Of all the smaller principalities in the world, Andorra could be the least publicised for the financial benefits and attractions it holds for foreigners. A landlocked, tiny country of just under 470 square kilometers, Andorra has France as a northern neighbour and crosses into Spain in the south. Situated among the southern peaks of the Pyrenees Mountains, the country is a picturesque tourist magnet for millions every year, writes Rachel Smith.

Widely recognised as constituted by Charlemagne or Charles the Great in the eighth century, Andorra was confirmed as a principality by a 1278 charter. The diarchy recognises the Catalonian Catholic Bishop of Urgell and the French president as governors of this sixth-smallest European nation. Circa 1993, a constitutional parliament was established, making the two recognised rulers only honorary heads of state.

Featuring in global appraisals as the sixteenth-smallest nation on earth, the originally Spanish population numbers less than 80,000. Around half of the country’s residents are still officially foreign nationals. Catalan is the official national language, although Spanish, French, English and Italian are commonly heard in the country. Some 10 million tourists visit the country each year, making tourism the prime industry of the tiny nation. 

The annual Tour De France cycle race also runs through the state, attracting many visitors each year. Although not an EU member state, Andorra utilises the euro as its official currency. The nation has struck a delicate balance between complying with EU member stipulations and maintaining its ability to order its own affairs.


Although landlocked, Andorra does present as central for many investors’ business purposes. The country’s rulers have also recognised the need to embellish its innate scenic value to tourists, with commercial benefits for investors as well.

Is Andorra a tax haven? The Organization for Economic Cooperation and Development (OECD) lists a number of factors that officially define a tax haven. These include very low or zero taxes, transactional anonymity, and an opaque veneer that guards internal dealings. In addition, The US government’s Accountability Office also notes Andorra for lacking requirements for a substantial local presence by foreign businesses and individuals. 

Self-promotion as a tax haven or offshore financial hub is also typically flagged as one of the hallmarks of tax havens the world over, although Andorra is less vocal on this than many others. It has struck a balance between benefits for investors and compliance with broader EU operational requirements. 

As it currently stands, neither the EU, The Financial Action Task Force (FATF), nor the OECD list Andorra as uncooperative or officially a “tax haven.”


In layman’s terms, however, Andorra is often deemed a “tax haven,” and the reasons are many. Although not meeting watchdog bodies’ definitions per se, the local taxation structure has many benefits. Individuals earning personal income that exceeds €40,000 per annum enjoy a capped tax rate of 10 percent. Corporate tax, too, is capped at the same low rate.

Andorra has also avoided the usual touch-it-tax-it structures of the vast majority of countries around the world. In other words, double taxation is a non-starter in the principality. Assuming an individual derives a dividend from a 10 percent-taxed company, for example, no further personal taxation is payable on that dividend. 

Andorra does have a general sales tax, known as IGI, but it is set at just 4.5 percent. Real estate taxes are also negligible in comparison to the vast majority of the world’s countries. To this end, although on the cusp of official tax haven status, Andorra shares its approach on these matters with Hong Kong, Switzerland, Singapore and even the Czech Republic. Indeed, there are quite a few countries never suggested to be “tax havens” of any sort that levy even less corporate tax, like Hungary, Estonia and Latvia.

For high net worth individuals and companies looking for a European home base that is both compliant and beneficial, Andorra sits high on the list. Entities can legally reside in the country with ease while paying a very low tax rate. Through methodical extrapolation and absorption of EU policies on banking and finance, Andorra has managed to maintain its minimal taxation while still being cooperative with global authorities and regional partners. A number of healthcare products and services, as well as rent, welfare goods and services are zero-rated in the country.

For the foreseeable future, the country is likely to occupy the grey, yet broadly positive, arena of attractive yet compliant nation-states. Being such a decidedly European nation and situated between key European countries, Andorra lacks the far-flung associations of pariah tax havens. Indeed, the Andorran parliament has made it clear that the country never “made the strategic decision” to present as a tax haven. The general sales tax on goods and services is simply able to fund the modest requirements of administering the tiny country, and thus no extensive tax network has evolved. 

Although small, the government has successfully steered internal legislation in accommodating the host of new financial regulations that have issued from Brussels over the last decade. In 2019, Andorra is negotiating double-taxation arrangements with various neighbours and other countries, but with a decided lean towards preserving its current state of affairs, while still ensuring good relations abroad.


Unlike many other “offshore” beneficial destinations for business and investment, Andorra lacks a focus on the classic products typically found in these economies. Trusts or specialised tax arrangements for banking, insurance or investment are absent in this mountainous land. Indeed, minor local property taxes, corporate registration fees and custom duties have traditionally filled government coffers. Even personal income and general sales tax have been very recent introductions.

As a result, the country has become a beneficial business hub almost by default, simply on the back of a lack of government avarice and typical public spending on infrastructure or other large capital projects. Boasting Europe’s highest capital city, with Andorra la Vella sitting at an elevation of some 1,023 meters, public works are constrained by geography and the very small population in the country.

Andorra maintained for a long time the legal stipulation that there be majority ownership of any business by resident Andorrans. This has now fallen away, giving rise to an easy-going approach to foreign business. Private foreign clients have always patronised the country’s banking sector, but now a large diversity of companies are looking at Andorra with new interest as a home base. 

During May 2012, Andorran legislation was amended to accommodate a “physical presence” residency requirement of just 90 days per annum. This is comparably highly favourable, particularly for high-net worth individuals, who are often penalised by the onerous residency conditions of investment destinations. The minimum investment threshold was also raised to €400,000, a still-low figure for the average international corporation or wealthy individual looking to limit tax losses.

Three types of residency are available in the country:

• Residence without business activity: Here the 90-day residency requirement kicks in, along with a minimum investment of €400,000 in Andorran real estate, an Andorran company shareholding, or financial investments such as deposits or other traded financial instruments. Applicants will also need to demonstrate their means of self-support, with a €50,000 deposit per principal and €10,000 per dependent forming part of the of €400,000 overall requirement.

• Professional residence conducting international business: This category requires the employment of a single Andorran national, the ability to prove that some 85 percent of business is conducted outside of Andorra, and proof of income that demonstrates  self-sufficiency. The deposits of either €50,000 or €10,000 per person must again accompany application.

• Scientific, cultural or sports residence: The 90-day residency applies to this category, as well as the same self-sufficiency deposits and supporting paperwork.


In Andorra, there is low personal taxation and no double taxation, no capital gains, wealth or dividend taxation, and no estate duty. Andorra is a simplistic and welcoming haven for those who wish to manage their financial affairs without constant losses to government coffers. An incredibly low crime rate, excellent schooling, and top-drawer medical facilities embellish Andorra’s attraction for foreign investment, too. 

In a proactive bid to attract investment, legislators have also made it possible for foreigners to own 100 percent of any business in the country. Although requiring sanction from the authorities, such arrangements are rapidly expedited. Non-resident property developers are curtailed, however, and non-resident companies are limited to buying only property deemed necessary for conducting their business affairs. Investors will need to hold an Andorran bank account as a further, logical stipulation of investment in the country.

Keeping the peace with EU authorities, while not rolling out a mass of complicated tax legislation, makes Andorra a very attractive destination for companies and high net worth individuals. For anyone looking for a business-friendly country with a high standard of living, Andorra should feature among top contenders.   E