Much has been written about whether the Principality of Andorra is a tax haven or not. Media, youtubers, journalists, talk-show hosts pronounce themselves on the matter and, unfortunately, most of the time inaccuracies are committed.
What is a tax haven?
Generally people think that a tax haven is a low tax jurisdiction where people go to defraud and hide money… but nothing could be further from the truth.
Nowadays the definition of tax haven has nothing to do with how much tax is paid. Rather, it focuses on aspects such as transparency and the exchange of financial and tax information: a tax haven is not a country with low or zero taxes, but a country that does not exchange tax information with others and does not have double taxation avoidance agreements with information exchange clauses.
Thus, both the OECD and the European Union do not consider tax havens to be jurisdictions with zero taxation such as Monaco, UAE or Qatar, but they do consider tax havens to be those that do not share any tax information such as Panama or Fiji.
Are there lists of tax havens?
Tax haven lists include those countries considered as such by other jurisdictions or international organizations. This usually implies a more pejorative tax relationship (high taxes) and business and banking impediments.
The main lists of tax havens that exist are as follows:
- National, are those established by a country to decide which jurisdictions to consider as tax havens.
- International of supranational organizations, such as the OECD or the EU, with major banking and business implications.
- International NGOs or the United Nations, understood more as a thermometer of good practices or social trend than as a real listing.
Why Andorra was a tax haven?
The Principality of Andorra was for decades in the national and international lists of tax havens due to the application of banking secrecy and the lack of exchange of information on tax matters with other countries.
In other words, for years money could be hidden in Andorra without the country of tax residence knowing about it. Nor was there very strong scrutiny of where that money came from.
Is Andorra a tax haven?
Andorra is no longer considered a tax haven on any international listing for these reasons:
- Transparency and international cooperation commitments adopted by the Principality.
- Bilateral agreements on exchange of tax information “on request” .
- The automatic exchange of information agreement or “Common Reporting Standard” (“CRS”) of the OECD.
EU and OECD criteria
- In May 2009, the OECD decided to remove Andorra from the list of non-cooperative tax havens in light of its commitments on transparency and effective exchange of information.
- Andorra is not a non-cooperative tax haven.
- It adhered to the BEPS inclusive framework, which implied that on December 4, 2018 ECOFIN agreed to leave the Principality of Andorra definitively off the list of non-cooperative countries.
In short, does anyone consider Andorra a tax haven?
Currently most OECD members and all EU members recognize Andorra as a tax approved jurisdiction and not as a tax haven.
However, some Latin American countries still consider Andorra a tax haven and the restrictive Intermon Oxfam list still considers Andorra a tax haven, although this has no legal implications.
Therefore, Andorra is internationally considered a country that complies with the requirements of minimum taxation, tax fairness and transparency imposed by the same Union.
If you are interested in changing your tax residence to Andorra, we recommend reading the report “The definitive guide to living in Andorra”. For any questions you can contact us without obligation.