Investing in real estate in andorra in 2024

The recent tax law regarding foreign real estate investments in Andorra introduces significant changes for those who are considering acquiring real estate in this attractive country. Announced last September, this measure ends a temporary moratorium and marks a turning point in conditions for foreign investors looking to exploit Andorra’s real estate potential. Let’s find out what these changes mean for investment strategies and what you can do to adapt.

Tax on Foreign Real Estate Investments in Andorra

The new law on this tax was approved at the beginning of February 2024. This is a progressive indirect tax, applied to the real value of the acquisition, and is broken down into four brackets:

• 3% on the purchase of the first property.
• 5% off the second and subsequent purchases.
• 8% when at least six properties are purchased.
• 10% on the tenth and subsequent properties, or for urban or real estate developments.

Who has to pay this tax?

According to the new law, any foreign national, natural or legal, who obtains permission to invest in real estate in Andorra is required to pay this tax.

Application and calculation

The amount of the tax is determined at the time of signing at the notary’s office. For new construction projects, it is calculated at the time of registration of the new construction. Once foreign investment status has been obtained, registration in the Register of Foreign Investments becomes mandatory, as well as the generation and payment of the corresponding tax. Note that in the event of loss of foreign investment status, the tax already generated and paid will not be refunded.

Tax reductions

The law provides for a 90% reduction in the tax payable if the property is used for permanent rental for at least 10 years. Any changes before the end of this period will result in the full payment of the tax, with limits imposed to prevent abuse.

Stimulating the rental housing market

Law 3/2024, which governs this tax, aims to promote the Andorran rental housing market. In September 2023, a temporary suspension of foreign investment in real estate was decreed to ensure sustainable development and control speculative purchases. The revenue from this tax will help facilitate access to affordable rental housing.

Invest and live in Andorra in 2024

Despite this tax, Andorra remains attractive for its competitive tax system, exceptional natural setting, low crime rate, and top-notch healthcare system. These advantages make it an ideal place to minimize the tax burden while benefiting from a stable economic environment.

A diversified range of investment options:

Andorra offers foreign investors a wide range of investment opportunities, allowing them to diversify their portfolios and achieve their financial goals. Some of the most popular options include:

• Investment in local companies: Andorra is home to a growing number of dynamic and innovative companies in various sectors, such as fintech, tourism, green energy, and biotechnology. Investing in these companies allows foreign investors to contribute to the country’s economic growth while benefiting from attractive potential returns.

• Real estate acquisition with rental advantages: The Andorran real estate market is booming, offering foreign investors opportunities to acquire quality real estate in an attractive environment. Renting out these properties can generate stable and attractive passive rental income, especially since rental demand is strong in the country.

• Portfolio investments: Andorra offers access to global financial markets, allowing foreign investors to diversify their portfolios with stocks, bonds, and other financial instruments. The country has a strong and regulated financial system, ensuring the safety of investments.

• Other forms of investment: Other forms of investment, such as investment funds, collective real estate investments, and investments in start-ups, are also available in Andorra, providing foreign investors with additional opportunities to diversify their portfolios and achieve their financial goals.

A business-friendly environment:

Andorra is committed to creating a business-friendly environment for foreign investors. The country has implemented advantageous tax reforms, including a 0% corporate tax on certain activities, and has simplified administrative procedures to facilitate the establishment of foreign companies.

What are the quotas for residence permits in Andorra for 2024?

What is changing?

• A new global quota has been introduced for residence and self-employment permits. This quota amounts to 100 authorisations for the year 2024.
• The specific quotas for the various self-employed professional activities have been abolished.
• Applications for residence permits and self-employment will now be processed in the order in which they are submitted.

Who is concerned?

• This new quota concerns third-country nationals who wish to settle in Andorra and carry out a self-employed professional activity.
• Nationals of the European Union, the European Economic Area and the Swiss Confederation are not affected by this quota.

How do I apply?

• Applications for residence and self-employment permits can be submitted to the Immigration Department of the Government of Andorra.
• Applications must be accompanied by a number of documents, including a valid passport, a clean criminal record certificate, and a business plan.

Foreign investment in Andorra in 2024: key points to remember

A significant contribution to the economy: Foreign investment has played a crucial role in the Andorran economy, accounting for 18.7% of GDP in 2021. This underlines the country’s attractiveness as an investment destination and its significant contribution to economic growth.

Continued growth in 2022/2023: The positive trend continued in 2022/2023, with a continuous increase in the volume of foreign investment. This trend highlights the growing confidence of investors in Andorra’s economic potential.

The preferred service sector: The services sector attracted the majority of foreign investment in 2023. This reflects the increasing diversification of the Andorran economy and its move away from its traditional dependence on tourism.

The origin of the investments: The main foreign investors in Andorra in 2022 and 2023 were Spain and France, neighboring countries. This is due to the close economic and cultural ties that Andorra has with these two countries.

Future prospects: The outlook for foreign investment in Andorra remains positive. The country’s stable political and economic framework, coupled with its commitment to innovation and sustainability, is expected to continue to attract foreign investors in the coming years.

Moving to or investing in Andorra has many advantages, both in terms of taxation and quality of life. With a variety of opportunities available, Andorra is an attractive choice for investors and potential residents. Feel free to contact us for more information about these new regulations and investment opportunities.