Relocate to Andorra and save taxes
The tiny state in the Pyrenees, wedged between France and Spain, is not an EU member but offers a maximum tax rate of 10%. Also, the sea is a two-hour drive away.
Andorra as a tax haven
Andorra offers extremely attractive tax advantages for investors and entrepreneurs: Corporate tax is only 10%, but can be reduced to 2% for small profits. Income tax starts at 0% and rises moderately to a maximum of 10%, with a tax-free allowance of €24,000.
Dividends from an Andorran company are tax-free for Andorran residents, as are many capital gains, such as those on cryptocurrencies, provided they are earned privately. There is no wealth tax, no inheritance or gift tax, and no capital controls.
Many financial experts recommend Andorra for long-term tax planning due to its stability and predictable fiscal framework. Its policies encourage reinvestment and entrepreneurial growth, making it easier for business owners to plan multi-year projects without unexpected tax changes.
Additionally, the absence of capital controls allows investors to move funds freely, supporting international business activities and portfolio diversification.
Andorra does not have a double taxation agreement with Germany, which could result in German taxation of German pensions, capital gains, or business transactions. However, Austria and Switzerland have each concluded a comprehensive double taxation agreement with Andorra, which avoids double taxation and significantly simplifies tax planning for Austrian and Swiss citizens.
Andorra – a paradise, but no longer an oasis! Both the EU and the OECD have, at least, stopped considering the country a tax haven for several years. Oxfam International (an NGO), however, places Andorra on its list of tax havens due to its low tax burden (more precisely, due to its lower percentage of revenue), and that's pretty accurate!
While Andorra remains financially attractive, it continues to evolve in response to international standards. Initiatives in sustainable energy, tourism diversification, and digital economy development reinforce its appeal not only as a tax-efficient location but also as a forward-thinking microstate. Residents increasingly benefit from programs supporting entrepreneurship and innovation.
The Andorran government is also investing in digital infrastructure, including high-speed internet and advanced banking technology. This is particularly appealing for digital entrepreneurs and remote workers who rely on stable connectivity.
Moreover, the country has begun offering incentives for renewable energy projects, eco-friendly tourism, and innovative startups, signaling a forward-thinking approach to sustainable development.
Andorra has also been involved in financial scandals in the past. For example, in 2015, when the Banca Privada d'Andorra was accused by the US Treasury Department of laundering funds connected to organized crime.
Meanwhile, Andorra is actively working to improve its image: In 2017, the principality abandoned banking secrecy, began exchanging information with the EU and the OECD, and concluded several transparency agreements.
For example, the Spanish tax authorities are now permitted to conduct tax inspections in the principality.
Thanks to these measures, Andorra has managed to get off the blacklists. And the fact that the IMF accepted the country as a new member in 2020 is also contributing to a new, improved image.
However, the small principality in the Pyrenees remains a financial paradise due to its low taxes compared to other European countries.
Book tax advice for moving to Andorra
Book tax advice for moving to Andorra
If you are considering relocation, early planning is essential. This includes reviewing your current tax obligations, evaluating the legal requirements for residency, and understanding the implications for business ownership and investment.
Many international advisors recommend a preliminary consultation to avoid common pitfalls and ensure compliance with both local and foreign tax laws.
Relocation planning also involves lifestyle considerations. Evaluating school options, healthcare facilities, language requirements, and social integration opportunities can make the transition smoother.
Living in Andorra, many expats enjoy a safer environment and a more balanced work-life dynamic, with outdoor activities and cultural engagement enhancing overall well-being.
How the attractive tax system works in Andorra
The Principality of Andorra remains an attractive destination thanks to its low income tax rates. Compared to other European countries such as Spain (49%), France (45%), or Germany (45%), personal income tax is significantly lower at a maximum of 10%. There is no wealth tax, and the VAT rate is the lowest in Europe. All this has led to trade, tourism, and the financial sector becoming the most important drivers of the Andorran economy.
Because of these tax advantages, large fortunes, small businesses, high-earning freelancers, and sports and film stars have established their headquarters (and residence) in Andorra.
With a clearly advantageous tax system and a tax structure designed to encourage investment and entrepreneurship, the Principality is among the top countries welcoming foreign investment.
The principality continues to work on offering a favorable tax system and extremely attractive tax rates for its residents. While Andorra may remain a "tax haven" for some foreigners, the country continues to entice foreign investors and attract new residents.
Additionally, Andorra’s political stability adds another layer of security for residents and investors. The principality enjoys a transparent legal system and low corruption levels, which provide confidence to those relocating their personal and business assets.
This stability, combined with economic predictability, makes it an appealing choice for long-term residency and wealth management.
The government has also introduced incentives for startups, tech companies, and creative industries, making it an ideal location for digital nomads and innovation-driven businesses. Tax breaks and simplified corporate procedures allow new companies to establish themselves efficiently while benefiting from Andorra’s favorable fiscal environment.
In this context, please also read Chapter VI, where you will find the tax rates in detail.
Book tax advice for moving to Andorra
For whom moving to Andorra is worthwhile (and for whom it is not)
Moving to Andorra can be a strategic move for various individuals and businesses, including smaller enterprises and freelancers. The decision to relocate, however, brings up numerous questions: What documents are necessary to obtain residency?
Is a significant investment required to establish a company? What specific tax advantages can be gained from this move? These and many other considerations must be addressed, and the requirements vary depending on your circumstances. Accordingly, Andorra's legal system provides for different types of residence permits:
a) Active Working and Residence Permit for Company Founders (Shareholders)
The best option for a company owner who wants to live in Andorra is a work permit for shareholders and partners.
You'll receive active residency as the managing director of your own company immediately after it's established. The company must engage in a proper commercial activity (such as production, services, or trade), and you must own more than 20% of its shares.
You are also required to pay into the Andorran social security system. Additionally, you must deposit a security of €15,000 with the government's financial authorities and live in Andorra for at least 183 days per year.
This type of residency is particularly beneficial for entrepreneurs who want to combine personal residence with operational control of their business, ensuring both tax efficiency and legal compliance in Andorra.
b) Passive Residency in Andorra
Passive residency is the most common type of residence permit in Andorra. It does not include a work permit and is typically for people who are financially secure, with sufficient passive income from sources like interest, pensions, dividends, or rental properties.
However, as we'll see in section b2, this doesn't mean you can't be gainfully employed! There are three types of passive residency:
b1) Passive Residency for Investors
To qualify, you must provide proof of the following:
Assets of €350,000 invested in Andorran real estate or deposited in an Andorran investment fund or bank.
A security deposit of €50,000, which is held by the Andorran government without interest.
A purchase or rental contract for a property in Andorra.
A medical report prepared within the country.
Financial security and income that is more than 300% of the Andorran minimum wage.
Private health insurance.
A police clearance certificate.
A stay of at least 90 days per year in Andorra.
This option is ideal for investors who prioritize wealth preservation and diversification while enjoying a high-quality lifestyle in a tax-efficient environment.
b2) Passive Residency for Businesspeople and International Professionals/Freelancers
This option is perfect for freelancers, self-employed individuals, and other professionals who offer their services internationally and plan to set up a business in Andorra.
The company doesn't need to be formed immediately; it can be established later. This category covers a wide range of professions, including software development, consulting, and international sales.
This permit is initially issued for two years and can then be renewed for another two. After that, it can be renewed for a three-year period. After the seventh year, you can receive ten-year extensions.
This flexibility allows professionals to gradually establish their presence in Andorra while maintaining international business operations, offering both financial and personal stability.
b3) Passive Residency for Renowned Scientists, Athletes, and Artists
This permit is designed for individuals with proven expertise in their fields who have a notable international reputation.
Like the permit in section b2, it is first issued for two years, renewable for another two years. Following that, it can be extended for three years. After the seventh year, you can then receive ten-year extensions.
Book tax advice for moving to Andorra
Special features when moving to Andorra
Residence for tax purposes:
Living in Andorra with a residence permit allows you to officially reside in the country, but this does not automatically mean you are also subject to tax in Andorra. A person can live in several countries, but only one tax residence applies at a time.
Andorra applies the same criteria as most OECD member countries. The three most important criteria are:
Andorra is your permanent residence. This requires a stay in Andorra of more than 183 days per year.
The center of your economic interests lies in Andorra.
Andorra is the centre of your vital interests, i.e. your family core (your partner and your minor children) lives in Andorra.
Special requirements for active residency:
You must stay in Andorra continuously for more than 183 days per year. However, this period may be interrupted by vacation or business trips.
You must pay a contribution to the Andorran social security system. This is currently a flat rate of around €465.00 per month and provides you with access not only to the Andorran, but also to the French and Spanish health systems.
Establishment of an Andorran company or acquisition of a stake of more than 20%
Deposit a security deposit of €15,000.00 with the Andorran Financial Authority (AFA).
You must hold a position in the administration of the company
Active residency ensures compliance with Andorran regulations while maximizing tax benefits, allowing entrepreneurs to integrate fully into the local economy.
Special requirements for passive residences:
b1) Passive residence for investors
An asset of €350,000 invested in Andorran real estate or deposited in an Andorran bank fund
A security deposit of € 50,000, which must be deposited interest-free with the Andorran government
The purchase or rental contract for a property in Andorra
A medical report prepared on site
Sufficient financial resources (over 300% of the Andorran minimum wage)
Private health insurance
A police clearance certificate
Staying in Andorra for at least 90 days per year
b2) Passive residence for business people and professionals/freelancers with an international orientation
A security deposit of € 50,000
Proof of sufficient income
Rental or purchase agreement for a property in Andorra
Proof of insurance (health, pension, disability insurance)
Minimum stay in Andorra of 90 days per year
Andorra must be the main office from which the professional activity is carried out
At least 85% of revenue must be generated in countries outside Andorra
A recognized business plan
b3) Passive residence for renowned scientists, athletes and artists
Physical transfer of main residence to Andorra
Minimum stay in Andorra of 90 days per year
Clear evidence and qualifications of scientific, cultural or sporting activities/achievements
Clean criminal record
A security deposit of € 50,000
Rental or purchase agreement for a property in Andorra
Proof of insurance (health, pension, disability insurance)
A medical certificate of health issued on site
Sufficient financial resources (over 300% of the Andorran minimum wage)
Information on the interpretation of tax residence in Andorra
Book tax advice for moving to Andorra
Tax rates in Andorra at a glance
Income tax:
Income in Andorra is tax-free up to €24,000. Income between €24,001 and €40,000 is taxed at 5%. Anything above that is taxed at 10%, which is the highest tax rate.
There is currently no double taxation agreement with either Germany or Austria.
This low-income tax makes Andorra more attractive than other European countries for high earners seeking legal tax optimization.
Wealth tax:
There is no such thing in the Principality of Andorra!
Inheritance tax:
This also does not exist in Andorra!
For foreigners living in Andorra, the inheritance laws of the country of the deceased's nationality apply. Therefore, it is recommended that a will be drawn up with an Andorran notary regarding local assets.
Corporate tax:
Corporate income tax ranges from 2% to 10% of company profits, depending on the company's activity. This makes Andorra an ideal location not only for large corporations, but also for medium-sized companies and freelancers.
From a tax perspective, establishing a company in or relocating its headquarters to Andorra is definitely worth considering.
Taxes on banking and financial services:
An increased tax rate of 9.5% applies to banking and financial services.
Capital gains tax:
For companies and individuals in Andorra, capital gains are taxed like any other income.
a) Capital gains tax on financial capital gains
The nominal tax rate here is 10%.
b) Capital gains from real estate sales (real estate capital gains)
are taxed based on the length of ownership prior to the transfer of the property. If the property has been owned by the same person for more than 10 years, no capital gain is due. Otherwise, the capital gains tax is
15% if the property was sold within 1 year;
13% if sold in less than 2 years;
10% if sold in less than 3 years;
After that, it decreases by another percent each year.
c) Capital gains tax on shares
If you own less than 25% of a company or have held shares in a company as a shareholder for more than 10 years, you do not have to pay capital gains tax on shares in Andorra.
This system encourages long-term investments in companies and real estate, making Andorra a strategic location for asset growth.
Taxes on bank interest:
Interest on bank deposits is tax-free up to an amount of €3,000 per year.
Real estate taxes:
The tax on real estate transfers was set at 4% by law on December 29, 2000 (3% for the municipality, 1% for the state). The property transfer tax (ITP) and notary fees (1%) are paid by the buyer. The brokerage fee (5%) is paid by the seller. Besides the transfer tax, residents also benefit from other tax advantages.
VAT:
Products and services in the health and education sectors are tax-free.
A reduced tax rate of 1% applies to food and non-alcoholic beverages.
The tax rate for art and culture is 2.5%.
For most goods and services, residents of the Principality enjoy a value-added tax (VAT) rate of 4.5%. This also applies to the import of goods (=total value of the goods including transport, packaging, and insurance costs) into Andorra, and must be paid to the customs office there. This is the lowest rate in all of Europe!
The low VAT rate ensures that everyday costs are minimized, further enhancing the financial advantages of living in Andorra.
Taxation of profits from cryptocurrencies and crypto assets in Andorra
Whether it's income from private cryptocurrencies and crypto assets, or profits from mining, staking, and commercial crypto trading, our website KryptoSteuern.info tells you how the resulting profits are taxed in Andorra and whether it's worth relocating to Andorra as a crypto investor. We also present over 60 other tax-friendly or tax-disadvantageous countries for crypto investors.
Book tax advice for moving to Andorra
Avoid the Boris Becker trap of a fake move
The definition of the center of life and its relocation are described in detail on this page.
Your move to Andorra must be a genuine move. You must completely relocate your primary residence and demonstrate sufficient local presence.
Living in Andorra means making it your main base, not just a temporary stay. If you continue to live regularly in Germany, Austria, or Switzerland, your center of life will not really be relocated and you will find yourself like Boris Becker 25 years ago, who spent much more time in Germany than in Monte Carlo.
Only a real move abroad, possibly with the whole family, is an option for you.
Establishing a genuine residence ensures compliance with international tax laws and avoids scrutiny from German, Austrian, or Swiss authorities.
Please also note that individuals who were subject to unlimited taxation in Germany and then moved abroad will regularly receive a questionnaire from the tax office regarding their move abroad, approximately three to 12 months after deregistering their residence in Germany.
This questionnaire contains 16 detailed questions in which you are asked to provide comprehensive evidence of the circumstances of your departure from Germany and your new residence abroad. Of course, you can simply ignore the letter, but we advise against it.
Tax debts can lead to the confiscation of your passport – at least if you fail to communicate with the authorities. The German government can confiscate your German passport even if they fabricate tax debts. The only solution then is to purchase a second citizenship (e.g., "Citizenship by Investment").
Book tax advice for moving to Andorra
What makes Andorra attractive as a country of residence
The country offers a lot, with a high quality of life and a low crime rate. Its education system and the CASS (Caixa Andorrana de Seguretat Social) healthcare system are excellent, contributions are very affordable, and residents also enjoy substantial tax benefits.
The cultural, culinary, geographical, and economic advantages that Andorra offers make it a unique, indeed admirable, country. The age of digital nomadism can—and probably will—make the small principality in the Pyrenees, along with its legal system and lifestyle, a preferred choice for other Europeans considering a change of residence.
Book tax advice for moving to Andorra
Cost of living in Andorra la Vella (the capital of Andorra)
The website Numbeo lists the international cost of living in various countries and major cities. An index value of 100 corresponds to the cost of living in New York City. Index values below 100 indicate that a segment of the cost of living (e.g., food) in that country is lower than in New York City.
On the overview page, you can find information about rental prices and restaurant prices, as well as the costs of many everyday items. Naturally, rents in the city center of Andorra de Vella are significantly higher than in the outlying areas.
This aspect should be taken into account when comparing costs. While a two-bedroom apartment in the city center can cost just under €800, rents outside the city center can be as little as €500. Depending on location, condition, and whether the building is new or old, rents here also vary considerably.
Living in Andorra with active residency offers highly appealing affordable costs compared to major European cities, making it attractive for both families and entrepreneurs.
Here is the link to the Numbeo page for Andorra la Vella.
Book tax advice for moving to Andorra
Tax aspects of moving away
We have explained the tax consequences of moving abroad in detail on this page.
An important point to note is that moving away from Germany does not exempt you from paying taxes if you continue to receive income from Germany. The same rule applies to Austria.
Whether or not you, as a German taxpayer, remain subject to limited tax liability in Germany must be examined on a case-by-case basis by your tax advisor. In this case, a consultation is essential and should be arranged well in advance of your move.
It should be noted that the Principality of Andorra is considered a low-tax country.
This may mean that, as a German taxpayer, you will not only remain subject to limited tax liability in Germany, but will also be subject to extended limited tax liability.
Please consult your tax advisor in Germany regarding this matter (the same applies to Austria. Switzerland does not have a similar regulation).
Exit tax is not deferred when moving to a non-EU country – if you have a company in Germany, the fictitious capital gain is immediately calculated, which you must then tax.
It may therefore make sense to first move to an European Union country and then move on to the Bahamas.
Book tax advice for moving to Andorra
Correct preparation
To properly prepare for your move to Andorra, you should clarify a few questions in advance, which we will briefly address in the following section. There are several aspects of your tax and wealth planning that should be clarified before taking this important step. Living in Andorra comes with specific residency and tax rules that you should understand beforehand.
What is the best time to move to Andorra?
There's no perfect time to move. From a tax perspective, moving within a current tax year, which runs from January 1 to December 31, is irrelevant.
Do I or another family member need a visa for Andorra, and on what basis do I apply?
Although Andorra is not a member state of the EU and is not part of the customs territory, a customs union exists between the principality and the EU.
EU citizens do not require a visa to enter Andorra. The country has concluded transit agreements with Spain and France, so European citizens do not require a special permit.
They only need their passport or identity card when entering and leaving the country. Therefore, as a German or Austrian citizen, you do not need a visa for yourself and your family and can stay in the country for up to 90 days without registering. Stays of more than three months require a residence permit.
Proper planning ensures compliance with immigration rules, avoiding potential delays or legal issues.
What happens to my existing business?
If you have an existing business, moving abroad has consequences. A corporation can, in principle, simply continue operating, possibly with a new managing director. If you were previously self-employed, continuing the business is not always possible.
Speak to your tax advisor and discuss the best solution. If you are considering selling your business, it is better to complete the process before moving.
Careful planning before relocation ensures that your business remains compliant with both domestic and Andorran regulations.
Do I have to start a new company abroad?
To obtain a passive residence permit, you don't necessarily have to establish a new business (see points IV and V). However, to benefit from the attractive tax incentives in Andorra, it can often be advisable. We will clarify the possibilities and options available in a personal consultation.
What happens to my current apartment at home?
In order to relocate your entire life to Andorra, you must give up your home. In order to be able to eliminate your tax liability in Germany, you cannot avoid giving up your home.
However, this does not mean that you have to sell your own property—you can rent it out if necessary. However, you must deregister your residence in Germany.
Securing your former property as a rental or sale is a strategic financial step that complements your tax planning.
Book tax advice for moving to Andorra
Automatic exchange of information according to OECD CRS
If you live in Andorra and are a taxpayer there, you do not need to take any action regarding the new automatic exchange of information under the OECD CRS. You are officially entitled to hold accounts abroad and receive capital gains tax-free.
The OECD Common Reporting Standard (CRS) was designed to increase transparency between countries, helping prevent tax evasion. For residents of Andorra, this means that while banks in participating countries will report account information to Andorran authorities, compliant taxpayers have no reason to worry.
This framework protects honest investors while ensuring that Andorra maintains its reputation as a transparent and cooperative jurisdiction.
Your home tax office is known to your bank as Andorra, and even if information is exchanged, you have nothing to fear from the Andorran authorities because you are not evading taxes.
It is important to maintain accurate records of all financial transactions and to declare any income properly in Andorra if required.
Keeping detailed documentation ensures that any queries arising from automatic information exchanges can be resolved quickly and without complications. This proactive approach helps residents stay fully compliant and maintain peace of mind.
However, it can become problematic if you distribute capital gains to Andorra and fail to declare the income on your tax return. If this comes to light as a result of the exchange of information, you could face difficulties.
Understanding the OECD CRS rules ensures that your cross-border financial activities remain fully transparent and legally secure.
Overall, the CRS framework promotes a safer financial environment for everyone. Compliant residents benefit from the legal clarity it provides while Andorra maintains strong international credibility. By following the rules carefully, you can enjoy the advantages of Andorran residency while avoiding unnecessary risks associated with cross-border finance.
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How our law firm can help you with your move to Andorra
Our firm has assisted many clients in relocating abroad. With offices in London, Malta, Dublin, and Austin, TX, we are ideally equipped to assist you with your move to the UK, Malta, Ireland, the USA, and the Bahamas.
The services we provide are always tailored to each client's individual needs. They typically include one or more of the following tasks, which the client entrusts us with:
Advice on the tax consequences of moving abroad for the entrepreneur: analysis, forecasts, assessments;
Clarify location issues abroad for your company based on various factors such as market access, available workforce, and public funding in cooperation with local experts;
Recommendation of local real estate agents who have experience with international clients and can help with the search for properties to buy or rent;
Recommendation of specialist lawyers in the field of immigration law to obtain a visa;
Advice and referral to local tax advisors who will handle the opening of bank accounts for the company and you personally;
Ongoing tax and administrative support for your company,
Tax-efficient structuring or restructuring of assets through foreign subsidiaries, holding companies, and trusts.
In principle, our services are billed on a time and material basis, although some services (e.g., the establishment of a company) have fixed prices.
Our tailored approach ensures that every aspect of your relocation and investment is optimized for tax efficiency and legal compliance.
As a first step, we recommend booking a consultation to discuss your project by phone, Skype, Zoom, or Signal. Together, we will find the best course of action and establish contact with our partner in Andorra. As your project coordinator, we will manage all the necessary details for the successful implementation of your ideas.
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How our law firm can support you in your project
We offer comprehensive tax and legal support for your relocation of residence to a tax-efficient foreign country.
We follow a well-established process. Depending on the country, we involve our local partner firm where necessary, but even then, we remain responsible for overall coordination.
The results are impressive: We have helped over 100 entrepreneurs and business people significantly reduce their tax burden.
Careful planning, thorough advice, and comprehensive support are a matter of course for us. Impeccable tax planning within the framework of international tax law is our top priority.
Our global experience ensures that even the most complex relocations are executed smoothly, avoiding unexpected tax or legal pitfalls.
Get advice now about relocating your residence to Andorra
Have you been actively considering relocating to Andorra and flagging out your residence for an extended period? Can you imagine moving to Andorra in principle? Have you reached a point where your internet research isn't helping you any further?
If you answer “yes” to these questions, it’s time to discuss your plans with a qualified expert on relocating to Andorra.
During a well-prepared, one-hour consultation, we can achieve a lot together: You'll receive the feedback you need to make a final decision regarding a move to Andorra.
You'll learn where you still need to improve your preparations and what the critical points are for the success of a potential relocation to Andorra.
You'll benefit from our "boot on the ground" practical knowledge gained from more than 15 years of practical consulting experience. The goal of this consultation is to provide you with planning security, composure, and confidence for your future in Andorra.
Relocating to Andorra can be the ultimate solution for tax optimization, especially for high-income earners. A consultation is the first concrete step toward a tax-optimized future.