How Does Andorran Residency Work?

Andorra is known for its attractive tax system, designed to encourage both individuals and businesses to establish themselves in the country. The tax regime is simple, with low rates and a focus on economic transparency. Key taxes include a corporate tax rate of 10%, personal income tax rates ranging from 0% to 10%, and no wealth tax or inheritance tax. The country also offers special tax benefits for businesses engaged in international activities, making it an appealing destination for entrepreneurs and investors.

What Are the Tax Benefits of Living in Andorra?

Living in Andorra offers several tax advantages. For individuals, the personal income tax rate is notably lower than in most European countries, with a top rate of just 10%. There is also no inheritance tax or wealth tax, which makes it especially attractive for those looking to protect their assets.

Additionally, VAT in Andorra is considerably lower compared to many other countries, with a standard rate of just 4.5%. For businesses, the low corporate tax rates and lack of capital gains tax make it a highly competitive location for
international investment and operations.

Requirements for Tax Residency in Andorra

To qualify for tax residency in Andorra, you must meet several criteria. First, you need to spend at least 183 days per year in the country. Additionally, you must either hold a property in Andorra or have a lease agreement for a minimum of one year. Lastly, you must not be a tax resident in any other country. Once these conditions are met, you can apply for tax residency, which entitles you to benefit from the country’s favorable tax regime.

How Axior Global Can Help

Axior Global can provide expert tax advice to help you maximize these tax benefits. We can guide you through the process of optimizing your tax strategy, whether you’re an individual looking to benefit from Andorra’s favorable personal income tax rates or a business owner seeking to take advantage of the country’s competitive corporate tax environment.

How to Obtain Physical Residency in Andorra: Step by Step

Obtaining physical residency in Andorra requires a few key steps. First, you’ll need to apply for a residence permit, which can either be active (for those who want to work or start a business) or passive (for retirees or individuals with sufficient financial means). You will be required to provide proof of financial stability, including evidence of income or savings, and a clean criminal record. Once your residency is granted, you will be required to spend a certain amount of time in the country each year, typically at least 90 days, to maintain your status.

Step 1: Determine Eligibility

Before you begin the application process, it’s important to determine whether you meet the eligibility criteria for physical residency in Andorra. Generally, you must fulfill the following conditions:

• Income Requirement: You must have sufficient financial means to support yourself and any dependents. This can be in the form of income from employment, business activities, investments, or savings. The minimum income requirement varies but is typically around €40,000–€50,000 per year for an individual.
• No Criminal Record: Applicants must have a clean criminal record in both Andorra and their home country.
• Health Insurance: You need to prove that you have health insurance coverage in Andorra, either through the Andorran healthcare system (CASS) or a private insurance provider.
• No Other Residency: You must not be a resident of any other country for tax purposes. Andorra requires that you don’t maintain residency in another jurisdiction.

Step 2: Establish a Residency Plan

The next step involves choosing the right type of residency. There are two main routes for obtaining physical residency in Andorra:

1. Active Residency (for those planning to work or run a business in Andorra)
2. Passive Residency (for retirees or individuals with sufficient passive income)

• Active Residency: If you plan to work in Andorra or operate a business, you will need to provide evidence of employment or demonstrate that you own a business in Andorra. For example, if you are employed by an Andorran company, you will need to present your contract and proof of income.
• Passive Residency: If you have enough income to support yourself without working, such as income from investments, pensions, or other passive sources, you can apply for passive residency. This option is particularly popular with retirees or those who can prove a steady, passive income.

Step 3: Gather Required Documentation

Once you’ve determined your eligibility and residency type, the next step is to collect the necessary documentation. Here’s what you’ll generally need:

• Valid Passport: A valid passport or national ID card for EU citizens.
• Proof of Financial Means: Documents showing your income, savings, or assets. This may include bank statements, proof of investments, or proof of pension income.
• Health Insurance: Proof of health insurance coverage through the Andorran health system or a private provider. If you plan to work, you may need to register with CASS (Caisse Andorrane de Sécurité Sociale) for social security.
• Criminal Background Check: A recent criminal record check from both your home country and Andorra.
• Proof of Address: A rental agreement or proof of homeownership in Andorra. You’ll need to provide evidence that you live in the country, such as utility bills, lease contracts, etc.
• Photos: Passport-sized photos (usually required for your residency card).

Step 4: Submit Your Application

Once you have gathered all the required documentation, you will need to submit your residency application to the Andorran Immigration Department. This process involves submitting your documents to the Immigration Service and paying the corresponding application fees. The process can take several months, depending on the complexity of your case and the type of residency you are applying for.

During the application process, the authorities will review your documents to ensure they meet the requirements, such as proof of sufficient income and health coverage.

Step 5: Establish Residency in Andorra

After your application has been approved, you will receive a temporary residency card. At this stage, you will need to complete the following:

• Move to Andorra: Once approved, you must physically move to Andorra and establish your primary residence in the country. This means spending the majority of the year in Andorra (at least 90 days in a calendar year).
• Register with Local Authorities: Upon arrival in Andorra, you must register with the local commune (town hall) and obtain your Andorran residence certificate. This process is relatively simple and can be done with the help of your legal or tax advisor.
• Get Your Residency Card: After registration, you will receive your official Andorran residency card, which confirms your status as a resident. For active residents, you will also need to prove that you are working or running a business in Andorra.

Step 6: Maintain Residency

To maintain your physical residency in Andorra, you must meet certain obligations:

• Stay in Andorra for a Minimum Period: You must spend at least 90 days per year in Andorra. Failing to meet this requirement could result in losing your residency status.
• Income Requirements: You must continue to meet the income requirements to prove that you can support yourself financially.
• Renew Your Residency: Residency cards need to be renewed every two years for active residents and every three years for passive residents.

Step 7: Permanent Residency and Citizenship

After being a resident of Andorra for 20 years, you can apply for permanent residency or Andorran citizenship. However, Andorra does not allow dual citizenship, so you would be required to renounce your original citizenship if you choose to become Andorran.

Permanent residency is typically granted to those who have made significant contributions to Andorra’s economy or have lived in the country for a long period.

Obtaining Andorran Residency and Citizenship by Investment

Andorra offers a unique opportunity for individuals seeking residency and citizenship through investment. Known for its attractive tax regime and high quality of life, Andorra has a residency-by-investment program that allows foreigners to obtain residency by making substantial investments in the country. This route is popular among wealthy individuals and entrepreneurs seeking a stable and low-tax environment.

To obtain residency by investment in Andorra, you can choose one of the following pathways:

1. Investment in Real Estate: You can invest in real estate within Andorra, with a minimum property purchase requirement of €400,000.
2. Business Investment: Alternatively, you can invest in a business or start a company in Andorra. This route typically requires a significant financial commitment and the creation of jobs within the local economy.

Once the investment is made, you will need to meet the financial stability and no criminal record requirements, along with spending a minimal amount of time in the country each year (typically 90 days). The initial residency is granted for an active residence permit, which can be renewed and eventually lead to permanent residency or citizenship after 20 years.