Andorra Banking Secrecy
Does Andorra have banking secrecy? Although this is a fairly common myth among people who know little about Principality, Andorra does not have banking secrecy. Following the transformation of the Principality, Andorra came off the OECD blacklist of tax havens. In 2016 Andorran government signed an agreement with the EU on automatic exchange of tax information and in 2017 banking secrecy was definitively eliminated.
In fact, banking privacy in Andorra no longer exists, but since July 2018, no secrecy has been a serious punishable offense, with all the consequences for banks that consent to it. Besides, a new law on money laundering and financing of terrorism was enacted, with insurance law, among other tax and financial regulations.
Adaptation After Banking Privacy Removal
Until the advent of the global economic crisis, Andorra exchanged banking information with Spain only if there was a criminal procedure in place. In 2010, both countries signed an agreement whereby the Spanish authorities can obtain banking information from the Principality when there is an open tax investigation. Not only banking information is exchanged for criminal proceedings, but also tax proceedings.
The agreement resulted in Andorra’s removal from Spain’s list of tax havens, as a consequence of greater banking transparency.
As a continuation of this process, the Andorran government has introduced a 10% corporate tax, with a tax exemption of up to 80% for certain strategic sectors, a tax equivalent to VAT of 4.5%, and a 10% personal income tax.
This policy of transparency has continued over the years, with various measures aimed at adapting legislation to international standards of transparency and tax cooperation.
In 2015, the Principality signed the agreement with Spain lifting double taxation. Subsequently, in 2017, the amendment of the Andorran Criminal Code Law was unanimously approved, including for the first time the tax offense, whose ordinary limit is from €75,000.
At the end of 2017, when the Economic and Financial Affairs Council, known as ECOFIN, decided to remove the Principality of Andorra from the blacklist of tax havens of the European Union, to move it to the gray list, having yet to make various changes to its legislation.
In 2019, the Principality of Andorra has joined the Single Euro Payments Area (SEPA). The geographical scope of the SEPA schemes is now available in 36 countries: 28 members of the European Union, Iceland, Norway, Liechtenstein, Switzerland, Monaco, San Marino, Andorra, and the Vatican City.
The End of Banking Secrecy in Andorra
In January 2017, Andorra committed to the automatic exchange of banking information of non-resident citizens in the country. Andorra started automatic cross-checking of tax data with Spain and the rest of the EU members, as well as with 13 other OECD countries. Furthermore, the Andorran Government has indicated that this figure will exceed 80 countries by 2021.
Tax authorities will receive names of the individuals and legal entities with accounts in one of the five banks operating in Andorra (Andbank, Morabanc, Banc Sabadell d’Andorra, Crèdit Andorrà, and Vall Banc), and the amounts they have deposited. With this information, any tax agency will be able to check if the amounts are duly declared.
Although according to the criteria of some institutions, Andorra is no longer a tax haven because of its commitment to greater data transparency, it is still an attractive tax destination thanks to its low taxes. For example, personal income tax is between 0 and 10%, compared to 49% in Spain, or 45% in France and Germany. Andorra also has no wealth tax and has the lowest VAT in Europe: 4.5%, compared to 21% in Spain, 20% in France, and 19% in Germany. All this has allowed the trade, tourism, and finance sectors to be the most important sectors of the Andorran economy.
Due to the above tax advantages, large fortunes, movie, and sports stars, and YouTubers have set up companies in Andorra or obtained passive residency to optimize taxation rates.