For people who want move to live in the Principality of Andorra permanently, it is necessary to bear in mind that it is not enough to obtain a residence permit. In order to establish permanent housing here and legally, the procedures for tax residence in Andorra must also be initiated. And how can you obtain tax residence in Andorra?
What is tax residence in Andorra?
You should know that the residence permit of the Principality allows anyone who has it to live in Andorra, but it is not enough. This permit does not automatically change the tax residence, that is, the place where taxes are paid. A person can live in different countries throughout the year, but they can only establish their tax residence in one. Like the vast majority of member countries of the OECD (Organization for Economic Cooperation and Development), Andorra uses certain criteria (CDI) that allow determining residence prosecutor.
Before detailing the requirements for tax residence in Andorra, it is important to clarify that there are two concepts that are often confused: administrative residence and tax residence . The first is granted by the competent authorities in matters of immigration and follows a specific process. Tax residence in Andorra is not a procedure in parallel to administrative residence, but is consolidated once certain regulatory requirements are met and following tax legislation.
The administrative residence can be:
- For work (employee account). It requires living and working in the Principality.
- Self-employed residence. An economic activity must be developed. To do this, it is necessary to create a society in the Principality. For this purpose, it is essential to reside in Andorra for 183 days per year and make a deposit of 15,000 euros with the AFA (Andorran Financial Authority). It is also important to pay Andorran social security taxes.
- Non-lucrative or passive residence. This type of permit can be acquired, as long as an investment of 350,000 euros is made in the Principality, as well as a deposit of 50,000 euros to the AFA.
Documentation for tax residence in Andorra
If you want to start the tax residency application in Andorra, we tell you that there are certain criteria to take into account. These are governed by what is established by the OECD, they are approved by the Principality and in addition, they are included in the Andorran personal income tax law.
According to these regulations, for a person to obtain tax residence in Andorra, it is necessary:
- Reside more than 183 days per year in the country. Also counted for these purposes are the days on which trips are made to other territories and that are not susceptible to attracting tax residence. A person can be considered a tax resident once they establish their fixed-habitual residence in Andorra and reside here for half of the year.
- Establish in the Principality a center of economic interests, that is, the majority of the income must be generated in Andorra.
- That the core of family or vital interests (due to marriage or having dependents) is located in the Principality. This criterion is known as presumption.
When these requirements are consolidated and met, it is possible to notify the Andorran authorities of the change of tax residence to begin paying taxes in the Principality. And what happens when these criteria are not met? Then the nationality of the applicant comes into play. Nationality allows to determine the place of taxation without restrictions and, if there is double taxation, then the authorities of both States will be in charge of resolving the conflict.
How can you determine in which country to pay taxes? To do this, the interested person must request a certificate of tax, active or passive residence in a certain country. Through this document the obligation to pay taxes (or not) in Andorra is then determined. The best thing, however, is to always put yourself in the hands of the experts to receive specialized information and advice.
Remember that each case is different and that is why, at MCA Assessors, we put a large team of experts in the field at your disposal.
FAQs about tax residence in Andorra
When it comes to deciding to establish tax residence in Andorra many doubts arise, which you can clarify with professionals. However, we put at your disposal some of the most frequently asked questions:
Is it possible to have a tax residence in two different States?
You should know that it is not possible to pay taxes in two countries. The taxpayer can live in different places, but can only hold one tax residence. That is, it is possible to live part of the year in Andorra and Spain, for example, but only paying taxes in one of these two countries.
What criteria must be met to be able to request tax residency in Andorra?
It is essential, as we already mentioned, that certain criteria are met to be able to request Andorran tax residence. These criteria are accepted by the vast majority of countries in the European Union and are based on Double Taxation Agreements (CDI). These criteria are:
- Living in Andorra more than 183 days a year.
- Have a family nucleus in Andorra.
- Establish an economic nucleus in the Principality.
