Andorra–UK Double Tax Treaty in Force (2026): What It Means for UK Movers, Investors and Pensioners

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

TL;DR: The first-ever double taxation convention between Andorra and the United Kingdom, signed in London on 20 February 2025, entered into force on 22 December 2025. It applies in Andorra from 1 January 2026 and in the UK from 1 February 2026 (withholding taxes), 1 April 2026 (corporation tax) and 6 April 2026 (income tax and capital gains tax). Headline rules: 0% withholding on dividends in the general case, interest and royalties taxable only in the recipient’s country of residence, private pensions taxable only where you live, and a standard residence tie-breaker. For a UK national relocating after the end of the non-dom regime, this treaty removes the biggest historical objection to Andorra — the lack of a treaty with the UK — and gives an OECD-model framework for sequencing the move.

What Is the Andorra–UK Double Tax Convention?

It is a bilateral agreement, based on the OECD Model, that decides which country may tax each type of income when a person or company has ties to both Andorra and the UK, and how double taxation is eliminated. In the UK it was enacted by The Double Taxation Relief and International Tax Enforcement (Andorra) Order 2025 (SI 2025/1301); in Andorra it was ratified by the Consell General and published in the BOPA. It is Andorra’s first treaty with the United Kingdom and brings the network to 22 conventions in force — see our treaty network update.

Key Facts Table

Item Andorra–UK DTC (2026)
Signed 20 February 2025, London
In force 22 December 2025
Effective — Andorra 1 January 2026 (all covered taxes)
Effective — UK 1 Feb 2026 (withholding), 1 Apr 2026 (corporation tax), 6 Apr 2026 (income tax & CGT)
Covered taxes — Andorra IS (corporate), IRPF (personal), IRNR (non-residents), tax on real-estate capital gains
Covered taxes — UK Income tax, corporation tax, capital gains tax
Dividends 0% withholding (15% only for distributions of real-estate income by tax-exempt property vehicles; pension funds exempt)
Interest Taxable only in the recipient’s state of residence
Royalties Taxable only in the recipient’s state of residence
Private pensions Taxable only in the state of residence
Government pensions Taxable in the paying (source) state, subject to treaty exceptions
Real-estate gains Taxable where the property is located (also for shares deriving >50% of value from property)
Other capital gains Taxable only in the state of residence of the seller (unless tied to a permanent establishment)
Relief method Credit method in both states; UK exemption for qualifying Andorran dividends received by UK companies
Residence tie-breaker Permanent home → centre of vital interests → habitual abode → nationality

Why Did This Treaty Matter So Much for UK Nationals?

Because until 2026 there was no treaty at all — every Andorra relocation from the UK had to be planned around unilateral UK rules, with no tie-breaker and no treaty protection on withholding. The UK’s abolition of the non-dom regime on 6 April 2025 (replaced by the four-year FIG regime) pushed many high-net-worth families to look at Andorra’s 0–10% income tax, 0% wealth, inheritance and gift tax. The treaty makes that move cleaner: a resident of Andorra now has a treaty-based answer to “where am I resident?” and to how UK-source dividends, interest, royalties and pensions are taxed.

Read the full relocation sequence in our UK non-dom to Andorra guide and the side-by-side numbers in Andorra vs UK 2026.

How Are Dividends, Interest and Royalties Taxed Under the Treaty?

Dividends: 0% withholding in the general case. Interest and royalties: taxable only where the recipient lives. For an Andorran resident holding UK shares, UK dividend income is therefore received without treaty withholding and taxed in Andorra under IRPF at a maximum of 10% (savings income, after the EUR 3,000 annual exemption). The only exception on dividends is a 15% rate for distributions of real-estate income by tax-exempt investment vehicles (UK REIT-type structures), which is waived for pension-fund recipients.

For an Andorran company receiving UK-source royalties or interest, the treaty allocates taxation to Andorra alone — combined with Andorra’s 10% corporate tax (see our corporate tax guide), this is a competitive structure for IP-holding and financing activities with genuine substance in the Principality.

What About Pensions?

Private pensions and annuities are taxable only in the state of residence. A UK pensioner who becomes Andorran tax resident is taxed on UK private pension income in Andorra — at 0% on the first EUR 24,000, 5% to EUR 40,000 and 10% above — rather than under UK income tax rates of up to 45%. Government-service pensions follow the source rule (taxable by the paying state), with the usual exceptions for nationals and residents. Anyone planning a retirement move should model both the treaty article and the UK’s own rules for pension withdrawals before relocating.

How Are Capital Gains Allocated?

Real estate is taxed where it sits; everything else is taxed where the seller lives. Gains on UK property — and on shares deriving more than 50% of their value from UK property — remain taxable in the UK. Gains on portfolios, company shares and other movable assets are taxable only in the seller’s state of residence, unless the assets belong to a permanent establishment in the other state. For an Andorran resident, that means most securities gains fall under Andorran IRPF — where gains on shareholdings below 25% and assets held more than 10 years are exempt, and other gains are capped at 10% — see when Andorra’s capital gains tax is 0%.

Two UK-side caveats remain: the UK’s Statutory Residence Test and temporary non-residence rules are not switched off by the treaty, and the UK’s residence-based inheritance tax rules carry a multi-year “tail” after departure. Sequencing the exit is still essential.

What Does the Residence Tie-Breaker Mean in Practice?

If both countries claim you as resident under domestic law, the treaty decides: permanent home first, then centre of vital interests, then habitual abode, then nationality. This is the clause that protects a well-executed move. Andorra’s own test is more than 183 days or the centre of economic interests (see our 183-day rule guide); the UK’s is the Statutory Residence Test. A family that keeps a UK home available, or spends most of the year in the UK, can still lose the tie-breaker — the treaty rewards a genuine relocation, not a paper one.

How Is Double Taxation Eliminated?

Both countries use the credit method: tax paid in one state is credited against tax due in the other on the same income, capped at the domestic tax on that income. The UK additionally exempts qualifying dividends received by UK companies from Andorran companies and profits attributable to an Andorran permanent establishment, where UK domestic conditions are met. Because Andorran rates are so low, in practice the exposure after a move is UK tax on UK-source income that the treaty leaves with the UK (UK property income and gains), not double taxation of the same pound.

What Should UK Movers Do Now?

Use the treaty as a planning tool, not a shortcut. The sensible sequence in 2026 is: confirm the Andorran residence route (passive, active or digital nomad); plan the UK exit date against the 6 April 2026 effective date and the Statutory Residence Test; map each income stream (dividends, interest, pensions, property) to its treaty article; and document the Andorran permanent home and centre of vital interests from day one. Andorra’s tax framework itself is unchanged: 0–10% IRPF, 10% IS, 4.5% IGI, 0% wealth, inheritance, gift and exit tax.

FAQ

When did the Andorra–UK tax treaty come into force?
On 22 December 2025. It applies in Andorra from 1 January 2026 and in the UK from 1 February 2026 (withholding taxes), 1 April 2026 (corporation tax) and 6 April 2026 (income tax and capital gains tax).

Is there withholding tax on UK dividends paid to an Andorran resident?
Under the treaty, 0% in the general case. A 15% rate applies only to distributions of real-estate income by tax-exempt property investment vehicles (pension funds are exempt from that rate).

Where is my UK private pension taxed if I live in Andorra?
Only in Andorra, under IRPF (0% to EUR 24,000, 5% to EUR 40,000, 10% above). Government-service pensions generally remain taxable in the UK.

Does the treaty stop the UK from taxing my UK property?
No. Income and gains from UK real estate — including property-rich shares — remain taxable in the UK, with a credit in Andorra.

Does the treaty replace the UK Statutory Residence Test?
No. The treaty’s tie-breaker only applies once both countries consider you resident under their own rules; you must still leave the UK properly under the SRT.

How many double tax treaties does Andorra have now?
22 in force, with the UK (December 2025) and Estonia (March 2026) the most recent; Austria and Bulgaria were signed in 2026 and await entry into force.

Sources

Relocating from the UK? Axior Global maps every income stream to the treaty and sequences the move with your UK adviser. Book a free consultation.

Leave a Reply

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