Andorra Tax Residency: Living in the Pyrenees at 10% Income Tax

Why Andorra?

Andorra — the tiny co-principality between France and Spain with a population of approximately 80,000 — has built a reputation as one of Europe's most accessible low-tax residency jurisdictions for high-net-worth individuals. Its income tax system, established by the Llei de l'Impost sobre la Renda de les Persones Físiques (IRPF) introduced in 2015, charges a flat 10% rate on income above the basic exemption, with a meaningful exemption for the first tranche of income.

The combination of a low rate, a physical presence requirement that is achievable without disrupting business activities, excellent skiing and outdoor infrastructure, access to both France and Spain within minutes, and a straightforward residency pathway has made Andorra a genuine alternative to Monaco and Switzerland for European-based HNWIs.

The Andorran Income Tax System

The 10% Rate and Exemptions

Andorra's IRPF applies at 0% on income up to €24,000 and at 10% on income above that threshold. There is no higher rate — the 10% is a genuine flat rate with no marginal rate step-up.

Income Band	Rate
€0 – €24,000	0%
€24,001+	10%

For a resident earning €500,000 in Andorra, the income tax liability is:

• First €24,000: nil
• Remaining €476,000 × 10% = €47,600
• Total: €47,600 (effective rate: 9.5%)

For a UK higher-rate taxpayer earning the same amount in the UK, the income tax liability would be approximately £225,000-240,000 depending on the nature of the income.

Foreign Income Exemption

Andorra operates an exemption method for foreign-source income. Income arising outside Andorra — foreign dividends, foreign interest, foreign capital gains, foreign rental income — is exempt from Andorran income tax. There is no remittance requirement; the income can be brought to Andorra freely.

This exemption makes Andorra particularly attractive for individuals whose income is predominantly foreign-sourced: investors with offshore portfolios, entrepreneurs with foreign business income, or internationally mobile professionals whose employers are non-Andorran.

Capital Gains

Capital gains on the disposal of shares and other financial assets are taxable in Andorra — the 10% rate applies. There is an exemption for gains on the disposal of a principal residence, and gains on disposals of securities held for more than 10 years are partially exempt.

The Residency Requirements

Active Residency

Andorran tax residency is acquired by spending at least 183 days per year in Andorra, holding a valid Andorran residency permit. This is the standard path for the majority of tax residents.

Passive Residency: The Investment Route

For individuals who cannot guarantee 183 days per year, Andorra offers a "passive residency" (residencia passiva) route:

1. Minimum physical presence: 90 days per year (not 183)
2. Investment requirement: Either:
   • A €400,000 refundable deposit with the Andorran government (interest-free), or
   • Investment of at least €600,000 in Andorran real estate, Andorran business, or Andorran investment funds

The 90-day requirement makes passive residency accessible to individuals who maintain business connections in other countries and cannot commit to 183 days in Andorra. However, meeting only the Andorran 90-day test does not automatically make Andorra the individual's tax residence if another country's domestic law also claims them — the interaction with other countries' tax tests must be carefully considered.

Residency Permit Categories

Category	Minimum Presence	Investment Requirement	Right to Work
Active residency (general)	183 days	None	Yes (with work permit)
Passive residency	90 days	€400k deposit or €600k investment	No (investment income only)
Self-employed residency	183 days	Business registration	Yes

The €400,000 Government Deposit

The government deposit for passive residency is held by the Andorran Financial Authority (AFA). It is not a tax or a fee — it is a fully refundable deposit that earns no interest. The opportunity cost (loss of investment return on €400,000) is the real economic cost.

At a 5% return (achievable in diversified fixed income or property), the annual opportunity cost is €20,000 per year. For an individual saving €200,000+ per year in tax by virtue of Andorran residency, this is a minor cost.

The deposit is returned when the individual terminates their Andorran residency.

Banking, Healthcare, and Schools

Banking: Andorra has three main banks — Andorra Banc Agrícol Reig (BANCA), Mora Banc, and Crèdit Andorrà. Following Andorra's adoption of CRS and its signature of a Monetary Agreement with the EU, banking access in Andorra has improved significantly compared to the pre-CRS era when Andorran banks were synonymous with secrecy. Opening a bank account as a new resident is straightforward with standard KYC documentation.

Healthcare: The Andorran national health service (CASS — Caixa Andorrana de Seguretat Social) provides good quality healthcare. Private health insurance is also widely available and relatively affordable.

International schools: Andorra has French-language, Spanish-language, and Andorran-language educational systems. The international school provision is limited compared to Monaco or Geneva, which is a consideration for families with English-speaking children at international school age. Several families solve this by maintaining children at UK or Swiss boarding schools while establishing Andorran residence.

Interaction with French and Spanish Tax Rules

Andorra shares borders with France and Spain. Both countries have specific anti-avoidance provisions targeting individuals who establish Andorran residence while maintaining their economic and personal centre of gravity in France or Spain.

France: The French fiscal domicile rules (Article 4B CGI) will apply to anyone whose foyer, séjour principal, or principal professional activity remains in France. An individual who claims Andorran residence but whose family lives in Toulouse, and who works primarily in Paris, will be French fiscally domiciled regardless of their Andorran permit.

Spain: Spain's anti-avoidance rules target Spanish nationals who claim to have changed their tax residence to a tax haven jurisdiction (Andorra was on Spain's tax haven list until a double taxation treaty was signed in 2022). Under the Spain-Andorra DTA, residents of each country are generally taxable only in their country of residence — providing treaty protection for genuinely Andorra-resident individuals.

The Spain-Andorra DTA provides a tiebreaker mechanism for dual residents, which is relevant for individuals with connections to both countries.

HPT Group advises clients considering Andorran residency on the full analysis of: the Andorran IRPF position, the exit position from their current country of residence, the passive residency investment structure, and the ongoing compliance requirements. Andorra works extremely well for the right client profile — particularly investors with predominantly foreign income who value European location and lifestyle. For a personalised comparison of Andorra against other European residency options, see our country profiles or contact our team.