Why consider tax residency in Andorra?
In several of our articles we have already talked about why and how to be a tax resident in Andorra.
Broadly speaking, being a tax resident in Andorra entails great tax savings in the country’s personal income tax and corporate tax.
The tax criteria that Andorra uses allow the taxpayer to obtain great and very interesting tax advantages, with respect to other neighboring countries such as Spain.
The tax saving is one of the main reasons why many businessmen consider obtaining the tax residence in Andorra and as we will see below, thanks to obtaining the residence permit in Andorra, the taxpayer will enjoy great tax advantages.
How much does it cost to be a tax resident in Andorra?
It is important, first of all, to take into account whether you want to reside in Andorra through the creation of a company in the country, through an investment or through working for another person.
If, for example, you are interested in setting up a company in Andorra to obtain tax residency in Andorra, you will need to calculate between lawyers’ fees, expenses and taxes, about 25K-30K€.
If, on the other hand, you wish to obtain your tax residence permit in Andorra through an investment, for example in a real estate property, you will need about 405K€. We will detail these amounts later on.
Finally, if you are interested in residing in Andorra through being hired by a company already resident in the country, you should know that the expenses for your residence will have to be paid by the company that hires you. However, it is advisable to have savings of at least 8K€, since normally to be able to rent a property in Andorra, two months of rent, one month of agency and one month of deposit are required.
Can I become a tax resident without living in Andorra?
No, being a tax resident implies that such person must reside in Andorra at least 90 days a year (in the case of passive residence) or 183 days a year (in the case of residence in Andorra for own account).
Currently, there are no off-shore company models in Andorra and in fact, these models are persecuted in the country, as they want to be avoided at all costs.
Can I live in several countries or travel most of the year?
Yes, it is possible to reside 183 days in Andorra and live the rest of the year in another country (WARNING, it is not recommended to live 182 days in your country of nationality, as your tax residence in Andorra could be truncated).
In addition, business trips are counted as days spent in Andorra as long as they are justified. Therefore, these advantages favor the possibility of having a residence permit in Andorra, without living 100% in Andorra.
What are the obligations of a residence in Andorra?
One of the most important obligations is that of having to reside the necessary days in the country.
Andorra needs its requirements to be fulfilled in order for the tax residence of any person to be properly supported.
Obviously, obtaining tax residency in Andorra, in addition to the obligation to reside in Andorra, entails the obligation and requirements to duly and timely file personal income tax and corporate income tax in the Principality, as well as to keep up to date accounting records. We can also advise you on this, so do not hesitate to contact us.
Residence in the Principality, not only fiscal residence, implies a higher quality of life, as the Principality is famous for its high level of security and therefore its low crime rate, its health service and its triple (quadruple if we count the private) educational system.
Tax residency criteria in Andorra
The requirements to obtain tax residency in Andorra are simple:
- Comply with the legality of each type of residence (below we detail it).
- Not to have a criminal record in the country.
- To reside effectively in the Principality (not to simulate the residence).
Therefore, it is relatively simple to fulfill the necessary requirements to obtain the residence in Andorra and stop paying taxes for example in Spain and start paying taxes in Andorra, thanks to living in Andorra effectively.
It is also important to mention the great savings that your company can have if we take into account that you pay a lot of VAT, since the general indirect tax in Andorra (Andorran VAT), is located in Andorra at 4.5% compared to the Spanish rate of 21%, this taxation to your business is very attractive.
How to become an Andorran tax resident?
As we have established before, it is important to take into account which type of residence is more adapted to your case:
Passive or non-profit residence.
Intended for those people who want for example to retire in the country or who do not intend to develop an economic activity in the Andorran territory (since it is totally forbidden, it is only allowed to obtain income from other countries).
This passive resident status implies that you must reside in Andorra for at least 90 days a year.
It will also be necessary to make an investment of 400K€, which will be divided in 350K€ in a real estate investment for example or in the instruments that the immigration law establishes and 50K€ direct to the AFA as a deposit (which would be returned at the moment of leaving the country definitively).
The passive residence authorization is obtained in one week and there is a period of 6 months to prove that the investment has been made in the Andorran territory.
Active self-employed residence
The active residence permit for own account is obtained through the generation of a business, that is to say, through the constitution of a company.
It will be necessary in this case to create a company in Andorra and to make an investment of 15K€ directly to the AFA as a deposit.
It is important to take into account that this residence implies a payment of 467€ per month to the social security.
Active residence as an employee
This residence is one of the most complicated to obtain since it is necessary to have a job previously in the country and that the Andorran company carries out all the procedures for the obtaining of this permission.
By law, it is necessary to present an apostilled certificate of penalties and to demonstrate the labor and academic capacity of the person who wants to obtain this residence.
Do you want to contact us?
We have been helping people to settle personally and to set up and move their business to Andorra for years, so if you have any doubts about which type of tax residence in Andorra best suits your needs, we can help you without any obligation.
We will make an initial phone call, where one of our advisors will be able to explain everything you need to know about taxes, about the criteria you need to meet and about the most important points for you to make this change of tax residence in Andorra.
In some occasions, it is very important to make a previous tax report, since different assumptions and structures require a further study of comparative taxation (for example between Spain and Andorra), because although all the requirements established by the Andorran legislation can be fulfilled from the beginning, the Spanish legislation has already established jurisprudence in different cases where it has not allowed its residents to make this transfer.
So contact us without obligation so that we can help you.
