• Individuals applying for active residence, work permit for shareholders, through the incorporation of an Andorran company, will have to make a non-remunerated deposit to the Government of Andorra of 50,000 euros instead of the 15,000 euros previously requested.
• Applicants for a passive residency, residence permits without employment in Andorra will have to make a total investment in the Principality of Andorra of 600,000 euros, previously 400,000 euros. In order for the real estate investment to be counted towards the total investment, it will each have to be at least 400,000 euros. However, if the investment is made in a housing fund promoted by the Andorran government, the deposit would remain at 400,000 euros.

These changes to the Immigration Law outlined here will not affect current holders of a residence permit in Andorra.

Although we do not have an official date for the entry into force of these changes, according to the usual Andorran parliamentary practice, it is likely that they will take place at the end of December 2022, before the end of the year.

We consider that the activation of the new deposits will be imminent and will directly affect all immigration files submitted from the same date that the modification of the Law enters into force, and therefore, on applications submitted in 2023.

Lastly, for persons who apply for residence as employees in Andorra or who obtain residence through family regrouping, the exemption from any deposit will continue to be maintained.

Andorra’s immigration law change 2023

This video covers the new changes in Andorra’s immigration law and how it affects new active and passive resident applications for 2023 onwards. Basically, the increase of the deposit to obtain the active residency in Andorra and the increase in the investment required for the passive residency in Andorra.

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We are sure that this news is very positive for everyone since the new notaries went through a strict competitive process where 13 candidates in total participated and they were the ones who obtained the highest qualifications. They have also successfully passed the strict training period. With this we want to emphasize that Andorra now has 5 highly qualified professionals to meet the needs of the country, which will speed up the capacity to process notarial signatures.

Visit our web page of notaries in Andorra where we will update as soon as possible the contact information of the new notaries.

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The Andorran executive has informed last Wednesday at a press conference, through his head of government Xavier Espot that the interprofessional minimum wage will increase by 3.5% as of January 1, 2021. This means that € 1121.47 will be paid per month / € 6.47 per hour.

Espot has also indicated that this increase is part of measures to progressively equate the minimum wage to the real cost of living and respect the recommendation of the Council of Europe so that the minimum wage reaches at least 60% of the average wage.

Reviewing the increase in the minimum wage in 2020, which was 3.2%, placing it at 50.5% of the minimum wage, with the increase for 2021 it will be 52.5% of the average wage. In this way, little by little, the recommendations of the Council of Europe will be fulfilled. This increase will represent between 3% and 4% above the CPI forecast at the end of 2020, so Espot pointed out that it is “an important and remarkable effort in a context in which many entrepreneurs are experiencing difficulties”.

The rise in the interprofessional minimum wage is in line with what is included in the draft Law on urgent measures related to the leases of urban properties and improvement of purchasing power, which will also increase the CASS pensions below the minimum wage and solidarity pensions by a 3.5%. In addition, the Law indicates that housing rental contracts will be extended and will prohibit increases in rents above the CPI. This Law will be approved soon in parliament where the Government has sufficient support.

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Citizenship via acquired nationality / naturalisation

The most common form of citizenship is by non-native passive or active Andorran individuals with 20 years of residency. They then may apply for Citizenship (Art. 11). Individuals must pass a Catalan language, Andorra history and a geography exam.

Once qualifying to being allowed to apply for citizenship they have 5 years to pass the exams. During this time, the individual must present a current nationality renunciation document to obtain the Andorran nationality and passport.

At the time of writing, the Principality’s Government looks to investigate reducing or disregarding residence time length in a future bill. For minors to be educated in Andorra between 6 to 16 years old will have citizenship in 10 years of living there (Art. 11.2).

Andorran Citizenship Through Marriage

A non-native Andorran with 3 years of residency and who contracts marriage with an Andorran native (Art 10) is entitled to citizenship. This may be 3 years before or after the day of wedlock. An individual of foreign birth with 15 years of residency and with Andorran heritage – a native citizen grandparent, is entitled to citizenship. (Art. 9.2).

Andorran Dual Nationality Citizenship

Unlike Spain, Andorra does not accept dual nationality citizenship. One must give up present nationality and passport to become a citizen.

Becoming an Andorran Citizen by descent

• Children of Andorran citizens born domestically (Art. 1) and in another country (Art.2) are entitled to citizenship.

Andorran citizenship is entitled by birth

• A child born to foreign parents having completed 10 years of residency will be entitled to citizenship. If neither parent has reached 10 years of residence, the minor as is entitled to a provisional passport. (Art. 6.)
• Children under 14 years old adopted by Andorran or foreign citizens and resident in Andorra for 10 years minimum, then the child is entitled to obtain a provisional passport (Art. 2 and Art 8.1, 8.2)

It takes a long time to get acquired citizenship. Care must be taken once it is achieved. It is forfeited if an individual becomes another country’s citizen. Simply, you have dual nationality, which is illegal. Individuals may not work for nor bear arms for the non-domestic government.

For more information don’t hesitate to get in touch with us.

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The parliament of Andorra has recently approved the legal amendment to the corporate tax law that previously permitted a special tax regime for various activities resulting in a 80% reduction on the taxable base. The special regimes also known as the 2% special taxation regimes have been altered or eliminated to some extent.
After adopting to the BEPS framework new protocols have been implemented following the harmonization of the Andorra taxation system with international standards suggested by the OECD and European Union.

Previously there was a series of special regimes applicable for a reduced taxation such as:

– International trading of goods
– International exploitation of intellectual property also known as patent box
– International cash-pooling
– International holding structure and participation

All of those were taxed at 2% corporate tax or exempted from taxation in case of the international holding structure under certain requirements.
However, the guidelines of BEPS (base erosion profit shifting) of the OECD and the Code of Conduct on taxation of EU companies have shown that the Andorran special tax regimes made allowed possible unfair tax competition which may lead to the artificial shift or delocalization of profits by offering an effective taxation significantly lower than the one generally applicable in other mostly European jurisdictions.
This has resulted in changes and elimination of some the special regimes.

Changes to the International exploitation of intellectual property

The reduction from 10% to 2% will only apply if the Andorran company that is exploiting the intellectual property is also developing the technology / knowhow involved through using sufficient resources and substance in Andorra. The essential meaning of this is not clearly confirmed, but we may assume that substantial HR and local resources have to be present in Andorra to actively work on, create and develop the intellectual property concerned.

This would go beyond the requirements of having a 20 sqm office with a part-time employee. We may assume that for example a software license or right may require a programmer to be working and developing the software from Andorra.

The benefits must come through royalties or license fees rather than from the simple sale of goods or services. So clearly there is a legal patent and license agreement to be registered and granted through a contract to the licensee.

Elimination of the special regime for trading companies / triangular invoicing

This special regime has simply been eliminated and the 10% standard tax rate is applicable. There is a transition period for companies that already are operating under this regime.

Elimination of the special regime for cashpooling companies

This special regime has simply been eliminated and the 10% standard tax rate is applicable. There is a transition period for companies that already are operating under this regime.

Changes to the special regime for international holding companies

The special holding regime allows to benefit from a tax exemption on dividends perceived by an Andorra holding company participating in foreign companies.

With the new changes the exemption is only applicable if the corporate tax rate of those companies that are participated in exceed 40% of the nominal tax rate in Andorra. In other words you can only be exempted if the company in the country of origin has paid a minimum of 4% in corporate tax on those profits. This would basically result in a taxation for holding companies in Andorra whenever there is participations in tax-haven based companies (with essentially 0% corporate tax in origin).

Summarizing the changes the standard tax rate of 10% is consolidated and special exceptions are eliminated except for companies that bring added-value in terms of knowhow and technological development to the country. The 2% regime for patent box / intellectual property exploiting companies in Andorra remains very attractive however it remains to be seen if logistics and local talent can be found and maintained to meet the substance requirements.

The Andorran special holding regime remains very attractive and essentially just sorts out aggressive optimization through participations in tax-haven based companies where no corporate tax at all is paid.

For more information especially on requirements to meet for the special regime for intellectual property / patent box in Andorra please contact us.

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