Category A Passive Residency - living in Andorra relocation guide

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Category A Passive Residency

Residency
CATEGORY A- PASSIVE RESIDENCY

Category A is the most straight forward of all the categories and if the investment of € 400,000 in permissible investments (please see below) is not a concern for you then this is the way forward. Please note that as a passive resident in this category you are not necessarily a tax / fiscal resident as you are required on paper ( and time here is not monitored) to spend a minimum of 90 days per year. To become liable as a tax resident you are required to spend more than 183 days per year so with careful planning you are most likely to be exempt from personal tax in Andorra. You can also choose to become a fiscal resident if that is what you require, very simply by declaring that Andorra is your principle base of economic activity regardless of how long you actually stay here.


In this category most people in effect face a choice of passive residency with or without the "fiscal".  For those requiring fiscal residency then Andorra provides a low tax country for that option.Over the coming years if the plans of the OECD, EU and other organisations are to come to fruition and everybody on this planet at some stage will require to become a fiscal resident and tax payer of a specific country .


Please also note that Category A also allows you to have an Andorran Company provided it is not trading or active in Andorra, so that also opens a few options. Whether you need tax / fiscal residency or not Andorra Category A passive residency can offer interesting options.


For applicants under Category A the applicants must:


  • Show proof of sufficient means to support yourself and family. This is currently proven by bank certificate of 300% of the minimum salary and 100% additional for each dependent, this involves openeing a local account and depositing the required funds currently (for 2016) €35,131.32 and €11,710.44  for each dependent (including ALL children regardless of age). You are not required under this category or any other category to prove the source of income.



  • Prove private medical insurance valid for Andorra. You require private medical insurance to satisfy the Immigration requirements for medical coverage in Andorra. (This is not so straightforward as the your Insurance Company will be required to sign the required declaration and many companies refuse, mainly on the grounds of company policy)  Medical Insurance that covers Immigration requirements is readily available with a local company and costs about €890 to €1250 per person per year but which premium depends on age bands. There is a flexible upper age limit to be accepted into this scheme really depending on individual circumstances on a case by case basis. We can discuss this if required.



  • Produce a  rental contract or title to a property that complies with Immigration requirements. Under the additional investment requirement  (see below) an applicant has 7 months in total from the date of the application to prove the additional investment. This means that if an applicant chooses to purchase property he must submit the "compromis de compra-venda" (purchase agreement) to Immigration, he has one year to then produce title deeds to the property. Alternatively an applicant may rent a property and invest the required investment in Andorran financial instruments under this Category.



  • Sign an undertaking that they will reside for a minimum of 90 days per year in Andorra.



  • Provide the appropriate police certificates legalised/Apostillised as required, and we will need to discuss this to determine exactly which police reports you will need and how to obtain them.



  • Pay to the Government (after the above documents have been accepted) a non-interest bearing bond (fully refundable upon departure) of €50,000 for the head of household and €10,000 for each dependent,



AND

  • That, INCLUDING the amount above for the bond, they sign an undertaking at the time of application that within a period of one month from the six month birthday of the application for residency ( i.e. SEVEN months from the date of application) they will submit documentary proof that, including the amount paid for the Government bond that  they  have invested a minimum total amount of €400.000 ( Including the bond already paid) in Andorra in permissible categories of investments. Please scroll down for details of permissible investments in ths category.



If you intend relocating with children, please see my section for  relocating to Andorra with a family. where extra documents are required in support of children'a application


The residency is granted initially for a period of 2 years, then for 2, 3 and then every 10 years. At renewal you do not have to be present, the documents required are obtained locally and the process is quite straightforward providing no changes have been arbitrarily made by the resident to areas such as insurance and banks without first seeking my advice.


If you are relocating with your spouse you must prove that you are still married, and I can advise on this relatively simple process of obtaining the correct Apostillised/ Legalised Marriage certificate. You should note that Immigration does not recognise the status of "partner" nor fiancé (e). As an unmarried couple you can apply together and live together but you will be required to pay the single bond each of € 50,000. (Once married or a civil partnership carried out in Andorra you can apply for the refund as you would have paid € 60,000 together as a married couple). The extra investment if not married will then be required also from each partner. Please see below what constitutes this extra investment requirement.

If you are a national of any of the former Eastern European States (Eastern Bloc
non EU countries) then until it is announced to the contrary you will require more documentary proof in support of your application. The requirements now demanded by Immigration for nationals of these countries are time consuming, we will need to discuss these requirements in detail, please contact me. These countries include ( but not exclusively) Russia, Ukraine, Belarus, Albania, and all of the now independent but former dependencies of the Russian Federation.

As at February 2014 the former Eastern European States ( Eastern Bloc) now EXCLUDES ALL nationals of EU member states. This is a big change in Andorran policy since up until this date Andorra has not recognised member states of the EU as actually part of the EU for the purposes of Immigration to Andorra. If you have enquired before as a national of an EU country and  that includes Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia, then please contact me immediately, the door is now open.

Areas of Investment Allowed by Immigration under Category A



  • 1.   Property in Andorra. This does not include mortgages unless the equity invested meets the criteria laid down by Immigration In other words a down payment of say € 350,000, and a mortgage of say € 650,000 to purchase a €1M property would be acceptable. It can also include the purchase of land but in which case you will have to rent a property as all residents need to prove a livable address. If you purchase land with a view to building then you will have 12 months to complete. The Architect I rely on will guarantee completion within 9 months. Please note there has been a new and important development as the requirements for all these new laws become clear. It is the head of household who individually must ensure that he or she has invested the full amount. An extremely frustrating situation has arisen for a couple who jointly purchased an apartment for €500,000. Immigration has interpreted that as equal parts for the couple amounting to  a value of € 250,000 each, which has meant that the head of household has under invested by €90,000 (notwithstanding who paid what). To rectify this will require a sale before the notary from one spouse to another and all the expenses involved, alternatively the head of household can invest a further €90,000 in local financial instruments. This is an example that all is not necessarily so straight forward.


A new ruling as from 22nd May 2013 allows ANY property that may have been bought in Andorra at some time in the past even before this new law was approved. Up until today the property had to have been puchased withhn 6 months before the residency application. This means that even if you bought a property 15 years ago it now counts towards the required investment. The value of all properties accepted by Immigration is the value on the title deed and not necessarily today's market value.


  • 2.   Shares of or funds issued by Andorran registered entities, this concerns investment funds issued by local banks, and even a local deposit account ( NOTE in January 2016 this is being reviewed and a simple account balance or deposit may NOT be acceptable from here on, I will advise shortly).  In all cases the funds will be required to be locked into Andorra for the duration of the residency unless they are withdrawn with the intention of satisfying other allowable investments such as property purchase. Interest or profit can be earned without tax or capital gains. A leading local bank is now offering interesting Investment Funds for those who are hesitant on purchasing property, please see the article to the right of this paragraph.


  • 3.   Shares  issued by Andorran registered companies, In practice this will be difficult for many reasons such as the current Andorran Company share structure, and transfer by private agreement since there is no stock exchange here. An investment in a local Andorran Company can be a viable investment alternative. It has now been confirmed that a passive resident can form an Andorran Company as long as it is not actively trading inside Andorra. It could be a holding company perhaps. The extra investment requirement can now be invested in a company that you can form yourself.


  • 4.   Andorran Government Treasuries or Public Company bonds,  Treasuries were recently available to the public at a return of 1.65% for 1 year. In fact this may not be a suitable investment due to the unknown time frame of issue and the fact that it is an auction so the full allocation is unlikely.   Public Company bonds are not readily available yet but may be in the future.


  • 5.   A straight increase in the bond paid to the Government but non-interest bearing of up to €400.000,  at face this may not be an attractive option bearing in mind bank deposits and investments, however it may offer a convenient and more accessible place to "park" the required funds pending, say, a delayed house build or other delays which may otherwise  jeopardise your application. Also since 2016 is the year to protect capital itself, this may be a better "investment" option !

So what do I do next?



Once you have satisfied your self with what is required the next step is to turn to the page titled 
 "Application Process"




What sort of return can I get if I invest in local funds?


A leading Andorran bank has now formulated some interesting offers for prospective and existing passive residents. For those applicants required to invest up to €400,000 under the new regulations or for those who are already resident but wish to make sound investments the following is on offer;

Minimum investment amount:  €200,000.

The investment is split 50/50 into a fixed deposit and an investment fund.  

The 50% on fixed deposit will currently earn 2% interest which in this day and age is an interesting return compared to savings rate in most banks globally.

The remaining 50% can be invested into established investment funds managed by the bank and which offer varying degrees of risk, from a fixed income with no risk with a return of about 2%, to an emerging market equity fund where returns of up to 14% have been possible in the last year. The downside risk on those investment funds where the return of capital is not guaranteed should of course be noted.

What is interesting to note is that there is NO penalty charge for early redemption. So as a new applicant it may be interesting to park your required investment as above and should a property opportunity arise then this investment can be very quickly realised and invested in property or for those also looking for an alternative investment to property but need to satisfy Immigration requirements this would appear to be the perfect solution.

As ever I can arrange a meeting for you to discuss any investment requirements directly with the bank.  I am not allowed to name the bank on this website as this could be construed as an advertisement contrary to regulations, many of you know which bank is concerned.


 

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