As we commented in a previous post, the airline Air Nostrum had been awarded in 2021 the tender to operate the Andorra-La Seu d’Urgell route with Madrid. On 15 November 2023, the Government of Andorra approved the final award to Air Nostrum, Iberia’s franchisee subsidiary for regional flights, of the tender to operate the new air route that will connect the airports of Andorra-La Seu d’Urgell with Palma de Mallorca.

A second company also took part in the tender, which was rejected because it was submitted after the deadline.

The Andorran Secretary of State for Energy Transition, Transport and Mobility is positive about the new air route, providing alternatives to diversify the arrival of tourists and the activity of the airport, as well as generating new economic synergies in the Pyrenees area and unlocking the country.

It was announced that this new route is part of a pilot test to connect the Balearic Islands with Andorra in the 2023-2024 winter season. The frequency of direct return flights will be every Friday and Sunday. There will be one flight per day. It will also be possible to make this route with a stopover in Madrid, although the most economical option will be the direct non-stop one. The route will operate from 5 January 2024 to 31 March 2024, a total of 13 weeks of operations this winter. It is already possible to book these flights on Iberia’s website.

Direct flights will depart on Fridays, from Palma de Mallorca at 8:45am and from Andorra-La Seu d’Urgell at 10:45am. On Sundays, a flight will depart from Andorra-La Seu d’Urgell to Palma at 15:40 and in the opposite direction at 13:45.

The airline announced that ticket prices will start at 50 euros each way, and residents of the Balearic Islands will have a 75% discount, applied by the Spanish government, on all flights from Balearic airports to foreign countries. The airline also announced that the internal connection with the airports of Ibiza and Menorca will be facilitated with the same flight ticket between Andorra and Palma de Mallorca.

As for compensation from the Government of Andorra, the Executive will offer a maximum of 220,000 euros depending on the actual occupancy of the new air route between Andorra and Palma de Mallorca as of 2024. This will ensure the economic viability of operating these passenger flights. In this way, this maximum cost will be reduced depending on the employability of the pilot test flights.

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This notice is related to the technical incidents suffered by the Andorran Government’s electronic office during the month of July and early August 2022, which as a result did not allow personal income tax returns to be filed normally.

In the Official Gazette of the Principality of Andorra, BOPA No. 101 of 24 August 2022, the following agreement is reported:

First

Exceptionally, personal income tax returns for the 2021 tax year will not be considered to have been filed out of time, provided that they are filed between 1 and 15 October, inclusive. During this period, no surcharge shall be applied for late filing, the tax debt may be paid by direct debit and the proposed settlement of earned income issued by the Ministry of Finance may be accepted.

Second

Exceptionally, the declarations of the partial payment of the personal income tax returns for the 2022 fiscal year will not be considered to have been filed out of time, provided that they are filed between 1 and 15 October, inclusive. During this period, no surcharge shall be applied for late filing and the tax debt may be paid by direct debit.

If you are one of those affected by the incidents at the electronic office and need assistance, you can contact ANDORRE INVEST for more information.

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Carles Casadevall, spokesman for Andorra Telecom, the company responsible for telecommunications in Andorra, pointed out that “In recent months, due to the increasing number of people teleworking, homes have become small offices”. And it was not only workers who needed a good Internet connection, as students also had to telestudy. Casadevall points out that this general situation “has increased the need for a high bandwidth Internet connection at home”.

Although it is true that in Andorra there is total fibre optic coverage, which allows for reliability and reduces connection incidents, until now 1 GB fibre optic was only offered to companies. Domestic users could contract Internet speeds of up to 700 Mbps. This has now changed, improving the connection at home, giving all users the possibility of having up to 1 GB speed.

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Flights will be twice a week, Friday and Sunday, allowing for weekend getaways and longer stays. Tickets will be available from 59 euros each way for return journeys.

The president of Air Nostrum, Carlos Bertomeu, pointed out that “Air Nostrum is going to put its more than 25 years of experience at the service of Andorra, and will provide it with a connection, via Madrid airport, with more than eighty national, European and intercontinental destinations”.

Jordi Gallardo, the Minister of the Presidency, Economy and Enterprise of the Government of Andorra, highlighted the importance of this new route in this way: “For the Principality this agreement is the culmination of a long-standing aspiration, that of connecting our country by air with the rest of the cities of Spain, Europe and the world. And we are doing so hand in hand with a company of great prestige and solvency. Air Nostrum is committed to Andorra and Andorra is committed to Air Nostrum: it is the perfect combination and we are very satisfied”.

Although the inaugural date of the flights was scheduled for January 2022, the airline is bringing forward its operations to 17 December 2021. In fact, flights can already be purchased from the airline’s website. The flight from Madrid is scheduled to depart at 14:30 and from Andorra at 16:50. The flight will take approximately 2 hours each way.

The aircraft that the airline will use for these flights is the ATR 72-600 and offers 72 seats. The aircraft is powered by two turboprop engines and is designed for regional and short-haul flights.

In the future, the airline is considering new evening and night time schedules so that passengers can make the most of their trip, as long as airport conditions allow it.

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Eighty per cent of the electricity consumed in Andorra is purchased from France and Spain. So why is it that the increase in electricity prices in neighbouring countries does not affect the Andorran electricity bill? This is because the Government of Andorra and the Andorran electricity company, FEDA, have made a great effort in recent years to improve the situation in order to continue to offer competitive prices and services in Andorra.

On the other hand, the Government and FEDA have kept the price of electricity the same as in 2020, and the will is that in 2022 it will remain the same. This is a clear commitment and effort to support families and companies that, during the economic and social crisis caused by COVID-19, have received this help from Andorran public institutions.

Another important aspect to understand why Andorra’s electricity bill is not affected by price rises in neighbouring countries is the agreement it has signed with the French electricity company, EDF, since 2019. It guarantees that part of the energy coming from France has a fixed price that is not affected by market price changes. Then, in 2020, a similar agreement was signed with the Spanish electricity company ENDESA, also guaranteeing a fixed purchase price on part of the electricity coming from Spain. In addition, FEDA is able to produce electricity during the hours when it is most expensive for its suppliers, avoiding buying when the price is highest. This reduces the impact of the international rise on the country.

Incidentally, most of the electricity produced in Andorra is hydroelectric, although there are also mini-hydro and photovoltaic installations, among others. Andorra’s intention is to continue investing in the energy transition and increase local production to cover 50% of local demand.

Electricity prices in Andorra are among the lowest in Europe. In 2020 it was 68% cheaper than Spain and 43% cheaper than France. Compared to the European average, it was 58% cheaper.

Despite the above, FEDA will still have to pay more than before for electricity purchased from outside. This means an obvious reduction in profits this year and probably next year as well. However, thanks to the Andorran electricity company’s healthy finances, FEDA’s commitment to its customers will not be affected by the rise in electricity prices in Europe. Moreover, the transition to a more sustainable energy model will allow Andorra to continue to maintain the quality and competitiveness to which Andorrans are accustomed.

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Let us remember that the Spanish, French and Portuguese currently have the privilege of being able to apply for family reunification 3 months after obtaining residency in Andorra. This is due to the existence of agreements with the 3 countries that allow it. However, the rest of the nationalities had to wait at least 1 year to bring their family to Andorra. At this moment all the residents in Andorra, regardless of their nationality, are equal. They will be able to apply for family reunification 3 months after obtaining their residency. It should be noted that the requirements remain the same and must be fully complied with in order to achieve this process.

With this modification proposed in the draft law, Andorra wants to support even more the new residents, promoting their better integration in the country.

You can obtain more information on the draft law in the General Council Bulletin and details on family reunification in Andorra here.

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For business owners the principality’s corporate and personal income tax rates are at the lower end as compared to other European destinations. Personal income tax is by far one of the lowest in Europe.

Establishing a tax residency in the principality allows businesses and individuals to enjoy one of the safest countries in the world, excellent health coverage, low living costs, attractive natural surroundings and quick access to the Mediterranean. Spain’s best beaches and some of the world’s best restaurants are just two hours away. The proximity to Spain and France offers potential for acquiring a second home while establishing a residency in Andorra respecting its tax residency laws.

Let us turn to the tax advantages the principality has to offer as compared to Great Britain. The United Kingdom does not typically apply withholding tax on dividends paid out by UK companies even in the absence of a double tax treaty (DTA). Income from dividends may be of particular interest for UK citizens. In Andorra, tax residents have a maximum of 5 – 10% income tax on salaries as well as have jobs for passive income. This may make Andorra very attractive for individuals that still hold economic interests in the UK through company participations. If they are structured via Andorran holding dividend participation they may be potentially tax exempted in Andorra for maximum optimization.

Inheritance and wealth tax do not exist on assets based in Andorra. International tax implications for asset inheritance located outside of Andorra will be subject to the tax and inheritance laws of the other jurisdiction.

Exempted qualified investment income under certain conditions is applicable to most capital gains for private investors. This covers stock trading and more.

Finally there are interesting allowances on investment and savings applicable to Andorran residents.

Property capital gains tax on property is quite progressive. It ranges from 15% to 0%. It is proportional to the years of holding a property.

Tax optimization by relocating your residency to Andorra offers significant tax and lifestyle advantages. Passive residents and international entrepreneurs that are solvent and willing to contribute to make Andorra prosperous and keep the country safe are exceedingly welcome. Tax residency criteria fit the residency type. Some residency programs are available by spending 90 days in Andorra for an entire year.

Andorra has a small and active British community of expats and retirees residing in and around the parishes of La Massana and Ordino. There are frequent British networking and social international club and group get-togethers.

We offer extensive bespoke income type cost/benefit analysis for optimizing your personal and corporate tax via Andorra residency. Our preliminary viability check offers a clear indication of the possibilities before you.

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