ANDORRA Law and Practice Contributed by: Albert Hinojosa and Marc Ambrós, Cases Lacambra
6.7 Payment of VAT The leasing of real estate is generally subject to VAT at a 4.5% rate. The lessor will charge VAT to the lessee, who will bear the VAT cost. However, no VAT will be payable on rent from the leasing of dwellings, as this kind of lease agreement is subject to VAT at a 0% rate. 6.8 Costs Payable by a Tenant at the Start of a Lease The tenant has an obligation to arrange an insurance policy that covers at least the risk of fire, explosion, water leaks and civil liability for damages, to sign up for the national electricity company through an elec - tricity journal, to pay taxes related to the economic activity that will take place, and sign up in the trade register. 6.9 Payment of Maintenance and Repair The tenant is obliged to pay the expenses that arise from the services and utilities supplied to the real estate that they can use. This consideration is derived from the use of common elements of the property, parking lots, gardens, porter’s lodge services, and the supply of water, electricity, heating, telephone and other analogues. 6.10 Payment of Utilities and Telecommunications In order to collect payment for the supply of utilities and telecommunications services, the landlord must justify the amount to the tenant. If the real estate is enjoyed by more than one tenant, the total cost is distributed among them, according to the surface of each floor, unless the participation fees are set for each floor or premises. This does not apply if there are individual meter boxes, in which case the tenant will pay according to what the individual meter box indicates. The agreement of a previously fixed amount for all services is valid. 6.11 Payment of Property Taxes Purchasing Property • Property transfer tax – 4% of the property’s value. • Notary services – 0.5–1% of the transaction amount (5–10% of the property’s price).
Owners • Annual property tax – EUR0.75 per square metre, on average. Only owners between the ages of 18 and 65 pay an annual property tax. • Build-up real estate – EUR0.30 to EUR3 per square metre. Furthermore, an infrastructure maintenance fee of EUR500 to EUR1,000 may be charged each year by the municipality. Leasing • Andorran tax residents – 0.4–4% tax on income gained from renting out properties. • Non-residents – 7.5% tax on gross rental income. Hence, landlords pay taxes on rental income. Unoccupied and vacant properties are charged with a special tax after two years of vacancy, according to Law 3/2019. The tax is calculated at EUR100 per square metre of the total usable area. In such a case, the owner must confirm at least one of the following conditions: • the property is empty due to a change of address or health issues; • the property is not the primary residence; • the property’s address is used for fiscal or business taxation purposes; • the property is related to commercial activities; or • the property is to be sold via a real estate agency. Sale of Properties As noted in paragraph 2.10 Taxes Applicable to a Transaction , taxation for sale transactions may vary depending on the type of transaction (share deal v asset deal). On the other hand, no stamp duty applies to the seller or buyer. 6.12 Insurance Issues The landlord is obliged to sign and maintain an insur - ance policy that sufficiently covers the damages that could be caused to the tenant and third parties.
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