Cheaper than Monaco and the Channel Islands for property, and with no income tax, the number of people taking residency in Andorra has historically been good for the last forty years.
Over the last two years, however, the number of residency applications in Andorra has dropped as the country's parliament debated whether to introduce a minimum investment level for new entrants. Once the government had made the decision, the number of people viewing property in Andorra rose again.
But now Andorra has decided for the first time to introduce income tax. Why? Could this mean the end of Europe's most accessible tax haven?
The OECD and EU have put pressure on the country in recent years to introduce an income tax. With neighbouring countries, especially France, needing as much revenue as they can get in the wake of the 2008 banking crises, Andorra will be moving her status from a tax haven to a low-tax jurisdiction to avoid being blacklisted by bigger nations and international organisations.
Over the last year, Andorra has already raised the bar as to who could take residency there. Until recently, it was possible to rent an apartment for as little as €700 a month, pay a €30,000 returnable deposit to the government, and as long as criminal records check out, an applicant could gain residency.
But now a €50,000 deposit to the government is needed. Overall €400,000 needs to be invested to gain residency. This can be in Andorra property, so the minimum amount new entrants need to be looking at for property in Andorra is €350,000.
Income tax is anticipated to be put in place in 2016. The first €24,000 earned will be tax free and the next €16,000 will be taxed at 5%. Income over €40,000 will be taxed at 10%. For someone with Andorran residency and earning €100,000 a year, their tax bill we be €6,800.
Moving to Andorra
So does moving to Andorra still make sense for those considering moving to a low tax jurisdiction? Tribune Properties , who have specialised in Andorra residency since 1997 say it is. They have sold two houses with a combined value of over two million euros in the week since the confirmation of income tax being introduced. They say this is early proof that Andorra is still a serious contender for those wanting to lower their tax bills.
The majority of people buying property in Andorra take passive residency and aren't working, they add. For those who are working, a tax rate of 6.8% on a €100,000 income is favourable compared to some of Andorra's competitors. Jersey and Gibraltar, for example, have tax rates of around 20% - double that of Andorra.
There's a real sense of community amongst expats. There is a good International Club with weekly meetings where newcomers can meet those who have lived in Andorra for a while.For those that do decide upon Andorra, the minimum number of days they need to live there is 90 a year, though many choose to stay there all year round.
Another attraction is the virtual absence of serious crime in the Principality, along with very low levels of petty crime such as vandalism, car theft, shoplifting or graffiti.
For those with children there is a choice of schooling, either privately through the International School in Andorra which is located in La Massana, or through the State system where the education is free.
Sport and leisure is well catered for. Each of Andorra's seven parishes have first class leisure centres with some even incorporating olympic size swimming pools. There are numerous spas to choose from as well.
Andorra has an international football team who famously caused England some embarassment in 2007. Despite being one of the lowest ranked countries in the world, they held England at 0-0 for the first half of a competitive international match, even though England ran out eventual winners 3-0. Andorra also have an international rugby team who fare a little better, but the country is most famous for her winter sports and is a popular destination between mid December and Easter for skiers.
With a population of 85,000, Andorra is small but has plenty going on for her citizens and residents. The tax advantages along with France and Spain both being easily accessible should ensure it remains a sought after low tax jurisdiction.
This article was submitted by Tribune Properties
