Passive Residence in Andorra
Firstly, a passive resident is considered to be a person who has a residence without lucrative activity in Andorra. This is a tax residency option offered by the country and is aimed at people who reside in the country for more than 90 days a year without exercising any professional or work activity. This implies that they do not receive income from work or any other professional activity. Holders of this visa are not automatically considered tax residents, but they must spend at least 90 days a year in Andorra. If they spend 183 days or more per year in the country, they become tax residents and are subject to taxation.
Residency in Andorra allows individuals to legally reduce their taxes while maintaining a high standard of living.
Passive residents must invest 600,000 euros in the Principality to obtain a permit from the Immigration Dept. of the Andorran Government since the last legislative amendment at the end of 2022. This represents an increase of 200,000 euros compared to the previous requirement. However, the amendments envisage that, if this investment is made in the state housing fund, 400,000 euros could be sufficient.
What are the characteristics of passive residence permits in Andorra?á
There are several types of passive residence in Andorra for which applicants are eligible. Each has its own requirements and benefits. However, the most important ones are the accreditation of a minimum income, the criminal record check and the contracting of a private medical insurance. As an applicant, you have 6 months to prove a minimum investment of 600,000 euros in the country. If you purchase a property in Andorra, you must present a purchase contract or purchase agreement to Immigration.
Initially, passive residence permits are granted for 2 years, then renewed for another 2 years, then for 3 years, and finally for 10 years. After 20 years, nationality can be applied for.
Income for passive residents in Andorraá
Income must be at least 300% of the Andorran annual minimum wage of approximately 13,500 euros, which means that they must prove an annual income of at least 40,500 euros. If applicants have a family, this same rule applies to each additional family member, but at a rate of 100% and not 300% for each of them.
This means that a family of 4 people with 3 dependants will have to prove an income of at least 81,000 euros. This figure may vary depending on the minimum wage at any given time.
List of requirements for passive residence in Andorra:
- 600,000 in one of the eligible assets such as the following:
- Purchase of one or more properties in Andorra.
- Investment accounts or deposits in Andorran banks.
- Shares in Andorran companies, with more than 34% ownership.
- Andorran government bonds.
- Investment funds under Andorran law.
- áDeposit a deposit of Ą50,000 with the Andorran Financial Authority.
- Submit the application for a residence permit without gainful activity.
- Present your passport.
- Pass the medical examination.
- Present the criminal record certificate.
- Have private medical coverage.
- Demonstrate financial autonomy with an annual income of more than 300% of the minimum wage and 100% for each additional family member.
Investment funds in Andorra: What are they and how do they work?á
As a Collective Investment Scheme Management Company, we will focus on explaining the benefits and opportunities offered to investors who choose to invest in investment funds.
Investment funds are one of the most popular ways of investing in Andorra. An investment fund is a collective investment vehicle that allows investors to invest in a wide variety of assets, such as shares, bonds, real estate, among others. Investors buy shares in the fund and, in return, receive a proportional share of the profits or losses generated by the fund's assets.
In Andorra, investment funds are regulated by Law 34/2014 of 26 December 2014 on collective investment institutions. This law establishes the requirements that investment funds must meet, as well as the obligations of management and depositary entities.
Investment funds in Andorra are managed by entities authorised by the Andorran Financial Authority (AFA). These entities must meet strict solvency and transparency requirements.
There are several advantages to investing in investment funds in Andorra:
- Advantageous taxation: Andorra offers some of the most favourable taxation in Europe. Non-resident investors are not subject to income or wealth tax, which means that they can earn a higher return net of tax compared to other European countries.
- Diversification: Investment funds in Andorra offer broad geographical and sector diversification. This allows investors to diversify their investment portfolio and reduce risk.
- Transparency and security: Investment funds in Andorra are regulated by the AFA, which ensures that management and depositary entities comply with strict solvency and transparency requirements. Furthermore, Andorra is known for its political and economic stability, providing a secure environment for investors.
Investing in real estate in Andorra: What are the options?á
Investing in real estate is another popular option for investors in Andorra. The demand for real estate in Andorra has increased in recent years thanks to its attractiveness as a tourist destination and its favourable tax system. At Agisa we work closely with some of the best real estate companies in the country to help you make the best decision to buy or rent in Andorra.
FAQ about Passive Residences in Andorraá
What is passive residence in Andorra?
Passive residence is granted to people who reside in Andorra and do not work. It is a visa intended for people with sufficient income to live without working, such as rental income, pensions, interest, etc.
How long does it take to obtain passive residence in Andorra?
The process of obtaining passive residence usually takes about 4 weeks to obtain the residence card in Andorra. The resident has a maximum of 6 months to prove the investment made in the country.
How can I obtain nationality in Andorra?
After living in the country for twenty years, either through active or passive residence, one can apply for citizenship and finally consider Andorra as home. There is also the option of completing your studies at one of Andorra's schools and residing for ten years before renouncing your current nationality, as dual nationality is not allowed in Andorra.
How much tax is paid in Andorra?
As a holder of a passive residence visa in Andorra, only 10% of your income is taxed. Sales taxes are 4.5% of the purchase price (VAT), but taxes on inheritance or investment income in Andorra have an additional cost of 0%.