ANDORRA Trends and Developments Contributed by: Oriol Giró, Laia Bertran, Yaumara Toledo and José Luis Andrés, Emindset Law Firm
Other forms of residence: employees and passive residents Andorra also offers residence categories for employ - ees, passive residents and persons with certain inter - national, professional, sporting, cultural or scientific profiles. Each category has its own conditions, invest - ment requirements, physical-presence rules and per - mitted activities. Passive residence may be relevant for individuals who do not intend to carry out ordinary employment in Andorra. It generally requires a substantial investment commitment, adequate financial resources, insur - ance and a minimum period of annual presence. The precise investment thresholds and qualifying assets should be reviewed under the legislation applicable when the application is filed, as this area has been subject to reform. Active residence, by contrast, is intended for persons working in Andorra, whether as employees or self- employed entrepreneurs. It normally entails a more substantial presence in the country and participation in the social security system. Prospective residents should also distinguish immi - gration residence from tax residence. An immigration permit grants a legal right to live in Andorra, but tax residence is determined according to statutory tests and factual circumstances. These may include the number of days spent in Andorra and the location of the individual’s principal economic or personal inter - ests. The government actively verifies that residents comply with the statutory minimum stay requirements and may request evidence demonstrating their effec - tive residence in the country. A relocation should therefore be implemented in practice, not merely documented administratively. Housing, family arrangements, management respon - sibilities, banking, professional activity and connec - tions with previous countries of residence should be reviewed as part of a coordinated legal and tax strat - egy. Investing in estate Real estate has traditionally formed part of many relo - cation and investment projects. However, this is now
one of the most closely regulated areas of foreign investment. Foreign acquisitions of Andorran real estate generally require prior administrative authorisation. A specific tax on foreign real estate investment also applies, with the applicable rate depending on the scope and characteristics of the acquisition. Recent reforms have increased the tax burden for certain investments and reinforced quantitative and qualitative restrictions. The regulatory purpose is not simply fiscal. The leg - islation seeks to moderate speculative demand, improve access to housing and direct foreign capital towards projects that generate broader value. Certain exemptions or reductions may be linked to maintain - ing the investment for a minimum period, creating rental housing, conducting an authorised economic activity or satisfying employment-related conditions. Investors should therefore assess real estate acquisi - tions in the context of the entire project. A property intended as a genuine home for an active resident raises different issues from a portfolio investment, development project or acquisition through a corpo - rate structure. Foreign investors may undertake real estate invest - ments jointly with local partners, creating opportuni - ties to combine international capital with local knowl - edge and expertise. The tax treatment of the acquisition, ongoing owner - ship, rental income and future disposal must also be analysed. The foreign investment authorisation does not replace urban planning, municipal, construction or sector-specific approvals. Substance Is becoming the key concept The direction of Andorran policy can be summarised in one word: substance. Companies are expected to undertake real activity, investors must explain the ori - gin and purpose of their capital, and residents should have a genuine connection with the country. Com - mercial and tax substance is required, ensuring that investors genuinely contribute value to Andorra.
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