Andorra Tax Residency
Are you interested in obtaining tax residency in Andorra in conjunction with forming a company? Are you considering one of the many fiscal advantages offered by Andorran passive residency? Whatever brings you to Andorra you will need assistance with the immigration office, finding housing, and moving your family and belongings. We will help you with all queries related to a certificate of residence to claim tax relief in Andorra!
Establishing Andorra tax residency requires the expertise of a local tax consultancy, to streamline all the steps. Andorra Partner can help you to integrate quickly into the country, with everyday life needs, and the formation of a company. Andorra offers different types of residency depending on your profile. If you wish to open a business in Andorra and create a company, active residency is the most appropriate option for you. Being the director and shareholder of an Andorran company automatically gives you the right to apply for residency which in turn gives you the right to be self-employed.
How to Become Tax Resident in Andorra?
Before we discuss in detail the requirements needed to obtain the tax residence in Andorra, we must differentiate two concepts that are often confused: the administrative Andorra residency and the tax residence. The administrative residence is granted by the competent immigration authorities, whereas the tax residence is not acquired in parallel, but is consolidated once a series of requirements set out in the current tax legislation have been fulfilled.
There are different modalities to obtain the administrative residence (the following are the 3 most consolidated):
- Work residence permit, which is obtained through an employment contract. This type of residence requires living in Andorra and working on site.
- Active residency requires the development of economic activity through Andorra company incorporation. In this case, the presence required is 183 days spread over a calendar year and the deposit of €15,000 to the Andorran Financial Authority (AFA). You need to be the administrator of the company, have more than 20% of the shares of the company, and contribute to the Andorran Social Security (CASS). In short, this is the model par excellence to develop a business in Andorra.
- Non-lucrative passive residency requires an investment in Andorra of €350,000 (buying real estate, shares of an Andorran company, or investing in listed financial products) and a deposit of €50,000 to AFA. You are only required to reside in Andorra for 90 days a year. In general, since the passive residency by investment does not contemplate any economic activity, it is usually a type of residency for retirees and wishes to manage their patrimony from Andorran territory, thus being able to benefit partially or totally from the advantages of the Andorra tax rates.
As we have already mentioned, the administrative residence is diametrically different from the fiscal residence since the latter is consolidated based on criteria not linked to the immigration regulations, however, what are the requirements to be considered an Andorran fiscal resident?
Tax Residency Andorra: Requirements
The criteria to consider a person a tax resident in a certain country is governed by the general criteria of the OECD, harmonized in the Principality, and duly included in the law of the IRPF tax of Andorra.
Said legislation establishes that a person will be considered a tax resident in Andorra if:
- Resides more than 183 days in the country, taking into account that the days in which travels to other countries (other than the jurisdiction likely to attract tax residence) are also computed.
- The center of economic interests is located in Andorra (i.e., where most of the personal income comes from).
- The nucleus of family interests or center of interests in case of being married or having dependents is located in Andorra (this third criterion operates as a presumption).
Therefore, once the above-mentioned requirements have been met, it is possible to notify the relevant tax authorities of the change of tax residence and be taxed in Andorra.
Why Consider Tax Residency in Andorra?
Andorra has a lot to offer apart from lower than usual tax rates. Many clients looking for low-tax countries in Europe end up moving to the country for quality of life.
- 0-10% personal income tax
- 2-10% corporate income tax
- 0% Wealth tax
- 0% inheritance tax and gift tax
- The safest country in Europe, together with Iceland and Liechtenstein
- One of the best health systems in Europe
- Located 2,5 hours from Barcelona and Toulouse
- Andorra cost of living similar to Spain
Tax Residency Andorra: FAQ
Can I Become a Tax Resident Without Living in Andorra?
No, you must spend at least 90 days in Andorra if you plan to become a passive resident. For other types of residency, a permanent stay is recommended (excluding business trips and vacations). You need to have a permanent address at all times, whether rented or purchased property.
Can I Live Between Several Countries or Travel Most of the Year?
Technically, you can be a resident in more than one country by having legal residency status in all of them. However, please note that tax residency is usually declared only in one country where all your worldwide income must be declared.
How Much Does it Cost to Become a Tax Resident in Andorra?
Andorra requires a refundable deposit of €15,000 for active residents who are shareholders or partners. The amount of €50,000 is required for passive/non-profit residents. Other types of residency, such as work permits or family reunification, do not require a deposit. The legal fees charged by AndorraPartner range from €1,000 to €3,500, depending on the type of residency.
How Long Does it Take to Become a Tax Resident in Andorra?
The duration of obtaining the residency process depends on the type of visa permit. It can take from 1 to 4 months. In general, active residencies are quicker to apply for once the company or employment has been established.
Is the Tax Residency in Andorra Passive or Active?
Tax residency in Andorra does not depend only on the type of residence permit but on many aspects of your personal life and financial income.