In the current context of economic and social instability caused by COVID-19 and the imminent tax hikes in both Spain and Latin America, many are wondering how to avoid being the scapegoat. And if the question is how to escape abusive taxation without having to move to a country with a culture radically different from that of Hispanics, Andorra inevitably comes up.
For example, imagine how much a high income person saves if instead of paying almost 50% tax in Spain, he/she pays less than 10% to the Andorran tax authorities. Amazing, isn’t it?
But what is Andorra?
For our Latin American readers who may not be as familiar, we can introduce Andorra as a small country in the Pyrenees located less than a three-hour drive from Barcelona. It is traditionally known for its ski resorts, mountains, long streets lined with stores and low crime rates.
However, perhaps the country’s biggest attraction is taxation: hundreds of high net worth individuals, content creators, cyclists, youtubers, gamers, Moto GP racers, poker players, big online marketers, traders, crypto-investors, etc. have already opted to relocate to this small country in the Pyrenees.
And why is its tax system so attractive?
- Maximum personal income tax rate with a maximum of 10%.
- Maximum corporate income tax rate with a maximum of 10%.
- The indirect tax (the equivalent of VAT) is 4.5%.
- There is no estate, inheritance or gift tax.
- Exemption on dividends from Andorran sources*.
- Trading tax exemptions.
- International tax transparency rules do not apply.
- Real Estate investments have a very low tax rate.
- The tax system is based on a liberal economy and a liberal executive.
* This means that if you have a company in Andorra, having already paid Corporate Tax you will not have to pay anything at all for dividends.
We would all sign to have something like this in our country, wouldn’t we?
Is Andorra a tax haven and does it have banking secrecy?
Andorra has been for decades a tax haven with banking secrecy, and this could still bring the odd problem for clients for banking compliance purposes. Despite this, Andorra has virtually disappeared from tax haven lists thanks to the country’s work and commitment to transparency and international cooperation.
In fact, recently, in December 2018, Andorra was excluded from the OECD’s “grey list”.
The elimination of banking secrecy, the rapprochement with the EU, the exclusion of pernicious tax regimes and the adoption of the BEPS Inclusive Framework make Andorra a country that, despite still being on some internal lists of tax havens (especially in Latam), will soon have an irreproachable image, thanks above all to the hard work that Xavier Espot’s executive has been doing lately.
And how can I reside in Andorra?
Currently, there are different types of residences, which are mainly divided between active and passive.
The first, active residency, requires establishing your residence permanently in Andorra and spending more than 183 days a year in the country. Such permanence will be controlled by the police and its fulfillment depends on the renewal of the residence.
The only inconvenience that exists to enter by the active route is that for some years you have to pay a deposit of 15.000€ that will be returned to you at the moment you leave the country. However, there is a clause that allows certain professions to be exempted from this deposit.
The second case, passive residence, has the advantage that it only requires your presence in the Principality for at least 90 days per calendar year, although you are obviously free to reside in Andorra longer. This requirement is not being controlled by the Andorran authorities at the moment.
However, this second type of residence requires a deposit of 50,000 euros and an investment of 350,000 euros, which despite sounding like an exorbitant figure is not so much if we take into account that it is equivalent to the “golden visa” that can be found in other European countries for much higher amounts.
Is this change of residence safe?
The Thyssen familiy, the Espargaró brothers, Maverick Viñales, TheGrefg, Patry Jordan, Natalia Cebrián and a long list of celebrities have already done it … And we have no doubt that more and more will opt to do the same, because living a few hours away from Spain and get rid of their excessive taxes is a real opportunity.
Of course, you need to make sure you have a local lawyer to help you with all the entry formalities, and depending on your assets and personal situation you may also need assistance in leaving your home country.
At Relocate&Save we believe that Andorra is an ideal option for high net worth individuals who want to reside in a quiet and safe place, or for people with short careers or dependent on external agents who want to take advantage of their best professional years to save.
If I am from Latin America, can I live in Andorra?
Andorra is not part of the European Union, so the entry of Latin Americans to Andorra will be just as easy as the entry of EU citizens. The question is that you are accepted by immigration either through an active or passive residence, for which you should not encounter any impediment.
With both active and passive residency, you will be able to move freely throughout Spain, Portugal and France. However, you must always make sure that you spend a minimum of 183 days a year in Andorra.
How to take the first step?
If you are considering moving to Andorra, we recommend reading the report “The definitive guide to living in Andorra”, with the most complete information on Andorran taxation, residence and society.
For any other matter, please do not hesitate to contact us.