ANDORRA Law and Practice Contributed by: Albert Hinojosa and Marc Ambrós, Cases Lacambra
published in the Andorran official gazette. Later, the government transmits the entire file to the Andorran Parliament ( Consell General ), with all the observations and objections received, attaching a report suggest - ing the approval or denial of the declaration of public utility and the necessity of occupation. The Andor - ran Parliament makes the final decision, which has to be published in the Andorran official gazette and is directly enforceable. In addition, Act 5/2025 has introduced a special regime for empty homes ( habitatges buits ). This Act provides for the compulsory transfer of the right to use empty homes to the Andorran government for a maxi - mum period of five years, which will incorporate them into the public housing stock for rental at affordable rates. The owner will receive financial compensation equivalent to an affordable rent amount. According to the Act, a dwelling is considered empty if (i) there is no electricity or water supply, or, despite having it, there is no energy or water consumption for the 18 months preceding the entry into force of Title IV; or (ii) it has been unoccupied for at least 18 months preceding the entry into force of Title IV and this unoccupancy is due to a cause attributable to the owner. 2.10 Taxes Applicable to a Transaction Taxation on the purchase of real estate depends on the envisaged purchase scheme (ie, asset deal or share deal) as well as the condition of the parties inter - vening in the transaction. Asset Deal The condition of the seller will determine whether an asset deal will be subject to General Indirect Tax ( Impost General Indirecte ), which is the Andorran VAT, or Transfer Tax ( Impost sobre transmissions patrimoni- als immobiliàries ). If the seller does not qualify as a business-person or professional for VAT purposes, the sale and purchase of real estate will be subject to Transfer Tax, which will be borne by the purchaser. The applicable Transfer Tax rate will be 4%. Should the seller qualify as a business-person or pro - fessional for VAT purposes, the sale and purchase of real estate will be subject to VAT, which will be charged
by the seller and borne by the purchaser. The appli - cable VAT rate will be 4.5%. If an asset is transferred as part of an independent economic unit for VAT pur - poses, such transfer will not be subject to VAT. Share Deal If the transfer of real estate is carried out through a share deal, the transaction would not be subject to VAT or Transfer Tax. However, the Transfer Tax Law sets out an anti-abuse rule to tax indirect transfers of real estate. This rule will apply if a company’s assets consist of at least 50% of real estate assets located in Andorra and are transferred and, by virtue of such transfer, the pur - chaser acquires more than 20% of the company’s shareholding. In both cases – Asset Deal or Share Deal – capital gains on the transfer of real estate would be subject to Corporate Income Tax ( Impost sobre societats ) if the seller is a company which is resident for tax pur - poses in Andorra, at a nominal rate of 10% to 20%, depending on how long the asset has been held by the seller. If the seller is an individual, Personal Income Tax ( Impost sobre la renda de les persones físiques ) or Non-Resident Income Tax ( Impost sobre la renda dels no-residents fiscals ) would apply. In this case the nom - inal rate would be between 0% and 25%, depending on both the residency in Andorra of the seller and the time elapsed since the date of acquisition. 2.11 Legal Restrictions on Foreign Investors A restriction on foreign investment in real estate estab - lishes that a foreign natural person must always obtain a prior foreign investment authorisation from the Andorran government to acquire real estate located in Andorra. Furthermore, foreign legal persons cannot directly acquire a property located in Andorra, so they must use an Andorran special purpose vehicle or SPV. The acquisition or constitution of the SPV is also sub - ject to obtaining the relevant prior foreign investment authorisation from the Andorran government if the for - eign entity owns more than 10% of the SPV’s share capital or controls more than 10% of its voting rights.
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