Taxation Andorra – Real estate capital gains
Andorra has become one of the most attractive countries in the world in terms of investment thanks to its competitive tax system. The Principality offers many opportunities in real estate. The capital gains tax rate on real estate transactions in Andorra ranges from 1 to 15%. Moreover, the Andorran real estate market offers a wide choice of properties. From apartments to mountain chalets, you can acquire the home of your dreams, regardless of your income or activity.
The tax system on real estate in Andorra
The Andorran tax system favors real estate investments, as well as the creation of businesses. Taxes on real estate in Andorra are calculated according to the type of dwelling and its size. The capital gains tax applies to Andorran tax residents. It is levied on the sale of a property that has been purchased for less than 10 years.
The calculation of this capital gain is made with a correction coefficient which is fixed each year by the Andorran Government. For rental investments, there is the law of tourist accommodation that it is advisable to know. Among other things, you must declare it to the Ministry of Tourism.
Buying a property in Andorra
If you are considering buying a property in the Principality of Andorra, you can do so as your usual residence. Another possibility is to buy a property with the aim of making an investment and making a profit. For this second case, it is not mandatory to have an Andorran residence.
However, if you are not a resident and do not intend to become one, you must apply for a foreign investment authorization for the Andorran real estate market and obtain a NIA (tax identification number).
Please note that since the reforms in the real estate investment in this country, dating from 2012, the number of property acquisitions is no longer limited.
Conditions to invest in real estate in Andorra
Since 2012, the law on real estate investments has been considerably relaxed. Even those who are not Andorran residents can buy a home, an administrative establishment for private use, etc.
However, there are various conditions that must be met to be able to make a real estate investment in this European microstate. Among them, you must apply for a foreign investment permit from the Andorran government and invest in real estate with a minimum amount of 40,000 euros. You must also prove that you have a stable income and the financial capacity for your investment. To do this, you must have a title deed or a bank authorization, among other things.
In the case of the acquisition of a second home, you must have a foreign investment authorization and a non-resident bank account.
Types of real estate in which to invest in Andorra
To benefit from this tax situation regarding real estate capital gains in Andorra, you should know that you have several options. It all depends on the interest and returns that you want to enjoy.
You can invest in:
- Parking lots: a small investment with little risk, but with high profits,
- Cottages: the originality and the atypical setting that attract,
- Apartments and studios: for year-round income or seasonal rental during the ski season,
- Commercial premises: with the rise in the creation of companies for various activities, it has become more profitable.
Taxation on real estate capital gains in Andorra
When you buy a property in Andorra, the fiscal law of the country requires you to pay the ITP. This is the capital gains tax on the transfer of real estate assets. It amounts to approximately 4% of the price of the property. This rate will be shared between the Andorran Government and the Comú of the parish where the property is located.
You must pay this tax to a notary when you sign the deed of sale. The notary's fees will be at your expense. They are 0.1% of the value of the property. They generally vary between 600 and 1200 euros.
Among the other costs related to your real estate acquisition, one should not omit the fees corresponding to the real estate agency services. They represent about 5 to 10% of the sale price of the property.
With its very advantageous tax situation, there are many other activities that can be undertaken in Andorra besides real estate investment. The creation of companies is one of them. The taxes related to the activities of companies are relatively low, or even zero in some cases.
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An attractive tax system in all areas
It is not only the real estate capital gain that remains interesting in Andorra. As a general rule, Andorra’s tax system is particularly low in all areas, thanks to conventions or its transparent tax law. As an example, personal income tax or IRPF does not exceed 10%. In France, the maximum rate is 45%.
The Andorran government is also making considerable efforts to attract foreign investors through conventions. Many companies are set up in Andorra, not only because of the advantageous tax system, but also because of the different reasons to move to this small state located between France and Spain.
In order to take full advantage of the tax benefits and certain tax exemptions in the Principality of Andorra, you should be accompanied by a tax expert. Compared to the real estate market in France, Spain or other European countries, the tax procedures are not the same, as well as the tax rates.