Detailed analysis of the 2025 Omnibus Law in Andorra

I. Introduction

Adopted in early 2025, the legislation commonly known as the “Omnibus Law” represents a significant set of legislative measures for the Principality of Andorra. This law primarily aims to address pressing socio-economic challenges, particularly the housing crisis and the need to more tightly regulate foreign investment in the Andorran real estate sector.

The context of this law is marked by a notable increase in real estate prices, fueled in part by a growing influx of foreign investments attracted by the stability and tax advantages of the Principality. This dynamic has created difficulties in housing access for residents and has raised concerns regarding real estate speculation. Faced with this situation, the Andorran government initially implemented temporary measures, such as a moratorium on foreign real estate investment authorizations in 2023-2024 and the introduction of Law 3/2024 establishing a specific tax on these investments (Tax on Foreign Real Estate Investment – IEI).

The Omnibus Law follows this continuity but represents a more structured and interventionist approach, aiming to ensure sustainable growth and preserve housing access for the local population. Historically, Andorra has favored investment through attractive conditions, but the growing negative externalities have led to this change of direction. The Omnibus Law, with the simultaneous introduction of multiple restrictions and regulations (purchase limitations, vacant housing regime, conversion of tourist accommodations, obligations for foreign developers), marks a fundamental evolution of Andorran policy, now prioritizing residential needs and controlled development over maximizing foreign capital flows in real estate.

This report aims to provide a detailed legal and practical analysis of the key provisions of the 2025 Omnibus Law, examining its specific requirements, implementation timelines, imposed restrictions, as well as its anticipated economic and social impacts and future evolution perspectives.

II. Legislative Timeline: Publication and Entry into Force

The Omnibus Law was adopted by the Consell General, the Andorran parliament, around March 6, 2025. In accordance with Andorran legislative procedure, the text subsequently required the sanction (signature) of the Co-Princes of Andorra before its official publication. This publication occurs in the Butlletí Oficial del Principat d’Andorra (BOPA), the official journal that gives legal force to published texts. Sources indicated that this publication was to take place before March 28, 2025. Although the exact publication references (number and precise date of the BOPA) are not explicitly detailed in the consulted documents, the law’s entry into force date is clearly established.

The Omnibus Law came into force on April 18, 2025. This date corresponds to the expiration of the usual vacatio legis period of 15 days following publication in the BOPA, a period during which the law is published but not yet applicable. It is crucial to note that several major provisions, especially the limitations on foreign real estate investment and modifications related to work permits, took effect from this date.

The relatively tight timeline between the law’s adoption in early March, the expected publication in late March, and the entry into force in mid-April demonstrates a governmental will for rapid implementation. Faced with a situation deemed urgent in the housing market, the authorities sought to minimize the delay between legal finalization and practical application of the measures, aiming for an immediate impact on investment flows and real estate market dynamics, even if it meant surprising some market players.

III. Foreign Real Estate Investment: New Restrictions and Regulations

The Omnibus Law introduces a significantly stricter regulatory framework for foreign investment in Andorran real estate, profoundly modifying the applicable rules.

A. Acquisition Limitations for Foreign Natural Persons

Since April 18, 2025, natural persons considered as foreign investors are subject to strict quantitative limitations when acquiring real estate properties:

• They can only acquire a maximum of two housing units (e.g., apartments, studios) OR a single single-family property (individual house, chalet).
• These acquisitions may include annexes, with specific limits: a maximum of three parking spaces and three storage units associated with the two housing units.
• If parking spaces are acquired independently, the limit is set at six spaces.

It is important to emphasize that real estate properties held by the foreign investor before the law’s entry into force (April 18, 2025) are not taken into account in calculating these new limits.

B. Scope of Application and Definition of “Foreign Investor”

The Omnibus Law redefines and clarifies the notion of foreign investor:

• Non-resident natural persons (except Andorran nationals).
• Resident natural persons (non-nationals) who have not resided in Andorra for at least three of the last ten years. This condition is stricter than the previous rule that required three years of uninterrupted residence.
• Foreign legal entities and foreign public entities.
• Andorran legal entities whose foreign participation (direct or indirect) in the capital or voting rights is equal to or greater than 50%.

A notable modification is the exclusion of Andorran entities with a foreign participation between 5% and 50% from the category of foreign investments subject to the Omnibus Law restrictions. This contrasts with the initial scope of Law 3/2024 (relating to the IEI), which targeted entities with a foreign participation greater than 5%. As the Omnibus Law amends Law 3/2024, it is important to verify whether the scope of the IEI has been aligned with this 50% threshold or if a potential divergence persists, which could create complexity for companies with a foreign participation between 5% and 49%. The latter could be subject to the IEI without being affected by the acquisition limitations of the Omnibus Law.

C. Exemptions and Special Conditions

The acquisition limitations regime includes important exemptions and specific conditions:

• Affordable Rental Housing: Properties acquired by foreign investors and intended for long-term rental (minimum 10 years) as a principal and permanent residence at an affordable price are explicitly exempt from the quantitative limits (2 units / 1 house). A new authorization can be requested after 10 years under the same conditions.
• Commercial Use: The acquisition restrictions do not apply if the real estate property is acquired by a foreign investor (natural or legal person) for the purpose of conducting their own commercial or professional activity there.
• Companies: Foreign companies or Andorran companies with majority foreign participation (>50%) can invest in real estate either to establish their commercial activity there, or if the ownership structure meets specific criteria (held by a single natural person or related parties such as family, partners).
• Prohibited Investments: The law explicitly prohibits certain types of foreign real estate investments:
  • Real estate development intended for resale.
  • Acquisition of housing intended for tourist or vacation use.
  • Certain sale-leaseback arrangements or rentals between related parties considered fraudulent.

Exceptions exist for developments entirely dedicated to long-term rental (of which at least 50% at affordable prices) or located in parishes that have updated their urban planning.

D. Associated Taxation: The Tax on Foreign Real Estate Investment (IEI)

The Omnibus Law also modifies Law 3/2024 that established the IEI. This progressive tax applies to the real value of the acquisition by foreign investors:

• Progressive rates:
  • 3% for the first acquisition (unit or house).
  • 5% for the second acquisition.
  • 8% from the sixth acquisition.
  • 10% from the tenth acquisition or for real estate development/urban planning operations.
• Reduction for Affordable Rental: A tax reduction of 90% on the IEI amount is granted if the acquired property is intended for rental as a principal and permanent residence for a minimum duration of 10 years, at a price considered affordable.
• Recovery Clause (Clawback): If the 10-year affordable rental commitment is not respected (e.g., early sale, rental at market price), the investor is required to reimburse the entire tax from which they had been exempted.

This tax structure reinforces the quantitative limitations. The acquisition of more than two properties becomes not only limited but also fiscally more costly, unless the investment is oriented toward the affordable rental market, which then benefits from a major tax advantage.

E. Obligations for Foreign Real Estate Developments

A distinct and crucial point concerns real estate development operations (development of new projects) carried out by foreign investors. The law appears to impose a general obligation: all real estate developments carried out by foreign investors must be intended for the creation of affordable rental housing. This requirement appears stricter than the limitations applying to individual acquisitions and aligns with the prohibition of developments intended for resale, unless they meet the rental criteria. The acquisition of developments by foreigners is only possible if they are intended for the rental market, with the notable exception of acquisition for commercial activity purposes. This suggests a marked will to channel large foreign development projects directly toward increasing the stock of affordable rental housing.

In summary, the legislation uses a combination of quantitative limitations, progressive taxation, and targeted tax incentives to discourage speculative property accumulation by foreigners and to actively direct foreign capital toward the rental housing segment, particularly affordable rental. The regime appears particularly constraining for foreign real estate developers, whose activity now seems almost exclusively confined to the production of affordable rental housing.

IV. Work Permits: Modifications for Non-EU Subcontracted Workers

The Omnibus Law also introduces significant changes regarding work permits for certain categories of foreign workers. Specifically, it targets non-EU (extra-community) subcontracted workers.

From the law’s entry into force on April 18, 2025, the following measures apply:

• First-time work permit applications for this category of workers will begin to be refused.
• Non-EU subcontracted workers already present in Andorra with a current permit will have to leave the territory upon expiration of their current work contract, as renewal will likely not be granted under these new provisions.

Although the analyzed documents do not explicitly detail the specific activity sectors targeted by this measure within the framework of the Omnibus Law, it is likely to primarily impact sectors that traditionally use this type of labor for occasional or seasonal needs, such as construction or certain tourism-related services.

The underlying logic of this measure appears to be a desire to more tightly regulate the labor market, potentially to favor employment of residents or European Union citizens, or to better control migration flows and pressure on infrastructure. This restriction on foreign labor represents another facet of the general trend of the Omnibus Law toward increased control of foreign influences and presences in Andorra, whether capital or workers. The direct impact could be a labor shortage in the affected sectors, potentially causing project delays or an increase in labor costs to attract authorized workers.

V. The Vacant Housing Regime (Applicable from October 2025)

One of the major pillars of the Omnibus Law is the establishment of a specific regime aimed at combating residential vacancy, which will come into application in October 2025. This regime is planned for a duration of five years.

A. Obligations of Property Owners

The law defines a vacant housing unit, particularly based on the absence of an electricity supply contract or a zero or very low energy consumption over a reference period (for example, the two years preceding January 1, 2024). Owners of properties identified as vacant according to the criteria defined by the law and its implementing regulations will have strict obligations:

• They will need to put their property on the rental market or sell it.
• An alternative provided is the mandatory transfer of the property’s use to the administration for a maximum duration of five years. The administration will then allocate the property to the residential rental market, in exchange for financial compensation paid to the owner, based on an affordable rental price. If the administration fails to rent the property within a period of six months, it will be returned to its owner.

B. Penalties for Non-Compliance

To ensure the effectiveness of these obligations, the law establishes or reinforces dissuasive financial sanctions:

• A specific and progressive tax is applied to housing units kept vacant, the amount of which increases with the duration of vacancy.
• The rate of this tax on vacant housing is significantly increased, potentially rising from 50 euros per square meter to 100 euros per square meter. The objective is to make keeping a housing unit vacant economically penalizing for the owner.

C. Objective

The stated objective of this regime is clear: to reduce the number of unoccupied housing units and, consequently, increase the supply of housing available on the market, especially for rental, in order to contribute to resolving the housing shortage in Andorra.

This system represents a particularly interventionist measure, directly affecting the right to private property with the aim of achieving a public policy objective considered priority. The State is equipped with strong regulatory and fiscal tools to compel owners to mobilize their vacant properties. Its success will depend on the administration’s ability to effectively identify the affected housing units, enforce the obligations, and manage the properties that may be transferred. This measure could exert downward pressure on prices if a large number of owners decide to sell simultaneously, and it will inevitably generate administrative burdens for both property owners and the government.

VI. Mandatory Conversion of Tourist Accommodations

The Omnibus Law also addresses the use of the existing housing stock by imposing a transition for tourist accommodation units (HUT – Habitatges d’Ús Turístic in Catalan). This measure adds to the restrictions already put in place regarding the granting of new licenses for this type of accommodation.

A. Conversion Obligation

The law requires that existing HUTs be progressively converted into housing intended for long-term residential rental.

B. Timeline by Category

This transition is organized according to a precise timeline, depending on the category of the tourist establishment:

• 2028 Deadline: Affects tourist accommodations classified as less than 4 stars.
• 2030 Deadline: Affects tourist accommodations classified as 5 stars or considered “luxury”.

C. Transition Period

A grace period of three to five years is granted to owners before these deadlines. This period aims to allow them to amortize their investments made in the framework of tourist activity before the mandatory conversion.

D. Context and Objective

This measure is part of the global logic of the law aiming to increase the supply of housing available for residents by reallocating a significant part of the housing stock (estimated at nearly 2,800 units in August 2024) currently dedicated to short-term rental.

This is a major structural transformation that will impact both the housing market and the tourism sector. By potentially reducing the supply of tourist accommodations of the apartment or chalet type, it could modify the structure of the Andorran tourist offer, possibly in favor of hotels. If it achieves its objective of increasing the long-term rental housing stock, it could contribute to easing the residential market. However, this measure risks encountering resistance from HUT owners and could affect the flexibility of the tourist accommodation offer and the revenues of certain actors.

VII. Analysis of Anticipated Impacts

The 2025 Omnibus Law, due to its scope and the diversity of its measures, is likely to generate significant impacts on several aspects of the Andorran economy and society.

A. On the Andorran Real Estate Market

Supply and Accessibility: The main objective of the law is to increase the housing supply, especially affordable housing, for residents. The mechanisms put in place (vacant housing regime, conversion of HUTs, tax incentives, and obligations for foreign developers) are designed for this purpose. Their real effectiveness will depend on the vigor of their application and the market response. Challenges remain to ensure that the increase in supply effectively translates into better accessibility for all residents.

Market Activity: A modification in the nature of transactions is likely: fewer speculative purchases by foreigners, more investments oriented toward rental (especially affordable). The overall volume of transactions could experience an initial slowdown, as market players adapt to the new regulatory framework. The marked interest of foreign buyers before the law suggests that the restriction will have a notable impact.

B. On Foreign Investment Flows and Andorra’s Attractiveness

• The law is likely to cool the interest of foreign investors specifically interested in real estate speculation or the acquisition of multiple second homes, due to quantitative limitations and the progressive taxation of the IEI.
• Nevertheless, Andorra could remain attractive for other forms of investment: direct investments in local businesses (except pure real estate), portfolio investments. In addition, substantial tax incentives (90% reduction of the IEI) could attract foreign investors specifically interested in the development or acquisition of long-term affordable rental housing.
• Andorra’s overall attractiveness is also based on other factors that remain: a stable economic environment, a still very competitive general taxation (low personal income tax, corporate tax at 10%, IGI at 4.5%, absence of wealth tax and direct inheritance rights), a high quality of life (security, health, environment), and improving infrastructure. The simplification of business creation procedures can partially counterbalance the increased complexity of real estate regulation.

C. On the Tourism Sector and the Accommodation Landscape

• The mandatory conversion of tourist accommodations (HUT) into residential housing will lead to a reduction in accommodation capacity in this specific segment (apartments, chalets in short-term rental).
• This could lead to a shift in demand toward hotels or other forms of accommodation, or potentially limit tourist volume if the overall supply does not adjust.
• This measure could be part of a broader strategy aimed at reorienting Andorran tourism toward different segments or those with higher added value (experiential tourism, luxury, wellness), rather than volume based on apartment rental.
• Companies specialized in the management of tourist apartments will be directly affected and will have to adapt their business model.

D. On the Housing Crisis and the Andorran Social Fabric

• The law has the potential to alleviate the housing crisis for residents by increasing the rental supply and curbing price increases.
• Socially, this could reduce pressure on tenants. However, frictions could appear with property owners (regarding vacant housing or the conversion of HUTs).
• The modifications of work permits for non-EU subcontractors could alter the composition of the workforce in certain sectors and have indirect social repercussions.

E. General Economic Considerations and Expert Perspectives

• The overall economic forecasts for Andorra remained moderately positive before the full measure of the effects of the Omnibus Law (GDP growth forecast around 1.5-2.1%, controlled inflation according to the IMF). The net impact of the law on these indicators remains to be evaluated.
• The law represents a complex attempt to find a balance between the need to regulate to protect residents and the desire to maintain a dynamic economy attractive for targeted investments. The success of this balance is not guaranteed and will depend on market reaction and implementation effectiveness.
• Although expert analyses specific to this law are limited in the provided documents, the general sentiment that emerges is that of a paradigm shift. The possibility of unforeseen effects or the need for future adjustments is recognized.

A powerful common thread through the various measures is the objective of promoting affordable housing. Whether through the tax incentives of the IEI, the mandates for foreign developers, or indirectly via the vacant housing regime and the conversion of HUTs, the priority given to increasing the stock of accessible housing for residents appears to be the main driver of this major reform of real estate regulation and foreign investment.

VIII. Potential Legal Challenges and Future Perspectives

Although the Omnibus Law is now in force, its journey may not be completely finished, and its future application could be influenced by various factors.

A. Legal Appeals

• The possibility of an appeal before the Constitutional Court has been mentioned, especially by the political group Andorra Endavant. However, the absence of necessary support from other political forces (such as the PS or Concòrdia) makes this eventuality unlikely in the short term.
• Potential grounds for such an appeal could concern infringements on property rights, issues of non-discrimination between national and foreign investors (although the structuring of the IEI in Law 3/2024 attempted to address this point), or other constitutional aspects. Nevertheless, given the current political context, a major legal reversal of the law seems unlikely.

B. Modification Factors and Future Evolution

• The law itself or its application methods could be subject to future legislative adjustments. The Andorran government could be led to modify certain provisions depending on the observed impacts on the market, implementation difficulties, or the evolution of political priorities. The complexity of the law and the interaction of its different measures make possible unforeseen consequences that might require corrections.
• The transitional regime provided by the law for transactions already engaged or previously authorized investments will modulate the immediate impact of the law for certain specific actors.
• Regular monitoring of authorized investments is planned by the authorities, indicating an intention to actively monitor compliance and potentially adapt the regulation based on the data collected.
• In the longer term, ongoing negotiations toward an association agreement between Andorra and the European Union could influence the national legislative framework, potentially including areas related to free movement, competition, or regulatory standards, although a direct and immediate impact on the specific provisions of the Omnibus Law seems less likely.

In sum, although a complete legal reversal seems unlikely, the 2025 Omnibus Law should not be considered as fixed legislation. Its complexity and interventionist character suggest that it inaugurates a new phase of regulation that will likely be subject to continuous monitoring, potential jurisprudential interpretations, and possible legislative adjustments as its concrete effects manifest. Investors and other stakeholders will therefore need to show vigilance regarding its practical application and possible future developments.

IX. Conclusion

The 2025 Omnibus Law constitutes a significant legislative response to the tensions observed in the Andorran housing market and the consequences of foreign real estate investment. It articulates several key measures: strict limitations on the number of real estate properties that can be acquired by foreign natural persons, a progressive taxation (IEI) strongly incentivizing investment in affordable rental housing, an obligation for foreign developers to dedicate their projects to this segment, a coercive regime to mobilize vacant housing, the mandatory conversion of tourist accommodations into residential housing, and restrictions on work permits for non-EU subcontractors.

The stated objective of the government is clear: to improve housing access for residents, curb real estate speculation, and ensure more sustainable and balanced growth. However, the real impacts of this complex law are still uncertain and could include a slowdown in the real estate market, a reorientation of foreign investment flows, adjustments in the tourism sector, and tensions in the labor market in certain sectors. The success of this law will depend on its effective implementation and the reaction of the various economic actors.

From the legal analysis perspective, the Omnibus Law marks a turn toward a significantly more interventionist regulatory environment in Andorra, especially in the real estate sector. Foreign investors, developers, property owners, and concerned businesses must imperatively analyze in detail the provisions that specifically affect them. It is essential to understand the interaction between the Omnibus Law and Law 3/2024 (IEI) as amended, as well as the implications of the different timelines and exemptions. Recourse to legal and tax advice specialized in Andorran law is more than ever recommended to navigate this new regulatory landscape and ensure compliance of operations. Diligence and anticipation will be crucial in this evolving context.

Ultimately, the 2025 Omnibus Law raises the question of whether it represents a cyclical adjustment or a structural and lasting change in Andorra’s approach to foreign investment and the management of its real estate market. The coming years will allow for an evaluation of the effectiveness of these measures and a determination of whether new adaptations will be necessary to achieve the objectives of sustainable development and well-being for the Principality.