Guide to living in Andorra, residency, personal advice on relocating to Andorra

Andorra- Finance

In all honesty, Andorra has had considerable pressure to reform it’s present system. However do not despair, there are still ways to use Andorra to financial advantage, especially with Residency status, things have just been made a little more complicated.

The three main bases of the Andorran economy are in trouble. Winter-ski tourism was down last season. The duty-free shopping on which Andorra relied (with goods available from an urban strip-mall of electrical goods, perfume and motor-vehicle stores in its main centres) has fallen seriously as a result of the crisis, above all that in its major market, Spain. Most seriously, one of the two “protecting princes” has taken a distinct dislike to Andorra’s role as a tax-haven.This is France’s president, Nicolas Sarkozy, who has threatened Andorra with severe sanctions if it does not fall into line with its fellow European tax-haven states Switzerland and Liechtenstein on issues of transparency, exchange of banking information, and tax-equalisation.

Spain, eager to put pressure on its other dependent tax-haven,Gibraltar, has joined in. The Andorrans have been told that if they do not sign a range of agreements on exchange of information immediatelythey may face punitive surcharges - of 30% or 40% - on all credit-card transactions carried out within the country. In part as a result, Andorra’s parliament passed a law on 7 September 2009 that will remove some elements of secrecy from its banking codes; the country is also consulting with a dozen other states over possible agreements on banking and tax-data, and on 22 September 2009 signed such an agreement with France.

The elections of April 2009 for the twenty-eight seats in the Andorran parliament brought to power for the first time the Andorran Social-Democratic Party (PSA), headed by the lawyer Jaume Bartumeu. The traditional ruling party, the Reformist Coalition (and a recent split from it, Andorra for Change [ApC]) were pushed into opposition. There is also a small Green Party, which won 3.5% of the vote, and supports the PSA: its representatives are proud to declare that they are the first party in Andorran history to call for a "republic", i.e. the abolition of the "co-princes" arrangement.

All parties have committed themselves to meeting the demands of the new European banking and taxation systems: if Switzerland is unable to resist pressure from Europe and the USA, it is evident even to the most resistant of Andorrans that they cannot either, even as they point out that the biggest fraud in Europe is not the existence of tax-havens, but the European Union's VAT system. Sarkozy's threats, and the sharpening of the global-governance response to the crisis reflected in the formalisation of the Group of Twenty (G20) at the Pittsburgh summit on 24-25 September 2009, have served to focus minds in the co-principality.

Currently Andorra is in the process of signing bi-lateral agreements for the exchange of bank information. This is a complicated area where once again those who have residency are unlikely to be affected other than for fraudulent proceeds. It should also be noted that Andorra is not alone in having pressure brought to bear and all of the so-called tax haven countries are being forced to take action. The latest announcements include:-

• Singapore has announced that it endorses the principles and standards for transparency and exchange of information agreed by a majority of OECD countries and several dozen non-OECD countries and territories and will introduce legislation by mid-2009 that will allow it to implement them.

• Hong Kong, China, have announced that they have introduced a bill in mid-2009 to allow it to negotiate agreements implementing the OECD standard for effective exchange of information.

• The Isle of Man has signed a tax information exchange agreement with Germany, raising to 13 the number of such pacts that it has with other economies.

• Liechtenstein, which has already signed a tax information exchange agreement with the United States, has announced its acceptance of the OECD standards and its willingness to negotiate agreements that provide for effective exchange of information in all tax matters.

• The Cayman Islands has announced that it will sign tax information exchange agreements with seven Nordic economies on 1 April 2009, bringing to eight the number of such agreements that it has with other economies.

Altogether, since G-20 leaders signalled their determination at their summit in Washington last November to combat cross-border tax evasion, more than 20 bilateral tax information exchange agreements have been signed between different partners.

As at March 2010 a total of 17 bilateral agreements have been signed between Andorra and other countries, the latest being the Nordic countries of Sweden, Norway, Denmark, Finland and as far apart as the Faroes, Iceland and Greenland. It is reported that negotiations are in hand for USA, UK and Australia, at this stage it is speculation, as due to these latest agreements bringing the number of treaties to 17 satisfies the requirements for Andorra to be taken off the list of fiscal paradises. So maybe there is a will to continue, probably not.