Written and reviewed by the Axior Global Advisory Team — Andorra-based tax, corporate and residency advisors.
Andorra vs Cyprus in 2026: Tax Comparison for HNWIs
TL;DR: Andorra and Cyprus are two of Europe’s best-known low-tax bases, but 2026 widened the gap between them. Andorra keeps everything low by design: personal income tax (IRPF) capped at 10%, corporate tax (IS) a flat 10%, VAT (IGI) of just 4.5%, 0% wealth, inheritance, gift and exit taxes, and capital gains reaching 0% after 10 years. Cyprus stays attractive mainly through its non-dom regime: after its December 2025 reform (effective 1 January 2026) the corporate rate rose from 12.5% to 15% to meet the OECD global minimum, personal income tax runs progressively to 35%, and VAT is 19% — but non-domiciled residents pay 0% defence tax on worldwide dividends and interest for up to 17 years. The trade-off: Andorra gives low, flat, worldwide taxes with clean compliance and EU-adjacent lifestyle but no EU membership; Cyprus gives full EU membership and a powerful (time-limited, planning-dependent) exemption on passive income. For HNWIs prioritising the lowest total tax on active and worldwide income, Andorra generally wins; for those living mainly off dividends and interest who need an EU passport-zone base, Cyprus is compelling.
Key Facts: Andorra vs Cyprus (2026)
| Item | Andorra | Cyprus |
|---|---|---|
| Top personal income tax | 10% (IRPF, Llei 5/2014) | 35% (progressive) |
| Income-tax structure | 0% to EUR 24,000; 5% EUR 24–40k; 10% above | 0% to EUR 22,000; 20–35% in bands above (top 35% over EUR 72,000) |
| Corporate tax | 10% flat (special regimes at 2%) | 15% (raised from 12.5% in 2026, OECD Pillar Two) |
| VAT | 4.5% (IGI) — lowest in Europe | 19% standard |
| Tax on dividends/interest | Andorran-source dividends exempt; worldwide income max 10% | 0% defence tax for non-doms (up to 17 years); GESY health levy applies |
| Wealth tax | 0% | 0% (none) |
| Inheritance / gift tax | 0% | 0% (abolished) |
| Exit tax | 0% | ATAD corporate exit-tax rules apply |
| Capital gains | Max 10%; 0% on property after 10 years; 0% on <25% shareholdings | 20% on Cyprus real estate only; 0% on securities |
| Health / social contribution | CASS 22% (15.5% employer, 6.5% employee) on local activity | GESY national health levy 2.65% (capped) on most income |
| Residency investment | EUR 1,000,000 min (passive, Law 2/2026) | 60-day/183-day residency tests; no fixed investment sum for tax residency |
| EU membership | No (association agreement pending) | Yes — full EU member and Eurozone |
| Double tax treaties | 22 in force (2026) | ~65+ in force |
Which Country Has Lower Taxes, Andorra or Cyprus?
On worldwide and active income, Andorra is clearly lower; on passive dividend and interest income, a Cyprus non-dom can match or beat it — but only temporarily. Andorra taxes all personal income at a maximum of 10%. According to Llei 5/2014, the first EUR 24,000 is exempt, income to EUR 40,000 is taxed at 5%, and everything above at 10%. There is no wealth, inheritance, gift or exit tax, and VAT (IGI) is 4.5%.
Cyprus works differently. Its personal income tax is progressive up to 35%, and after the 2025 reform the tax-free threshold rose to EUR 22,000. What makes Cyprus attractive to internationally mobile wealth is the non-domicile regime: qualifying residents pay 0% Special Defence Contribution on worldwide dividends and interest for up to 17 years. So an HNWI living principally off a dividend portfolio can pay very little Cypriot tax on that income — though the national health system levy (GESY, 2.65%, capped) still applies.
The essential difference: Andorra’s low rate is permanent, flat and universal; Cyprus’s headline exemption is conditional and time-limited (17 years, non-dom status, passive income only). Salary and business profits earned personally in Cyprus are taxed on the progressive scale up to 35% — far above Andorra’s 10% cap.
How Did the 2026 Cyprus Tax Reform Change the Picture?
Cyprus enacted its biggest tax overhaul in two decades in December 2025, effective 1 January 2026 — and the headline change was a corporate-tax increase, not a cut. The reform raised corporate income tax from 12.5% to 15% to align with the OECD’s Pillar Two global minimum, lifted the personal tax-free threshold from EUR 19,500 to EUR 22,000, and abolished both stamp duty and the deemed-dividend-distribution regime. The prized non-dom exemption on dividends and interest was left intact.
For HNWIs, the takeaway is that Cyprus’s corporate advantage narrowed: at 15%, a Cypriot company now sits above Andorra’s flat 10% (and well above Andorra’s 2% special regimes). Cyprus’s continued draw is therefore less about company tax and more about the personal-level exemption on passive income plus EU membership. Andorra, by contrast, made no rate increases in 2026; its 0–10% IRPF and 10% corporate tax remain unchanged.
How Do the Corporate Regimes Compare?
Andorra’s flat 10% now undercuts Cyprus’s post-reform 15%. An Andorran company (IS) pays 10% on profits, with special regimes as low as 2% for qualifying activities, and dividends distributed to Andorran-resident shareholders are exempt from further IRPF — a clean, roughly 10% total burden. A Cypriot company pays 15% after the 2026 reform. Cyprus retains a strong IP Box (an effective rate around 2.5% on qualifying intellectual-property income) and the benefits of being an EU company — access to EU directives, no intra-EU withholding frictions, and passporting in some sectors.
So the corporate choice is: Andorra for the lowest straightforward rate and simplicity; Cyprus where EU legal status, the IP Box, or access to the single market outweighs the higher headline rate.
How Do the Personal Regimes Actually Work?
Andorra taxes worldwide income at 0–10% for everyone, with no domicile distinction; Cyprus taxes worldwide income progressively to 35% but carves out passive income for non-doms. An Andorran resident earning EUR 500,000 from salary, dividends and gains pays at most 10% — often less, given exemptions on sub-25% shareholdings and long-held property.
A Cyprus non-dom with the same profile pays 0% defence tax on the dividend and interest slice (subject to the 2.65% GESY levy, capped), but any Cyprus-source salary or personally earned business profit is taxed up to 35%. The Cyprus advantage is real but shaped: it rewards those whose income is predominantly passive dividends/interest and who remain within the 17-year non-dom window. Once that window closes — or for income that is active rather than passive — Andorra’s flat 10% is materially lower.
What About Residency Requirements and Lifestyle?
Andorra’s investment route requires real capital; Cyprus’s tax residency can be achieved with day-count tests and no fixed investment sum. According to the Omnibus Law 2 (Law 2/2026), Andorran passive residency requires a EUR 1,000,000 minimum investment (or a EUR 400,000 housing-fund route), a non-refundable EUR 50,000 state fee to the AFA, and EUR 12,000 per dependent; real estate used toward the threshold must be worth at least EUR 800,000 and carries the foreign-investment tax (IEI) of 6% (first property) or 10% (additional).
Cyprus offers a lighter entry: you can become tax-resident under the 60-day rule (if you are not tax-resident elsewhere and meet employment/business and accommodation conditions) or the standard 183-day rule, with no mandatory investment figure for tax residency itself. Cyprus is a full EU member in the Eurozone, English is widely used, and it offers a Mediterranean lifestyle; Andorra is a Pyrenean micro-state outside the EU (with an association agreement pending), offering mountain living, strong safety, and proximity to Barcelona and Toulouse.
Andorra vs Cyprus: Which Should an HNWI Choose?
Choose Andorra if you want the lowest flat tax on worldwide and active income with permanent simplicity; choose Cyprus if EU membership and a 0% exemption on passive dividend/interest income are your priorities. Andorra suits entrepreneurs, business owners and those with mixed active income who value a universal 10% cap and zero wealth/inheritance/exit taxes. Cyprus suits investors living mainly off dividends and interest who need to stay inside the EU and can benefit from the non-dom window. Many advisers model both before deciding — the right answer depends on the composition of your income far more than on headline rates alone. See our “Andorra vs Europe” comparison hub and the “Andorra Law & Tax Changes in 2026” pillar for the wider context.
Frequently Asked Questions
1. Is Andorra or Cyprus cheaper for taxes in 2026?
For worldwide and active income, Andorra is cheaper — a flat 10% cap versus Cyprus’s progressive scale up to 35%. For passive dividend and interest income, a Cyprus non-dom can pay 0% defence tax (plus the 2.65% GESY levy) for up to 17 years, which can beat Andorra on that specific income type.
2. What is the Cyprus corporate tax rate in 2026?
15%, raised from 12.5% by the December 2025 reform to align with the OECD Pillar Two global minimum. Andorra’s corporate tax remains a flat 10% (with special regimes as low as 2%).
3. Does Cyprus tax dividends and interest?
For non-domiciled residents, dividends and interest are exempt from the Special Defence Contribution (0%) for up to 17 years. The national health levy GESY (2.65%, capped) still applies. In Andorra, dividends from Andorran companies are exempt from further IRPF, and worldwide income is capped at 10%.
4. Do Andorra or Cyprus charge wealth or inheritance tax?
Neither. Both levy 0% wealth and inheritance tax. Andorra also has 0% gift and exit tax.
5. Which country is easier to move to?
Cyprus has a lighter entry for tax residency (60-day or 183-day tests, no fixed investment sum) and is an EU member. Andorra requires a EUR 1,000,000 investment (or the EUR 400,000 housing-fund route) for its passive permit but offers a lower, flatter tax outcome once resident.
6. Is Cyprus in the EU and is Andorra?
Cyprus is a full EU member and uses the euro. Andorra is not an EU member (an EU association agreement is pending) but uses the euro and sits between Spain and France.
Model Your Own Andorra vs Cyprus Numbers
The right choice hinges on how your income breaks down between salary, business profit, dividends and gains — and on how long you expect to stay. Use our Tax Savings Calculator to compare your projected annual tax in Andorra versus Cyprus, then book a free consultation with Axior Global to pressure-test the numbers against your specific situation.
Sources
- Portal Jurídic del Principat d’Andorra (primary source of Andorran law): https://www.portaljuridic.ad
- Butlletí Oficial del Principat d’Andorra (BOPA): https://www.bopa.ad
- Llei 5/2014, del 24 d’abril, de l’impost sobre la renda de les persones físiques (IRPF)
- Omnibus Law 2 (Law 2/2026) — passive residency thresholds and AFA state fee (published in BOPA)
- Govern d’Andorra — official double-taxation-treaty table: https://www.govern.ad
- Cyprus tax reform 2026 (corporate 15%, personal brackets, non-dom regime) — Sovereign Group: https://www.sovereigngroup.com/news/cyprus-brings-comprehensive-tax-reform-into-force/
- Cyprus 2026 tax rates and non-dom regime — Global Citizen Solutions: https://www.globalcitizensolutions.com/cyprus-tax-reform-2026/
Related Axior guides: Andorra vs Malta · Andorra vs Monaco · Andorra vs Portugal (after NHR) · Andorra Tax Residency: the 183-Day Rule · Andorra Law & Tax Changes in 2026 (pillar hub).
This article is for general information only and does not constitute tax or legal advice. Andorran figures reflect law as of August 2026; Cyprus figures reflect the 2025 reform effective 1 January 2026. Confirm details for your circumstances before acting.