Crypto in Andorra: how are the purchase, sale and holding of Bitcoin and others taxed?

Applications for tax residency in Andorra by traders and large cryptocurrency holders have greatly increased during the first half of 2021.

And it is not by chance, as we will now see.

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Why Andorra is attracting hundreds of crypto-investors

The reasons why more and more people in the cryptocurrency world want to move to Andorra are obvious:

  • Very favorable taxes, with a maximum of 10% on profits.
  • Accounting advantages related to cryptocurrencies.
  • Cryptofriendly banks with knowledge of the cryptocurrency market.
  • Digital asset law about to be approved.
  • An environment with many people in the industry: miners, traders, whales…

In fact, in Andorra it is very easy to make connections with people related to cryptocurrency projects.

How is the sale of cryptocurrencies taxed?

At the moment, in Andorra capital gains derived from the sale of cryptocurrencies are taxed at 10%.

That is, if you bought an Ethereum for €100 and now sell it for €3,000, you would pay only €290 tax on the €2,900 profit.

And we say “for the moment” because a Cryptocurrency Law is being negotiated. We will talk about it later in this article.

And the exchanges from one cryptocurrency to another?

The exchange of one cryptocurrency to another or cryptocurrency swap can also generate a capital gain that would be taxed at 10%.

How to account for capital gains from the sale of cryptocurrencies?

Unlike many other jurisdictions such as Spain, to calculate cryptocurrency gains in Andorra it is not necessary to use the FIFO method, which is very detrimental to early holders. Any other justified and legally valid method such as LIFO is accepted.

This allows those who bought cryptocurrencies prior to the big rises, such as Bitcoin, to calculate the gains from portfolio sales on the last Bitcoin acquired at a higher price, therefore reducing taxation considerably.

We will spare you the technical explanations on other specific cases (Bitcoin forks, Ethereum, mining and staking, NFTs, DeFi, crypto betting, cryptocurrencies), but in all of them Andorran taxation is kinder than in neighboring countries.

Do Andorran banks accept cryptocurrencies?

Andorran banks were initially very reticent about cryptocurrency transactions.

However, recently some of them have started to incorporate staff with knowledge of blockchain and already accept cryptocurrency holders as clients. They also seem to be starting to value OTC trading, cryptocurrency trading, funds, etc.

It is crucial, therefore, to choose the right bank for your needs and arrive with your homework done. On more than one occasion, poorly advised clients have been turned down by banks, for example for not having sufficiently accredited the traceability of funds.

Does Andorra have a cryptocurrency law?

As we commented before, the government of Andorra presented in early 2021 a draft Law on Digital Assets that would regularize and greatly facilitate the installation of businesses related to cryptocurrencies and their relations with banks and institutions.

In our opinion, there are two particularly exciting details in this Draft Law:

  • Possibility to set up exchanges and regulated funds in Andorra
  • Tax exemption on the sale of cryptocurrencies if reinvested in Andorran products.

The latter would be a real revolution: Andorran residents would be able to sell their cryptocurrencies tax-free, provided they reinvest in Andorran companies or real estate.

What to do to pay cryptocurrency taxes in Andorra?

To take advantage of Andorra’s attractive cryptocurrency taxation you need to be a tax resident in Andorra. If you want to know more about ways to achieve residency, you can read our guides on active residency and passive.

How to take the first step

If you are interested in changing your tax residence 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.

And if you have any doubts about how your situation would fit into the Andorran legality, do not hesitate to contact us.

You can contact us without obligation in the following ways:

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"The definitive guide to living in Andorra"

  • Explanation of the tax framework
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