This requirement ensures that tax residents maintain a significant connection with the country.
It's highly recommended to consult tax advisors to clarify all tax obligations in Andorra. Tax legislation can be complex, and having professional advice can help avoid mistakes and ensure compliance with all regulations.
Additionally, it's essential to treat tax residence and administrative residence separately and year by year. This means that the requirements for both residences must be continuously met to maintain the status of tax resident in Andorra.
In summary, being a tax resident in Andorra offers numerous advantages, including low taxes, absence of wealth, inheritance, and donation taxes, and a fiscally favorable environment for individuals and companies. Active residency allows for working and setting up businesses, while passive residency is ideal for those living off passive income.
The application process for tax residency in Andorra requires submitting several documents and proving sufficient economic means, as well as having adequate health insurance. Additionally, it is crucial to meet the minimum stay criteria and demonstrate a center of economic and social interests in the country.
Ultimately, Andorra offers a unique opportunity to optimize the fiscal situation and enjoy a high quality of life, thanks also to double taxation agreements. If you're considering changing your tax residence, Andorra could be the perfect destination for you.
The main types of residency permits in Andorra are the active residency permit, which authorizes working in the country, and the passive residency permit, intended for those generating income without needing employment in Andorra.
To be considered a tax resident in Andorra, it's necessary to reside more than 183 days a year in the country.
To apply for tax residency in Andorra, it's necessary to submit between five and eight documents, including bank statements ensuring sufficient economic means and adequate health insurance.
The tax rate for income tax in Andorra is 10% for income over 40,000 euros, while income between 24,001 and 40,000 euros is taxed at 5%.
The process of applying for tax residency in Andorra generally takes between two and six months. It's essential to consider this duration when planning your application.
