Dr. Giannina Tacca Soriano
Partner, Kreston Iberaudit, Andorra
A member of the team at Kreston Iberaudit Andorra and a partner at Valgianni, she possesses extensive experience in business strategy, a field she has been immersed in since 1997.
Her educational credentials include a Bachelor’s in Business Administration from the Instituto Tecnologico Autonomo de Mexico, complemented by an MBA from ESADE. She further honed her expertise with a specialisation in International Finance from Cornell University. In acknowledgement of her distinguished contributions, several Iberian universities have conferred upon her Doctorate Honoris Causa degrees. Moreover, she has obtained diplomas from IESE in Negotiation and the Blue Ocean Institute in diversification strategies.
Foreign investment opportunities in Andorra
January 11, 2024
Kreston Iberaudit, Spain, works with clients looking for foreign investment opportunities in Andorra. This small principality located between France and Spain has emerged as a preferred destination for business investments due to its low tax system and strategic geographical position. The local firm is run by Giannina Tacca Soriano, who has worked with large global telecom brands such as Orange and Vodafone, and household name brands such as Aguas de Portugal, Credit Lyonnais and Nestlé.
With such diverse global experience in the region, Giannina helps us understand what brings wealthy investors to Andorra.
Tax benefits in Andorra
“It offers significant tax benefits for companies, helping them reduce their tax burden and enhance competitiveness. The country is within convenient reach of major European cities and ports, such as Barcelona, Madrid, and Marseille.”
The allure of Andorra for investors is significantly rooted in its tax system, concludes Giannina, “a series of tax benefits that make it an interesting option for companies seeking to optimise their tax burden.” This approach to taxation is not about creating a tax haven but about establishing a low-tax regime that aligns with the guidelines of the OECD.
The government tax on business profits (I.S. Impuesto de Sociedades), as well as the tax on personal income (IRPF Impuesto sobre la Renta de Personas Físicas), are capped at a maximum 10% tax on EBITDA and on Personal income, making it an economically viable option for businesses and professionals. Additionally, the cost of labour and social security contributions are competitive, providing further financial incentives for businesses.”
2012 Foreign Investment Law
Giannina believes a pivotal moment for Andorra’s economic trajectory was the introduction of the Foreign Investment Law in 2012.
“This legislation opened doors for global investors, allowing any foreigner to invest in Andorra. This move, coupled with Andorra’s adherence to international tax standards, has positioned it as a reliable and attractive destination for global capital.”
Geographically, Andorra’s proximity to major European cities is a significant advantage, just 200 km by car from the Port of Barcelona or the French city of Toulouse, 5 hours by train from the city of Madrid, and 500 km from the Port of Marseille. This strategic location provides convenient access to key European markets, adding to Andorra’s appeal as a business hub.
Personal tax laws in Andorra
Individuals seeking fiscal residence in Andorra are also drawn by the tax benefits, explains Giannina,
“The personal income tax system is simple, with a maximum rate of 10% for personal income above €40.000 and rates as low as 5% for any annual personal income lower than €40,000 or 0% tax if the income is lower than 24.000€. This tax structure is attractive compared to many other countries, offering significant savings for residents.”
Housing crisis
Andorra’s economy has seen growth, particularly in the real estate sector, reflecting its increasing attractiveness as a business and residential destination. The demand for real estate has “had a 25% yearly increase” in recent years, and prices have risen “from an average purchase price of €2,100/m^2 in 2018 to €4,500 /m^2 in 2023, expected to be €5.300/m^2 in 2024.”
Andorra’s urban development has been responsive to its growing population, which has “increased from 70,000 inhabitants in 2012 to 82,000 in 2022, with an expected 100,000 by 2027.” This population growth, driven by new residents, is creating opportunities in the construction, services, and real estate sectors.
These new inhabitants are mainly investors who are attracted by lifestyle benefits such as a low tax crime rate and a territory made of 468 km^2 of nature with lakes and, probably the highest concentration of protected areas in the world since it has 3 nature-protected spaces, where several winter and summer sports are practised. The largest protected nature area is the Madriu-Perafita-Claror which covers 10% of the surface area of Andorra and its landscape is spectacularly beautiful, which is why it was declared a UNESCO cultural landscape world heritage site, notes Giannina.
Recently, Spanish or French YouTubers moving into the area have been blamed for a housing price increase, causing the government to instigate a temporary ban on new investment from wealthy foreign investors buying property.
“The digital sector finds Andorra promising due to its commitment to technological infrastructure and favourable tax rates for digital enterprises. In case of being a Youtuber, Influencer, or digital content supplier, your income will be taxed in Andorra at 10% EBITDA and 10% Personal Income.”
Although this newest move to restrict the sale of the property to foreign investors is a temporary measure, it is set to be replaced by a tax on all foreign residents property purchases. The revenue generated from this tax will be allocated to constructing more affordable rental housing, addressing the needs of local Andorrans.
Passive residence in Andorra
However, Giannina cautions that there are still ways to by-pass this move;
“The ban applies to non-residents, suggesting that wealthy foreigners might simply respond by applying for residency permits to be treated as residents. A residency option called “passive residence” requires living in Andorra for just 90 days per year. It is an attractive option for affluent individuals, particularly digital nomads, who earn their income abroad.
Passive residents are typically obliged to invest at least €600,000 in the country, with a substantial portion of investors deciding to directly invest in real estate. This aspect of the residency program underscores the complexity of addressing housing affordability in a nation where attracting wealthy foreign investors and residents has long been a cornerstone of the economic strategy.”
Wealth management
After a housing market stagnation that began in 2008 and started to see changes in 2016, Andorra sees itself in an unusual predicament, a victim of the success of its taxing policies. However, due to its transformation from a quaint mountain principality to a bustling centre of international business, the country is still keen not to be considered a tax haven.
“Andorra is recognised and accepted by International Tax Institutions of the OECD as not being a tax haven but a low taxes country that applies the OECD procedures. Its low tax policies can still appeal to wealthy investors. Almost 70% of the Moto Grand Prix Teams (competitors and technicians) live in Andorra; as well as cyclist runners who enjoy cycling up and down the different hills of Andorra. In addition, Andorra offers great security with almost nonexistent street robbery.
With a low VAT tax on Capital Sell such as 2.5% tax and 0% tax on capital gains, Andorra has also attracted professional art collectors that live and make businesses in the principality, including Gorgeov, Philippe Shangti and the Thyssen Baroness Carmen Cervera ”
With a high quality of life and a favourable tax regime, investors will continue to find Andorra attractive for some time.
“Andorra must carefully manage its growth to ensure it remains an idyllic haven without compromising its core values. In doing so, it seeks to maintain its status not as a tax haven, but as a calm Principality surrounded by the Pyrénées mountains with a low-tax policy aligned to OECD standards, offering a unique blend of economic opportunity and high-quality living to both investors and locals.”
If you would like to talk to one of our experts about doing business in Andorra, please get in touch.
