Active and Passive Categories summarised - living in Andorra relocation guide

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Active and Passive Categories summarised

Residency
An Overview
Please note that you will need to be here in person with any dependent over 18 years old at the time of application. For children we can get around that requirement.

There are now a number of options for categories of residency. This is now being complicated somewhat by the new income tax system. The main thing to note is that passive residency does not automatically confer fiscal residency and consequently you may be exempt from personal tax liability in Andorra. As for active residency as you are considered to be living and working in Andorra as your principal base then (it is most likely that) you will be presumed to be a fiscal resident. Please refer to the page on IRPF and personal taxation for details. In summary few residents will be obliged to pay tax by virtue of the generous exemptions and allowances, but for those who need fiscal residency then Andorra has one of the best tax systems, also having now double taxation treaties with France and Spain and other countries soon to follow there may be considerable advantages.

Categories can be inter-changeable once approved, but strictly in compliance with the bureaucracy of Immigration.

Let me summarise the different categories available and the tax implications. Once you have decided which category may be appropriate for you then please click on the appropriate category link to read in detail the requirements and how to go about starting the procedure.

living in andorra cartoon
Categories of Residency and tax implications summarised as at April 2016



The fully refundable but non-interest bearing bond payable to the government is €50,000 for the head of household and €10,000 for each dependent. Within seven months of approval the applicant must then show that he is invested a total amount of €400,000 in Andorra, please note that the government bond does form part of this investment (Explanation: the €50,000 bond is paid at the time of application as is an additional €10,000 for each dependent. Therefore a husband and wife and one child will pay €70,000 as a bond. The extra investment requirement will then be €330,000). This investment may be in property or financial investments in Andorra or a combination, and these are outlined in detail on the page specific to Category A.
On paper the minimum required stay is 90 days per year. The minimum required stay to become a fiscal resident is 183 days per year. So a passive resident who stays in Andorra for less than 183 days per year can maintain his residency and not become a fiscal resident. For those passive residents who need to become a fiscal resident but who cannot in reality stay for 183 days per year can simply opt to declare tax by stating that Andorra is their principal base of economic activity regardless of the number of days spent here. For details of tax implications please refer to the Andorra Tax page.
Residents under category A are also allowed to form an Andorran company at any time but the company is only allowed to trade outside Andorra.
Category A is a paper exercise and remains the most straightforward category of residency to apply for. It takes 3-5 weeks for the card to be issued. If the investment requirement is not a concern for you then this category is by far the most straightforward and quickest route.



The fully refundable but non-interest-bearing bond payable to the government is €50,000 for the head of household and €10,000 for each dependent. In this category you are not required to prove any extra investment as in Category A. However you must within seven months of approval have formed an Andorran company. This category is subjective and approval is granted on the basis of a viable business plan. Historically this has proven to be difficult but now I am able to gauge more accurately what is required for approval with a good success rate.
As with Category A, the minimum required stay is 90 days per year.  Of course the company itself will be liable to Company tax in Andorra at 10% on profits but for the individual shareholders unless they stay here for more than 183 days will not necessarily become a fiscal resident. In effect category B allows residency, an Andorran company, and flexibility of living and working in Andorra as a principal base. One point of the tax law is that dividend distribution from an Andorran company is exempt from personal income tax in Andorra (once the company tax is declared)..
Category B provides that a minimum of 85% of business activity must be conducted outside of Andorra, and there is a provision for the company to be able to employ a maximum of one employee in Andorra.
Category B can take considerably longer, maybe 1 to 3 months, for approval to be granted as the business plan has to be studied by various government departments. Once approval is granted the residency card is issued within 3 to 6 weeks and the formation of the Andorran company can commence. Family dependents can be included in the application at the same time as the main applicant ( but NOT always in Category D, please see below) or can be added at any time after approval of the head of household.


In essence this is exactly the same as category A but the applicant is required to show that he is a professional and famous sportsman, scientist, sculptor, author, or famous person in his own right. If this can be proven by means of a professional contract, CV and proof of achievements then the applicant will be required to pay €50,000 bond to the government plus €10,000 for each family dependent but will be exempt from having to invest a further  amount up to €400,000 as in category A.
Again the minimum required stay is 90 days per year and therefore the resident is not necessarily a fiscal resident as in Categories A and B above.
As in category B there is a subjective element In determining whether the applicant is of sufficient fame all standing to be approved under this category but approval does come through a lot quicker than Category B and generally the paperwork is not too complicated to put together in most circumstances.



Category D (known locally as "Compte Propi") comes with a stern warning from the Police in Andorra that they are checking ( and I can very much confirm this is the case) that not only are you living and working in Andorra as your principal base but also the business that you are developing is in Andorra. There are no hard and fast guidelines as to time spent here or what constitutes business development from the police but very few who have been investigated and denied continuation of residency have succeeded in subsequent appeals..
Please note that in Category D you may become a full fiscal resident but that the personal income tax law means that dividend distributions from an Andorran company are exempt from personal taxation (once the corporation tax is declared).
Category D does not require a business plan but does require the formation of an Andorran company first and before applying to immigration. It should be noted that once the Andorran company is formed the procedure at immigration is a paper exercise only. This category is not applicable to those seeking employment from an existing company, there must be a formation of a new Andorran Company . The only provision for self employment is in certain professions such as architects, doctors and so on, but the rules are complicated and procedure difficult for approval (Known locally as "Professionel Liberal")
Under category D there is no bond requirement nor extra investment requirement. Quite clearly the 90 day rule (even a mention of 275 days per year may be insufficient) does not apply in this category and the police as I have warned above are checking to ensure compliance.
In this process the Andorran company can take up to 6- 10 weeks to complete as foreign investment approval is required. Once the company documents are available an application can be then made to immigration for active residency. The processing time for active residency is a matter of days, but does include an undertaking to prove to immigration that all of the company formation and local licensing procedure will be completed within 3 months of residency approval.
For a spouse to become a non-working dependent, Immigration require a 12 month wait between the main application and the family grouping (unlike Category B). However if the spouse can be included as a minimum 11% shareholder applications can then be at the same time. This will incur extra contributions though to CASS ( Social security) as the spouse will be deemed to be working. Category D is the only category where you are obliged to contribute to CASS, the other categories require private health insurance.


Once you have an idea of what category you may be interested in please click now on the appropriate Category heading and discover in more detail what is involved. I fully understand that each individual case is different and that very relevant questions arise. Please do email me if you have specific questions.

Changes to the documentary requirements for the "old" East European EU Member States

As from 1st February 2014 the old and discriminatory extra documentary requirements for some EU States have been lifted. ALL EU member states are now to be treated as the same.

What does this mean?

Before  the rules changed, those applying for residency and who were nationals of  Bulgaria,Estonia,Czech Republic, Hungary,Latvia, Lithuania,Poland, Romania, Slovakia and Slovenia were required to provide very onerous documents with the correct stamps and Apostilles. Often these documents were unobtainable and many potential applicants were unable to follow through to application.

Now, the documentary requirements are identical ( France, Spain and Portugal still are privileged in that official documents do not require to be legalised under the tri-partite accord with Andorra).

If you have in the past enquired about residency and were subject to these old restrictions please get in contact with me, the way forward is now far easier.

Changes for those under the old law.


If your application was accepted under the old law from before July 2013, the following may be important for you and does not apply to new applicants after that date:

  • You are only required to be in Andorra 90 days, and not 183 days as under the old law.


  • For family groupings where a spouse or child joins an existing resident, or children born to existing residents the bond payable for family dependents remains at €7,000 following a recent decision by Immigration.


  • If a resident under the old law decides to marry, the bond for the spouse remains at € 7,000


  • If a family pairing divorce both individuals will be treated under the old law so the bond will be 30,000 euros each after the refund of 7,000 euros, the original bond for family dependents.

New rules for passive residency renewals
It was considered that new requirements dictated by Immigration and backdated had been solved but there potentially may remain an issue which you all as passive residents may need to address before your next renewal. The new requirements involve the bank certificate and the 300%, 400% etc of the minimum salary that is required for renewals for passive residents ( only). Originally Immigration required the bank to state that as of "today"( the issue of the bank certificate) there is in the account  the percentage of funds required. Now after a long struggle with the banks to agree on wording  they have decided to require the banks to state that in each of the past ( however many) years since the last renewal there must have been annual "ingressos" into the account equivalent to the percentage required. "Ingressos" can be defined loosely as funds paid in, Immigration had demanded that the banks state "rendes" or earned income : The banks stated clearly to Immigration that they could have no knowledge of the source of funds and could not be drawn to make that statement. Immigration therefore insist on the word "ingressos" in each of the years since the last renewal. In practice this means that all transfers into the account, regardless of source or purpose, and any investments on account have to add up to more than the percentage required in each year so the bank can conform to this new wording.

The important date in considering funds for that particular year is the date of the last bank certificate which in each case I need to obtain from Immigration and I will notify you. This date is an inportant part of the wording for Immigration, but  for your rough calculations it may be assumed that it is a few weeks prior to the issue of your current card. No funds have ever been intended to be blocked on account as some banks have insisted on as Immigration accept that the funds are income and is there to be spent but they wanted to strengthen the requirement for proof of annual income  as required under the wording of the law.

So where does that leave the passive resident who is as always facing renewal ?

  • Under the old law ( which changed in July 2012) and where the bond was 30,000 euros you will be affected if you have not had investment funds or deposits or turnover on the account for each of the years since the last renewal date. For those of you, as we were all told we could do, who have kept a bare minimum balance over the years and have as done before only transferred the funds to the bank for the issue of the bank certificate under the old "today" rule, you may this renewal have a problem with the  balance on the previous 2 or more years. For those of you at Andbank we have worked a solution for this first renewal under the "ingressos" rule but it does involve remitting funds to satify the requirements. If you are with Andbank and you fall into this category  please contact me for details on this. If you are with other banks then you need to speak directly to your account manager. For some this may be a more than annoying decision by Immigration and the fact that it is back dated arbitrarily is unjust and probably unlawful but until someone brings this before a judge, there are no avenues of appeal. I am also discussing the possibility of foreign bank certificates that may also help some to resolve this. A point to note in that the renewals that I have recently completed the issue has all been solved relatively easily so there is no need for a mass panic.

  • Under the new law ( after July 2012) where the bond is 50,000 the following may be affected:

  1. Those in Category B
  2. Those in Category C
  3. Those in Category A other than those who have opted for the 350,000 euros investment with the bank ( who can clearly issue the certificate in this situation), where for example you have purchased a property.

For the future the banks clearly expect you  to pass through the account during each year more than the equivalent minimum salary percentage required, and for those facing renewal next year I would advise a transfer in as soon as possible to cover this calendar year. As stated above it does not need to stay in the account  but you may need to act now.

 

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