Active Residency vs Passive Residency
Before beginning, it's fundamental to understand the difference between active and passive residency in Andorra:
Active residency: This option is mainly aimed at professionals, freelancers or entrepreneurs who wish to establish their company or work in Andorran territory. Active residency allows the holder to carry out an economic activity and pay taxes in Andorra.
Passive residency: On the other hand, passive residency is intended for those who do not wish to engage in any type of paid labor activity in the country, either because their income comes from abroad or simply because they want to enjoy their retirement without worrying about having a work permit.
Now that we know the basic differences between both modalities, we will focus on delving into active residency in Andorra and its characteristics.
What are the requirements to access active residency in Andorra?
To obtain active residency status in Andorra, it is necessary to meet a series of requirements specified by Andorran law. These are some of the most important:
Having a work contract or being a freelancer who carries out an economic activity in Andorra: To apply for active residency, you must prove that there is employment in the country or that a local company is being registered. The employing entity must be established in Andorra and comply with current legal provisions.
Investment in a dwelling in Andorran territory: Those wishing to apply for active residency must purchase a property in Andorra or rent one for at least the time duration of the permit (generally, about five years). The dwelling must be suitable for the size of the family unit.
Being medically insured: People opting for active residency must take out health insurance covering medical and hospital needs in the event of illness or accident during their stay in the country.
Not having a criminal record in the country of origin or in other countries where you have previously resided: Criminal records must be accredited by means of a certificate issued in the corresponding country.
In addition to these requirements, there are other procedures to be carried out and additional documentation to be presented for the active residency application. It is advisable to have the support of an advisor or specialized gestor to facilitate the process.
What are the tax advantages of active residency in Andorra?
Once obtained, active residents can enjoy a series of benefits and tax advantages for carrying out their economic activity in the country:
Income Tax (IRPF)
Income tax in Andorra is considerably lower than in other European countries. The maximum tax rate that can be reached based on income level is 10%. Additionally, Andorra has a tax exemption bracket where no IRPF is paid if annual income is below €24,000.
Corporate Tax
Corporate tax also represents a competitive advantage for those wishing to establish their company in Andorran territory. Its tax rate is set between 5% and 10%, one of the lowest in Europe.
VAT in Andorra
The General Indirect Tax (IGI), equivalent to VAT in other countries, is also lower in Andorra: it ranges between 1% and 4.5%, depending on the type of product or service taxed, which benefits residents and entrepreneurs in terms of consumption.
Other benefits of active residency in Andorra
Beyond tax advantages, obtaining active residency in a country as idyllic as Andorra has numerous additional benefits. One of them is, without a doubt, the quality of life offered by the Andorran territory:
Privileged natural environment: The Pyrenees offer a stunning landscape, perfect for hiking, mountain biking, skiing, and enjoying all possible outdoor activities.
Papers-class health care: Andorra has both public and private healthcare networks of high quality, ensuring that residents receive timely and adequate medical attention.
High standard education: The Andorran education system is characterized by offering trilingual education (Catalan, Spanish, and French) and its access to renowned public and private schools ensures the future of new generations.
Security and social well-being: Andorra is considered one of the safest countries in the world, being ideal for families looking to settle in a calm and protected environment.
In summary, active residency in Andorra represents an excellent alternative for those who wish to enjoy a country with favorable taxation and a high quality of life. Meeting the requirements and necessary procedures is the first step to becoming an active resident of Andorra and beginning to experience all the benefits this European country offers.
