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Andorra: Country and Foreign Investment

Executive Summary

This page was last updated on 30 Jan 2019.

Economy Based on Tourism

In one way or another, tourism accounts for 80% of the Andorran economy. There is some local manufacturing, including tobacco processing, but Andorra is structurally import-dependent. There is low unemployment and inflation tends to mirror that in France and Spain. Andorra joined the euro in January 2002 and signed a monetary agreement with the EU in June 2011. There was a government deficit from 2006 to 2009 due to the economic crisis, which did reduce tourist numbers. The crisis also had an effect on other industry and a drop in population of around 7,000 was recorded during those years.

The national debt is very low - estimated in the Budget to be around 1% in 2018. GDP per head, at US$39,150 (2017 est.), is one of the highest in the world. Until recently, Andorra protected its domestic business sector with ownership restrictions, but now allows 100% foreign ownership of companies in a bid to help the economy.

Andorra's Low-Tax Specialisations

Until 2011 there were no taxes in Andorra for resident companies or individuals other than modest annual registration fees, municipal rates, property transaction taxes, some minor sales taxes and a sliding scale capital gains tax introduced in 2007. Legislation providing for corporation tax, initially on non-resident entities, at a rate of 10% came into force on 1 April 2011. Non-resident companies and are now subject to tax on locally sourced income at a rate of 10%. Resident companies and individuals engaged in business activities are subject to a 10% tax from January 2013.

A value added tax (VAT) regime came into force in January 2013. VAT is imposed on a broad spectrum of goods and services at a rate of 4.5%. A concessionary rate of 1% is available on food, books, newspapers, and magazines. A rate of 0% applies to a number of healthcare goods and services; on basic living essentials such as rent; and welfare goods and services.

Andorra's Bank Accounts are Very Secret

As a home for money, Andorra is hard to beat. Banks are solid and there are no capital or exchange controls. Numbered accounts are said locally to be known about only to you, your banker and God. Strict anti-money laundering legislation stops criminal activity, but excludes tax avoidance which is not deemed a crime in Andorra.

In June 2004, Andorra was obliged to accept the EU's Savings Tax Directive. From July 2008, a withholding tax of 20% was imposed on returns on savings paid to citizens of EU member states, of which 75% is remitted onwards to the states concerned.

In March 2009, Andorra’s government announced that it would cooperate with OECD principles by reaching tax information exchange agreements (TIEAs). In February, 2010, it was placed on the OECD's 'white list'. At the time of writing (January 2019), Andorra has signed 22 TIEAs.

Immigration Controlled by Residence and Work Permits

To encourage immigration by high-net-worth individuals (often retired), the Government offers passive residence permits. These are not cheap and are subject to a quota which is determined periodically according to the “economic and social needs of the Principality of Andorra”. Long-term residence under recently amended rules is also possible either through a 'B' (business) or a 'C' (cultural) permit.

 

 

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