Living in Andorra. CONS & PROS

 

Living in Andorra. Relocation guide

Andorra is a country which, in 2012, first opened its doors to business immigration opportunities. However, despite low taxation, over the past eight years, the country has not been able to attract a single large foreign investor.

Since the amendment of the Law on Foreign Investments, which allowed foreigners to create companies with 100% participation in Andorra, and after which foreign investors were actively attracted to Andorra, there have been several significant changes that have led the Andorran immigration model to lose its former attractiveness.

Firstly, when registering a company today, a deposit of €15,000 is required at the AFA (Autoritat Financera Andorrana). This amount is refunded only if the business is cancelled. Secondly, a private entrepreneur, having registered his business in Andorra and applying for the residence of Andorra, is obliged to live in the principality for at least 183 days a year. The price of an “admission ticket” for obtaining Andorran resident status without the right to work has also increased. Today it is necessary to invest from €400,000 in the country’s economy (securities) or in real estate on its territory. And since recently the prices on the Andorran real estate market have unreasonably increased, for this amount at today’s prices it is hardly possible to buy a decent two-bedroom apartment not even in the prestigious area. Among the main difficulties in the modern Andorran model of immigration—to open a bank account—the number of applicants who have not passed the compliance procedure is constantly increasing.

PROS

1. The minimum direct taxation in the form of income tax of citizens and residents in Western Europe is 10%. If the family income does not exceed 24,000 euros per year, income tax is not paid. Indirect taxes (VAT) are fixed at 4.5%.

2. Almost zero crime rate (mainly alcohol and tobacco smuggling). Andorra is one of the safest countries in the world for both living and tourism. According to a World Bank report, Andorra ranks fifth in the world according to the criteria of “political stability” and “lack of a criminal situation” (index 1.32). For example, neighbouring Spain is in thirty-first place (index 0.01). However, this indicator applies to large cities, and the countryside (in particular, the Pyrenean cities and villages of Spain and Catalonia) also boast a minimum crime rate.

In addition, the situation with drug trafficking has recently seriously worsened in Andorra. Despite the total ban on the use of all types of drugs in Andorra, reports of the detention of Andorran drug dealers have recently become more frequent. Even during the COVID-19 pandemic, Spanish police managed to detain a resident of Andorra with a batch of hard drugs (ecstasy). Since the pandemic in Andorra, extortion cases involving sexual content have also increased.

3. The environmental situation. There are no industrial enterprises in Andorra, and almost 15% of the territory is a national park under the protection of UNESCO. But unfortunately, already this year in the Principality the first garbage processing plant will be built. This project is called the priority project of the government of Andorra. Moreover, the capital of Andorra (like some other cities of the country) is in a narrow gorge, and with congestion on the roads there is a big gas contamination. The traffic problem has been observed more often in recent years, and today traffic jams inside Andorra are a common occurrence both in the morning (from about 8:00 to 9:30) and in the evening (from about 16:30 to 19:00).

4. The cheapest utility tariffs for living in developed Europe: electricity, heat, garbage collection.

5. Andorra is the only country in the world in which three systems of free primary education are simultaneously represented: Andorran, Spanish, French.

True, a quality higher education in Andorra is problematic. There is only one university in the country, it is paid, unlike the state universities of neighbouring France, and the number of faculties is limited. Therefore, the youth of Andorra prefers to study in France or Spain. For information: in France, the first university was opened in 1220—this is the University of Montpellier (only 300 km from Andorra). The first and the only university in Andorra opened in 1997.

6. Holders of the Andorran residence are free to move and live in Spain and France if they follow Andorra’s established rules of immigration law. However, monitoring compliance with these rules has recently been tightened. For a successful extension of the residence, you need to live in Andorra exactly as many days a year as necessary, depending on the type of residence. Deceiving immigration officials is almost impossible. Electricity bills, calls from a mobile phone and geolocation, as well as transactions by credit card of an Andorran bank are controlled (an account in one of the five Andorran banks is a prerequisite for obtaining resident status).

7. Andorra is the fourteenth oldest state in the world that has remained neutral for the last 700 years of history.

CONS

1. According to the legislation of Andorra, the tax burden on a business can be reduced to 2%—if the company is registered in Andorra but engaged in activities outside it (for example, a trading business). However, in practice, it is impossible to obtain this tax relief. Unofficially, experts confirm that in 2019 not a single permit was issued to reduce the tax rate to 2%. This was some kind of official “promotion” used by many law firms to bait investors.

Thus, a potential investor can expect to get a standard 10% income tax rate. And, for example, the effective income tax rate in Malta (for example, for trading companies that do not operate inside Malta) is only 5%.

2. Andorran banks are very reluctant to open corporate accounts for clients and do not service international transactions if the client does not make a deposit of at least €250,000, although according to the laws of Andorra, a client who has passed the compliance procedure and has registered a company in Andorra has the right to open an account and conduct international transactions without an appropriate deposit.

Banks of Andorra do not accept payments from a number of countries. The compliance procedure itself can take six months and even more.

All five banks of Andorra are private, the state does not have leverage over them.

Andorran banks, unlike other European banks, do not work with PayPal (as well as with no other similar payment system). That is, from Andorra it is impossible to make convenient purchases and money transfers on the Internet without disclosing bank card information.

Tariffs of Andorran banks are high compared to other European banks. Many residents of Andorra prefer to open accounts with banks in neighbouring Spain or France for business and living.

4. In Andorra there is no mortgage market and foreigners, even those who have received a residence, have no opportunity to get a loan for business development and mortgages. Despite the loud statements of the bank leaders and catchy advertising panels on the central streets of the cities, almost all foreigners are denied loans.

5. The real estate market of Andorra is illiquid. Houses and apartments in Andorra, in contrast to neighbouring Spain or France, can be sold for years, but prices are not reducing, but, on the contrary, are rising. Andorra has few high-quality luxury properties that meet international standards.

6. Business immigration and company registration in Andorra. A lot of non-professionals work in the market. Former taxi drivers and excursion guides assimilated in the country register sites for the provision of relevant services and lure customers with cheap tariffs. However, being incompetent in matters of local law, which is constantly changing, they are often unable to complete the case and are forced to turn to local law firms, which leads to an “unexpected and unforeseen increase in tariffs” in the process of registering a company. That is, in fact, potential customers fall into the hands of unscrupulous intermediaries. To conduct such activities (registration of a company and assistance in obtaining a residence), no license is required, therefore, these schemes are not controlled by state authorities. There are little professional lawyers in Andorra, working at adequate rates and guaranteeing the quality of services.

7. Earlier shopping in Andorra was one of the advantages, in recent years the situation has radically changed for the worse. Today Andorra keeps competitive prices only for cigarettes and alcohol.

Food prices in Andorra are 15-30% higher than prices in Spain and France. That is why on weekends, next to the supermarkets of nearby Spanish and French cities, you can see parking lots lined with cars with Andorran license plates. A comparison table with prices can be found here.

Among the stores of clothes, shoes and accessories of Andorra there are no “luxury” brands. There have been cases when in the central stores of Andorra, it was possible to meet goods from last year’s collection, put up for sale without a discount (so called “new collection”). In most stores, bought goods cannot be returned but can only be changed. In Andorra, the central clothing and shoe stores belong to the same owners, that is, the same buyers work on the market, so the presented collections are not diverse.

8. Transport. The cost of tickets of Andorran bus companies from Barcelona to Andorra is much higher compared to similar destinations in Europe. The cost of a one-way trip is about €35 (the route is about 200 km), and, for example, the price of tickets from the Spanish company Alsa for the Barcelona-Madrid route (more than 600 km) is only €16.

9. Problems with the delivery of goods from the European Union. Since Andorra is not part of the EU, customs delays are possible. If the client, for example, was not satisfied with the quality of the goods, for example, furniture delivered from neighbouring France or Spain, its return and exchange may take several weeks.

10. A complicated procedure for obtaining Andorran citizenship. The Andorran passport excludes the possibility of dual citizenship and implies the renunciation of the applicant’s current citizenship within five years following the granting of Andorran citizenship. A prerequisite for obtaining Andorran citizenship is passing an exam in the Catalan language (the official language of the country) in the history and geography of Andorra. Foreigners must live in Andorra continuously for 20 years.

11. The percentage of citizens and residents of Andorra who speak English is low. The country speaks Catalan, Spanish and French. Accordingly, the difficulties of communication can become a problem when moving to this country (although in Andorra there are free courses to learn the Catalan language for everyone, you can study in person or in absentia).

12. In Andorra, a tourist destination hosting millions of tourists, the nightlife industry is completely absent. The Après-ski parties take place in the mountains near the ski resorts and are limited in time—they end by 21:00 because these open areas are surrounded by houses and hotels. At the same time, for example, in the neighbouring French Pyrenees, you can easily combine both pleasures—skiing and nightly entertainment. For example, the French ski resort of Gran Turmale/Pic du Midi organizes night discos right on the territory of the observatory with breath-taking views.

13. Andorra is a country of skiing. However, a few years ago, the resorts of Andorra competed with the Alps, today the prices for ski passes and the entire infrastructure have seriously increased and have become equal to prices at the leading resorts in Austria or Switzerland. In addition, climate warming in the Pyrenees leads to the late opening and early closure of resorts. For example, the 2019-2020 season began with the complete absence of snow (skiing was available only in some areas with the guns). After the snowfall in late November, warm sunny days came. Warm weather continued throughout January. And the long-awaited snowfall that collapsed in late January was again replaced by warm days.

14. The main minus of Andorra is the problem with logistics. Andorra, being a tourist country, has neither its own railway station nor its own airport. You can get into the country only by regular bus (the nearest international airports are in Barcelona and Toulouse) or by car. On weekends and holidays collapse on roads and kilometres of traffic jams both for entry and exit take place. For this reason, the number of residents and tourists arriving late to the airport is growing steadily.

Look here for all residence types available now in Andorra