Andorra vs Gibraltar (2026): Tax & Residency Comparison for HNWIs — Cat 2 vs Passive Residency

Written and reviewed by the Axior Global Advisory Team — Andorra-based tax, corporate and residency advisors.

TL;DR: Andorra and Gibraltar are the two small European jurisdictions most often shortlisted by HNWIs — especially UK nationals after the end of non-dom — who want low tax without leaving Europe. Andorra taxes personal income at 0–10% with no minimum, corporate profits at 10%, consumption at 4.5% IGI, and has no wealth, inheritance, gift or exit tax; passive residency needs a EUR 1,000,000 investment (or EUR 400,000 into the Housing Fund) plus a EUR 50,000 non-refundable contribution under Law 2/2026. Gibraltar’s Category 2 regime taxes only the first £118,000 of income — a fixed £37,000–£42,380 a year — but from June 2026 new applicants need £5 million of net worth (up from £2 million) and a £5,000 fee; corporate tax is 15%, with no VAT, capital gains, wealth or inheritance tax. Andorra has 22 tax treaties; Gibraltar has 2. The EU–UK treaty on Gibraltar, provisionally applied since 15 July 2026, removed the land border and created an EU customs union. For most entrepreneurs and investors Andorra produces the lower bill and broader treaty protection; Gibraltar suits very high earners who want a fixed annual tax in a sterling, common-law, English-speaking setting beside the Costa del Sol.

This article is part of our comparison series under the hub Andorra Law & Tax Changes in 2026. See also Andorra vs Monaco, Andorra vs Malta and Andorra vs UK after non-dom.

Key Facts: Andorra vs Gibraltar (2026)

Item Andorra Gibraltar
Personal income tax 0–10% (first EUR 24,000 exempt; 5% to EUR 40,000; 10% above) — Llei 5/2014 Progressive for ordinary residents; Cat 2: tax on first £118,000 only → £37,000 min / £42,380 max per year
HNWI residency route Passive residency: EUR 1,000,000 investment (or EUR 400,000 Housing Fund) + EUR 50,000 non-refundable contribution + EUR 12,000 per dependent — Law 2/2026 (in force 13 Feb 2026) Category 2: £5,000,000 net worth (new applicants, announced 18 June 2026; previously £2M), £5,000 fee, approved accommodation, private medical insurance
Corporate tax 10% flat (2% special regimes) 15% (from 1 July 2024; previously 12.5%)
Consumption tax IGI 4.5% (0%–9.5% band) No VAT
Capital gains Shares <25% stake: 0%; real estate: 0% after 10 years; otherwise within IRPF at max 10% No capital gains tax
Wealth / inheritance / gift / exit tax 0% / 0% / 0% / 0% None / none / none / none
Social security CASS 22% (15.5% employer + 6.5% employee) Social insurance contributions (capped weekly amounts)
Double tax treaties 22 (Estonia in force 24 March 2026) 2 (UK, in force 2020; Spain, in force 2021)
Minimum presence Passive: 90 days/yr for the permit; tax residency: >183 days or centre of interests Cat 2: approved residential accommodation available for exclusive use; presence rules per Cat 2 conditions
Currency / language / legal system EUR / Catalan (Spanish, French, English widely used) / civil law GBP / English / common law
EU relationship Outside the EU; Association Agreement expected to be signed in autumn 2026 British Overseas Territory; EU–UK treaty signed 14 July 2026, provisionally applied from 15 July 2026 (Schengen checks, EU–Gibraltar customs union)
Territory / population 468 km² / ≈85,000 6.8 km² / ≈38,000

Sources: Portal Jurídic d’Andorra, BOPA, Law 2/2026, Llei 5/2014; Government of Gibraltar Income Tax Office, PwC Worldwide Tax Summaries (Gibraltar, reviewed 22 August 2026), House of Commons Library. Full list below.

How Much Income Tax Would You Pay in Andorra vs Gibraltar?

In Andorra you pay at most 10% of your income, with no floor; in Gibraltar a Category 2 individual pays a fixed £37,000 to £42,380 regardless of how much they earn above £118,000. Which is cheaper depends entirely on your income level.

Under Llei 5/2014, Andorra’s IRPF exempts the first EUR 24,000, taxes the band up to EUR 40,000 at 5%, and everything above at 10%. A resident with EUR 500,000 of taxable income pays roughly EUR 46,800; with EUR 2,000,000, roughly EUR 196,800. There is no minimum tax and no special regime to apply for — the ordinary rate is the regime.

Gibraltar’s Category 2 status caps assessable income at £118,000, producing a maximum charge of £42,380 and a minimum of £37,000 for the 2025/26 tax year (Gibraltar’s tax year runs 1 July to 30 June). Crucially, Cat 2 income tax is only charged on that capped amount; income above it is outside the charge. The break-even against Andorra is therefore around EUR 500,000 of annual income: below it Andorra is cheaper, well above it Gibraltar’s fixed charge becomes a smaller percentage. For an ultra-high earner with EUR 5 million of income, Gibraltar’s £42,380 (about EUR 50,000) compares with roughly EUR 496,800 in Andorra.

Two caveats keep the comparison honest. First, Andorra’s IRPF exempts several categories entirely — notably dividends from Andorran companies and capital gains on assets held more than 10 years — so an investor’s effective Andorran rate is often far below 10% (see Andorra dividend tax and capital gains). Second, Cat 2 status is now reserved for individuals with £5 million of net worth and comes with restrictions on carrying on business in Gibraltar; ordinary Gibraltar residents pay progressive rates with no cap.

What Does It Cost to Become Resident: EUR 1M Investment vs £5M Net Worth?

Andorra requires a EUR 1,000,000 investment that stays yours, plus a EUR 50,000 non-refundable contribution; Gibraltar’s Cat 2 requires proof of £5 million of net worth, a £5,000 fee and approved accommodation, but no investment in the territory itself. The two tests measure different things.

According to BOPA (Law 2/2026, Llei Òmnibus 2), in force since 13 February 2026, Andorra’s passive residency requires a qualifying investment of EUR 1,000,000 in Andorran assets — property, bank deposits, Andorran securities, or a combination — or EUR 400,000 directed to the public Housing Fund. On top of this, the applicant lodges a EUR 50,000 state contribution with the AFA, which since Law 2/2026 is a definitive, non-refundable payment rather than a deposit, plus EUR 12,000 for each dependent. If property is used, the minimum purchase is EUR 800,000 and the foreign real-estate investment tax (IEI) applies at 6% on a first property and 10% on additional ones. Presence of at least 90 days per year keeps the permit; more than 183 days makes you tax resident. Full details in our passive residency guide.

Gibraltar’s Category 2 regime under the Qualifying (Category 2) Individuals Rules 2004 requires the applicant to have approved residential accommodation in Gibraltar available for their exclusive use, private medical insurance, and net assets above the threshold. On 18 June 2026 the Government of Gibraltar announced that, for new applicants, the net-worth requirement rises from £2 million to £5 million and the application fee from £1,233 to £5,000; existing Cat 2 holders are grandfathered. The same announcement clarified that Cat 2 status does not confer entitlement to public healthcare or education and that losing Cat 2 status no longer automatically preserves a right of residence.

The structural difference: Andorra asks for capital deployed in the country (which you keep and can earn a return on), while Gibraltar asks for evidence of wealth plus an annual fixed tax. Over ten years, a Cat 2 resident pays a minimum of roughly £370,000 in tax with no investment; an Andorran passive resident pays EUR 50,000 up-front and then ordinary IRPF, with the EUR 1 million still on their balance sheet.

How Do Corporate Tax and Company Structures Compare?

Andorra taxes company profits at a flat 10%; Gibraltar at 15% since 1 July 2024 — and Gibraltar’s Cat 2 regime restricts the holder from carrying on business locally, whereas Andorra actively invites entrepreneurs through active residency. For founders and operating businesses this is usually the decisive factor.

Andorra’s Impost sobre Societats (IS) is 10% on worldwide profits, with 2% special regimes for qualifying activities, and no withholding on dividends paid to Andorran-resident shareholders, whose Andorran-source dividends are IRPF-exempt. A founder who moves under active residency — running a registered Andorran company with at least 34% ownership and a director role — combines the 10% corporate rate with 0–10% IRPF and CASS contributions of 22% in total. See Andorra company formation and corporate tax at 10%.

Gibraltar’s corporate income tax is 15%, charged on a territorial basis on income accrued in or derived from Gibraltar, with no VAT on services. It remains competitive against the UK’s 25% main rate and has a well-developed financial-services, gaming and insurance sector. But the Cat 2 individual is, by design, a passive resident: the regime is not intended for someone who wants to run an operating business from Gibraltar, and Gibraltar-source trading income is generally outside its scope. Executives on the HEPSS scheme (tax on the first £160,000 of employment income, minimum salary £160,000) are the employment-side equivalent.

For a business owner relocating with the company, Andorra’s combination of a 10% rate, a route to residency through the business, and an IRPF exemption on domestic dividends is hard to match.

Which Has No Wealth, Inheritance or Capital Gains Tax?

Both. Neither Andorra nor Gibraltar levies a wealth tax, inheritance tax, gift tax or exit tax, and both leave most capital gains untaxed — Gibraltar entirely, Andorra after a 10-year holding period. On the “silent taxes” that erode HNWI wealth elsewhere in Europe, the two jurisdictions are near-equivalent.

According to the Portal Jurídic d’Andorra, Andorra has no wealth tax, no inheritance tax, no gift tax and no exit tax. Under Llei 5/2014, gains on the sale of shares are exempt where the seller’s stake is below 25% of the company — which covers listed equities, funds and most minority positions — and other gains fall within IRPF at a maximum of 10%. Real-estate gains have their own regime, on a sliding scale that reaches 0% after 10 years of ownership. Details in Andorra wealth, inheritance and gift tax.

Gibraltar has no capital gains tax, no wealth tax, no inheritance tax and no VAT, and does not tax most investment income of individuals such as bank interest or dividends from quoted companies. For a pure investor with no business activity, Gibraltar’s investment-income treatment is marginally more generous; for a family thinking about succession, the two are equivalent — and both are far ahead of Spain, France or the UK.

Which Has the Better Treaty Network and International Standing?

Andorra has 22 double tax treaties in force in 2026; Gibraltar has 2 — with the UK and Spain. For anyone with income from several countries, this gap matters more than a percentage point of rate.

Andorra’s network of 22 conventions — including Spain, France, Portugal, Luxembourg, Malta, Cyprus, the Netherlands, the UAE and, since 22 December 2025, the United Kingdom, with Estonia the latest, in force 24 March 2026 — allocates taxing rights, caps withholding at source and provides tie-breaker rules for dual residency. Andorra has also completed a decade of OECD alignment: automatic exchange of information, BEPS commitments, and a modern IRPF/IS/IGI system introduced from 2012 to 2015. Read our Andorra–Estonia treaty update.

Gibraltar’s UK–Gibraltar Double Taxation Agreement entered into force on 24 March 2020 and the International Tax Agreement with Spain on 4 March 2021. The Spain agreement is particularly relevant: it contains strict residency tie-breaker rules that treat individuals who spend more than 183 overnight stays in Spain, or whose spouse, home or main economic interests are in Spain, as Spanish tax residents — a live risk for Cat 2 residents who actually live in Sotogrande or Marbella. Beyond those two agreements, Gibraltar relies on unilateral relief.

A UK national leaving after the end of the non-dom regime now has a treaty on both sides: the first-ever Andorra–UK Double Taxation Convention entered into force on 22 December 2025 and applies in the UK to income tax and capital gains tax from 6 April 2026, while Gibraltar’s UK DTA has applied since 2020. Neither treaty, however, switches off the UK’s statutory residence test or the new residence-based inheritance-tax rules with their multi-year “tail”, so sequencing the departure is essential in both cases — see our UK non-dom to Andorra relocation guide.

What Did the July 2026 EU–UK Gibraltar Treaty Change?

On 14 July 2026 the UK and the EU signed their agreement on Gibraltar, provisionally applied from 15 July 2026: the land border fence with Spain came down, Schengen border checks moved to Gibraltar’s port and airport, and an EU–Gibraltar customs union was created. Formal ratification on both sides is still in progress as of September 2026.

For HNWIs the practical effects are mixed. Free movement across the frontier makes Gibraltar far more liveable — residents can use the Costa del Sol’s housing, schools and Málaga airport without queues — but it also makes the Spain tie-breaker rules above more relevant, because living in Spain and “commuting” to Gibraltar is precisely what the Spanish tax agreement targets. The customs union also implies alignment on goods and indirect taxation over time; anyone whose model depends on Gibraltar’s absence of VAT should follow the implementing measures closely.

Andorra, by contrast, is negotiating from the outside in: it has never been in the EU, sits outside Schengen (with open borders with Spain and France in practice), and its Association Agreement with the EU is expected to be signed in autumn 2026, which would extend single-market access in goods and services without changing Andorra’s own tax system. Andorra’s tax regime is set by the Consell General and published in the BOPA; there is no external customs union that could reshape it.

Lifestyle: Mountains and Space vs the Rock and the Costa del Sol

Andorra offers 468 km² of Pyrenean mountains, ski resorts and a population of around 85,000; Gibraltar packs around 38,000 people into 6.8 km² at the gateway to the Mediterranean. The two could hardly feel more different.

Andorra offers space, safety, outdoor life, a lower cost of living than Monaco or Switzerland, and road access to Barcelona and Toulouse in roughly 2.5–3 hours. Catalan is official, but Spanish, French and English are used daily in business; private banking is concentrated in three domestic banks (Andbank, Creand and MoraBanc). Property is expensive and scarce, which is why the passive residency investment is often satisfied with financial assets rather than a home.

Gibraltar offers English as the working language, common law, sterling, a UK-style financial sector, a mild climate and — since July 2026 — seamless access to the Costa del Sol. Its constraints are physical: little land, dense housing, and a reliance on Spain for space that now carries the tax-residency risks described above.

Andorra vs Gibraltar: Which Should You Choose?

Choose Andorra if you run a business, earn under roughly EUR 500,000 a year, hold significant investments you plan to keep for the long term, or want a broad treaty network and a European mountain lifestyle. Choose Gibraltar if you have £5 million of net worth, very high income that makes a fixed £42,380 bill attractive, no need to trade locally, and a strong preference for an English-speaking, sterling, common-law environment beside southern Spain.

In our practice the pattern is consistent: founders and active investors are better served by Andorra’s 10% corporate rate, 0–10% IRPF, dividend and capital-gains exemptions and a residency route that welcomes business; passive, ultra-high-income individuals with UK ties sometimes prefer Gibraltar’s capped tax, provided they meet the £5 million threshold and avoid becoming Spanish tax residents by default. Both are transparent, OECD-aligned choices; the right one depends on your income mix, business, family and where you actually want to live — which is why we model both before recommending either.

FAQ: Andorra vs Gibraltar

1. Is Andorra or Gibraltar cheaper for income tax?
For income below roughly EUR 500,000 a year, Andorra’s 0–10% IRPF produces the lower bill. Above that, Gibraltar’s Cat 2 fixed charge of £37,000–£42,380 becomes proportionally cheaper — but Cat 2 now requires £5 million of net worth.

2. How much do I need to invest for Andorra passive residency vs Gibraltar Cat 2?
Andorra: EUR 1,000,000 in Andorran assets (or EUR 400,000 into the Housing Fund) plus a EUR 50,000 non-refundable contribution and EUR 12,000 per dependent (Law 2/2026). Gibraltar: no local investment, but proof of £5,000,000 net worth (new applicants from June 2026), a £5,000 fee and approved accommodation.

3. Which has the lower corporate tax?
Andorra, at 10% flat (2% special regimes), against Gibraltar’s 15% since 1 July 2024.

4. Does either country have a wealth or inheritance tax?
No. Both Andorra and Gibraltar have 0% wealth, inheritance and gift tax. Gibraltar has no capital gains tax; Andorra exempts gains on shareholdings below 25% and on real estate held for more than 10 years, and caps other gains at 10%.

5. How many tax treaties does each have?
Andorra has 22 double tax treaties in force (Estonia added 24 March 2026). Gibraltar has 2: the UK (2020) and Spain (2021).

6. Can I live in Spain and be a Gibraltar Cat 2 resident?
It is risky. The 2021 Spain–Gibraltar tax agreement treats individuals with more than 183 overnight stays, a habitual home, a spouse or their main economic interests in Spain as Spanish tax residents. The removal of the border in July 2026 makes this trap easier to fall into, not harder.

7. Is Gibraltar now in Schengen?
Not formally. Under the EU–UK treaty provisionally applied from 15 July 2026, Schengen border rules are applied at Gibraltar’s external entry points and the land fence with Spain was removed, and an EU–Gibraltar customs union was created. Ratification is ongoing.

8. Is Andorra in the EU?
No. Andorra uses the euro under a monetary agreement and is negotiating an Association Agreement with the EU, expected to be signed in autumn 2026. Its tax rates are set domestically and published in the BOPA.

Sources

Plan your move with Axior Global

Estimate your savings: Compare your current tax bill with Andorra’s 0–10% regime — try the free Andorra tax assessment.

Talk to an expert: Book a free consultation with our licensed Andorran tax advisors. We will model Andorra against Gibraltar for your income mix and tell you honestly which fits.

This article is for general information only and does not constitute legal or tax advice. Andorran figures reflect Law 2/2026 and the 2026 tax framework; Gibraltar figures reflect the 2025/26 tax year and Government of Gibraltar announcements as of September 2026. Always confirm your personal position with a qualified advisor in each jurisdiction.

Leave a Reply

Your email address will not be published. Required fields are marked *