Moving to Andorra has become a popular option for entrepreneurs and professional people seeking to minimise their taxation. However, there are many myths about living and doing business in Andorra, and not everything that is said is true. In this article, we debunk the most common beliefs about applications for residence, about taxation and about the cost of living, so that you have a clear picture before you make your decision.
Is it true that everything is cheaper, is it easy to become a resident, and does no-one pay taxes in Andorra? Read on to find out.
Table of contents:
- Applying for a residence permit in Andorra
Taxation and the process of setting up a company in Andorra
Living and quality of life in Andorra
Is it a good idea to move to Andorra?
We are here to help you every step of the way
Applying for a residence permit in Andorra
1. “Getting a residence permit in Andorra is quick and easy”
This is a common myth. It is not impossible to obtain a residence permit in Andorra, but it involves a number of bureaucratic procedures and financial requirements.
There are two main types of residence: active and passive.
• Active residence:
for those who wish to work or set up a company in Andorra. To obtain it, you must fulfil the following requirements: have a foreign investment permit to set up a company in which you hold at least 34% of the shares, hold a position in its management and prove, within a maximum of three months, that the company is operational and registered.
• Passive residence:
For those who will not be working in the country. In this case, in addition to the required documentation, it is necessary to prove an annual income of more than 300% of the minimum wage in Andorra, plus 100% for each dependant. A minimum investment of 600,000 euros in the country is also required, either in property, or financial instruments.
The process requires the submission of official documentation, so it is advisable to start it early. To avoid complications, a specialist advisor can make all the difference. If you are ready to take the first step, consult all the requirements here.
2. “I can live in Spain and continue paying my taxes in Andorra”
This is a myth that can lead to fiscal problems. In order to be a fiscal resident in Andorra, it is compulsory to fulfil the criterion of physical presence, which involves spending at least 183 days per year in the country (for active residences) or 90 days per year (for passive residences).
Common mistakes:
- Believing that it suffices to travel to Andorra occasionally
- Believing that the authorities do not verify fiscal residence.
- Ignoring the fact that Spain and Andorra have agreements to prevent double taxation and tax evasion.
If you want to take advantage of the Andorran tax system, you must actually reside in the country and comply with the established requirements. Failure to do so could result in fiscal penalties.
3. “I can create a company in Andorra and continue living in my country”
It is lawful to set up a company in Andorra without being a resident, provided that you fulfil the necessary requirements. In this case, you will continue to be taxed as an individual in your country of residence, while your company will pay taxes in Andorra.
Key points to consider:
- If you are not a resident of Andorra, you will need a foreign investment permit.
- You will need to open a bank account with an Andorran bank.
- Your company must have a physical address in Andorra and, if the director is not resident in Andorra, you must employ at least one employee and register him/her with the Andorran Social Security Department.
In short, setting up a company in Andorra without living there is possible, but certain administrative and tax requirements must be satisfied.
If you are thinking of opening a company in Andorra while still living in your country, we tell you everything you need to know in our article.
Taxation and the process of setting up a company in Andorra
4. “No taxes are paid in Andorra”
Although Andorra is known for its low fiscal burden, this doesn’t mean that it’s a tax haven. The country has developed its own taxation system in line with international standards and has signed agreements to prevent tax evasion. The fiscal burden is low compared to that of other European countries.
Key differences with Spain:
- Personal income tax: maximum 10% in Andorra (up to 47% in Spain).
- Corporation tax: 10% in Andorra (25% in Spain).
- VAT (IGI in Andorra): 4.5% (21% in Spain).
You will pay less tax in Andorra, but not zero. If you want compare the taxes in Andorra with those in Spain, we show the full details here.
5. “Opening a business in Andorra is not for everyone”
To open a company in Andorra, a minimum investment of €3,000 in share capital is required. This is the share capital required for a limited company. In addition, you must have a fiscal residence and engage in a real economic activity in the country, and also complete a series of legal formalities, such as obtaining the appropriate permits and registrations from the administration.
• Requirements for investing in Andorra as a foreigner
If the investor is not resident in Andorra, he or she must apply for a foreign investment permit before the company can be set up, a procedure that requires the submission of specific documentation. Despite these requirements, Andorra remains an attractive option. However, it is essential to have a well-structured plan and to be aware of all the legal and fiscal obligations before taking this step. We can advise you on how to set up your company in Andorra.
Living and quality of life in Andorra
6. ” There is nothing to do in Andorra”
Andorra is a small country, but that doesn’t mean it’s boring. The range of leisure activities on offer depends on the lifestyle of each individual. Here are some examples:
• Nature and sports:
It is a paradise for lovers of skiing, hiking, cycling and outdoor sports in general. With resorts such as Grandvalira Resorts and Naturland, you can ski in winter and hike in the mountains in summer.
If you are a fitness and health enthusiast, you will find a wide range of high-quality gyms and spas throughout the country.
• Gastronomy and social life:
Although Andorra’s nightlife is not comparable to that of big cities, its inhabitants are by no means hermits. The country has an abundance of high-quality restaurants, bars and charming venues. In recent years, cultural events, music festivals and exhibitions have proliferated.
• Sports competitions
Throughout the year, the country hosts high-level international competitions such as the Skiing World Cup and the MTB World Cup, as well as running and cycling events for professionals and amateurs.
7. “Everything is cheaper in Andorra”
It is a common misconception that everything is cheaper in Andorra.
• Rent and housing:
In the residential property sector, as in large cities, the demand for housing has increased in recent years. This has led to increases in rents and in purchase prices, making it more and more difficult to find affordable housing, especially in central areas or in municipalities with high demand.
• Everyday purchases:
When it comes to everyday purchases, although VAT in Andorra is only 4.5%, the prices of basic products such as food, clothing or essential services are similar to those in Spain. This means that although the tax saving is a great advantage, it does not necessarily result in a lower cost of living. Nevertheless, it is possible to benefit from lower prices for products such as petrol and electronics.
Is it a good idea to move to Andorra?
Moving to Andorra presents a good opportunity for anyone trying to reduce their taxes and find a high quality of life. With a stable taxation system and regulations, the country offers juridical security and a peaceful environment without losing its links with Spain and France.
While it is true that there are certain legal and bureaucratic requirements involved in setting up a business in Andorra, these are part of a well-defined process.
Surrounded by Nature, Andorra combines modernity and well-being with a mountain lifestyle. Adapting to its climate and environment is part of the experience, and many find that this improves their quality of life.
We are here to help you every step of the way
If you are considering moving to Andorra, we can help you every step of the way. From advice about taxation to the setting up of your business or company and the obtention of residence for you and your family.
Contact us and we will provide you with personalised information to make your project in Andorra a reality.