living in Andorra guide on residency relocation advice

Many people have asked me about the effect of all the latest tax agreements with the EU and other countries and how they affect the position of Andorra. Well, in summary if you look at the position of other countries affected by these and other agreements then the position of Andorra may have even strengthened, especially the case for becoming a passive resident.

There is no income tax in Andorra for passive residents, and there is no income tax for any money earned outside Andorra by individuals or companies, furthermore there is no disclosure or declaration required of funds or monies earned outside Andorra. Due diligence by the bank as to the source of funds is often now required, this is no requirement of a report to the Government, it simply means if there is a transfer in to Andorra and you cannot prove the source of funds or bona fide ownership of the money to the satisfaction of the bank, then the transfer in may be rejected.

The Government hasintroduced in Andorran Corporation Tax starting on 1st January 2012, this only applies to Andorran registered companies. In 2012 the tax will be 5% of all profits in excess of €50.000 profit, from 2013 it will rise to 10% where it is intended, at least for now to stay at 10% for future years
.
This affects Andorran registered companies only (another reason unfortunately for not considering the option of registering a company here but staying "off-shore" where you can enjoy the benefits of less regulation and no tax whilst enjoying the status as a passive resident).

It should be noted that as at 2012 there is no personal tax system in place, although this is now planned to come into force before 2015, but again only affecting the highest paid salary earners in Andorra.

The good news is that this will not affect passive residents.

But what will affect everyone is the changes to current service taxes of 4% which the Government intends to put under one umbrella of a 5 % VAT or IVA, a small rise but neverthelss a lot less than other countries in Europe.

Already in place is the tax on foreign services of 10%. Any Andorran company who uses the services of a non-resident is now obliged to withold and pay to the Government 10% of the total. this also includes a resident renting out a property to a non-resident. Once again (as passive residents cannot sublet or do business in Andorra) this will not affect passive residents!

My advice overall is that the passive residency scheme remains by far the most beneficial scheme probably in Europe if not the world, remaining outside domestic regulations and most legislation.

I am pleased to say that I have teamed up with a UK based but International team of experts who are in a position to advise you on matters that may concern you in your country of tax domicile, wherever that may be, when considering a relocation to Andorra. This will be done on a free and without obligation introductory chat with an advisor to find the best way for you to take advantage of the zero income tax regime of passive residency in Andorra. Whether you are concerned about or wish to legally avoid paying company taxes, income taxes, VAT or the setting up offshore companies, trusts etc, this website is now a one stop service to advising you and putting theory into practice, and without obligation.

I plan to keep an explanation of recent tax agreements very simple:

Before these agreements Andorra enjoyed one of the most secretive banking systems in the world, and after these agreements that in most cases remains as is (although the word secret should be replaced with say "private"). Residents of Andorra are not affected firstly by the EU Witholding Tax, and that includes passive residents no matter where their previous country of residence.

From July 2011 any resident of an EU country who is not a resident of Andorra and who has a bank account in Andorra has 35% of all interest or profit earned on investment retained by the bank who will pass the funds to the Fiscal Department here in the Andorran Government.
Then, 75% of that money will be remitted to the country of residence of the EU National, and 25% retained by Andorra. Contrary to rumour, absolutely NO information on the identity of or details of the account holder WHATSOEVER will be passed to whichever country where the funds are remitted. In other words "private" banking continues as normal, albeit with a penalty tax.

Andorra opted for this route rather than the sharing of information which some other offshore jurisdictions have. As a passive resident you will NOT be liable for any witholding tax whatsoever.

Secondly there are the agreements signed between Andorra and other countries called double taxation treaties but should correctly be referred to as Disclosure Agreements. As at March 2010 a total of 17 bilateral agreements have been signed between Andorra and:-

France, Portugal, Spain, Austria, Belgium, Netherlands, Denmark, Sweden, Finland, Norway, Iceland, Liechtenstein, San Marino, Monaco, Argentina, the Faroe Islands and Greenland.

However Andorra’s former Head of Government, James Bartumeu, announced on May 3rd 2010 that Andorra had opened negotiations with Australia, the US and Britain regarding new treaties. Nothing has been heard since, and it is debatable whether the will for more treaties is there as the total of 17 countries was the minimum number of agreements that Andorra had to sign to be removed from the list of financial paradises demanded by the EU. As at May 2011 no further news has been received concerning further negotiations, and it should be noted that the incumbent Government was ousted in a landslide by the opposition making more agreements probably less likely.

The criteria for Andorra to be removed from the blacklist has now been satisfied.

So why the do I say that the secrecy has been retained ?

Any request for financial information is not a fishing expedition and strictly must derive from a judicial request relating to the evasion of tax by an individual (resident or non-resident in Andorra) from one of the signatory jurisdictions. The Ministry of Finance in Andorra will consider the request and either issue the disclosure order to the relevant bank or not. This has not been tested yet and is due to come into effect in January 2012 for most countries but is already operative for requests from Spain and as at May 26th 2011 not one single disclosure request has been received from the Ministry of Finance. So unless you are criminally evading tax payable in one of these countries and it is so proven to the Andorran authorities, your banking here remains (very) "private".

In fact it remains a criminal offence here for any person to disclose any information on any account to anyone, and that goes as far as confirming the person even has an account. There will continue to be no liaison directly with tax authorities in any jurisdiction in the world except as explained above on a judicial request.

The advice laid out here is my personal advice and does not constitute legal advice.