Real estate capital gains tax in Andorra: understanding the rules and optimising your sale in 2026

Real estate taxation in Andorra is often presented as simple and advantageous. This is true in certain situations, but this reputation can also lead to misunderstandings. When a property is resold, the actual amount of tax due depends in particular on the seller’s tax status, the length of ownership, the purchase price and acquisition costs, any work carried out and, in some cases, whether the property was used as a main residence.

The rules have also changed recently. Following real estate speculation that contributed to serious housing crises, the Andorran government has introduced stricter laws. A reform that came into force has notably strengthened the taxation applicable to real estate transactions considered speculative. The rules governing foreign real estate investment were also amended in 2026.

How does real estate taxation work in Andorra?

The first distinction to make is between taxation related to the purchase and taxation applicable when the property is resold.

When purchasing real estate subject to the Property Transfer Tax (Impost sobre transmissions patrimonials, or ITP), the general rate indicated by the Andorran administration is 4% of the property's actual value. This tax is paid by the buyer. It should not be confused with the tax that may become payable several years later when a capital gain is realised.

For a foreign investor, another layer of taxation may also apply at the time of investment. Following the changes adopted in 2026, the tax on foreign real estate investment can notably reach 6% or 10%, depending on the nature and scope of the investment concerned. Its application nevertheless depends on the buyer's profile and their history of residence or investment in Andorra.

In other words, referring to an “Andorran real estate tax rate” without specifying which tax is meant can be misleading. The purchase, ownership and resale of a property are subject to different mechanisms.

What is a real estate capital gain in Andorra?

A capital gain arises when the value used for the disposal of a property is higher than its fiscally recognised acquisition value.

For an individual who is tax resident in Andorra, the Personal Income Tax (IRPF) legislation provides that the real estate capital gain is determined based on the positive difference between the property's transfer value and its acquisition value. The latter does not necessarily correspond solely to the price stated in the previous deed of sale. Certain investments, improvement works, taxes and costs directly related to the acquisition may be taken into account when they meet the legal requirements and are properly documented.

This is a point that is often underestimated. Keeping invoices, proof of renovation work and documents relating to the acquisition can have a real impact several years later when the property is sold. However, this amount is not automatically the tax payable, nor is it necessarily the final taxable base. The length of ownership, resident or non-resident status and any adjustments provided for by law must still be taken into account.

Why is the length of ownership so important?

The length of time the owner holds the property plays a major role in Andorran taxation.

For an individual who is tax resident in Andorra, Personal Income Tax (IRPF) is generally subject to a 10% rate. However, real estate gains are subject to specific rules. When the sale takes place shortly after the acquisition, a surcharge may apply. Under the legislation currently in force, a 10% surcharge applies when the property has been held for less than two years, followed by a 5% surcharge when it has been held between two and five years.

Conversely, the law provides for adjustment coefficients when the holding period exceeds six years. The portion of the capital gain included in the taxable base gradually decreases between the sixth and tenth years. When the holding period exceeds ten years, gains and losses falling under this mechanism are no longer included in the taxable base under the rules set out in the relevant article.

This mechanism explains why two owners realising exactly the same accounting capital gain may face very different tax liabilities.

It also shows why the former approach of simply applying a scale ranging from 15% in the first year to an almost complete elimination of the tax after ten years no longer accurately describes, on its own, how the current regime applicable to residents works.

What about a non-resident property owner?

This is one of the most important points to check before calculating a real estate capital gain in Andorra: the rules applicable to a non-resident are not the same as those applicable to a tax resident.

Since the 2025 reform, the Non-Resident Income Tax provides for specific rates for certain real estate capital gains. A sale carried out after less than two years of ownership may be taxed at 25%. Between two and less than five years of ownership, the applicable rate is 20%. Between five and less than ten years, it is 15%.

It would therefore be risky to use a resident's calculation to automatically estimate the tax due by an investor living in France, Spain or another country. Tax residence must be determined legally and not simply based on nationality, the address appearing on a document or the fact that the person owns a property in Andorra.

Which costs and improvements can reduce the capital gain?

The question of deductible expenses deserves particular attention because it can significantly affect the result.

Andorran legislation allows the acquisition value to take into account, in particular, certain investments and improvements made to the property, as well as taxes and costs directly associated with the acquisition, provided they meet the legal requirements and can be properly documented.

In practice, a major renovation supported by invoices is therefore not treated in the same way as an expense that cannot be substantiated several years later.

The best practice is to build the property's tax file from the time of acquisition rather than waiting until a buyer appears. The purchase deed, invoices, administrative authorisations and proof of payment can then become essential elements in the calculation.

The aim is not to artificially include every expense in the property's cost basis, but to be able to substantiate the amounts that are genuinely eligible in the event of an audit.

Can a main residence be exempt?

An exemption may be available in certain situations when a taxpayer sells their main residence and reinvests the proceeds from the sale in a new main residence located in Andorra. However, this exemption is not automatic.

Current legislation sets out several conditions, particularly regarding the seller's actual residence in Andorra, the use of the property as their main residence, the length of occupancy and the reinvestment. In particular, the property must have been the taxpayer's main residence for the period required by law, which is currently four consecutive years, subject to specific situations permitted by the legislation. The reinvestment must take place within the statutory period, currently set at one year after the transfer. In the event of partial reinvestment, the exemption is applied proportionally.

It is therefore preferable not to organise a sale on the assumption that “a main residence means no capital gains tax.” The exemption depends on meeting all the conditions set out in the regulations. For a significant transaction, these conditions should be verified before signing an irrevocable commitment to sell, rather than afterwards.

Foreign investment: taxation that must be distinguished from capital gains

For someone wishing to purchase property in Andorra without having sufficient residency history, foreign investment taxation has become an unavoidable consideration.

The law adopted in 2026 notably provides for a 6% rate for certain acquisitions corresponding to a first level of real estate investment and a 10% rate in other situations exceeding the thresholds established by the legislation. The classification as a foreign investment also depends on the investor's profile and, for certain residents, on the length of their actual residence in Andorra during previous years. This tax applies within the context of the acquisition. It does not replace the ITP where applicable, nor any taxation that may arise from a future resale.

To determine the actual profitability of a real estate project, it is more relevant to calculate the overall tax cost across the entire investment cycle rather than looking solely at the capital gains tax rate.

Legally optimising the taxation of a property sale

Tax optimisation is not about finding a loophole to avoid paying tax. In the current Andorran context, it is primarily about planning ahead.

The length of ownership can have a considerable impact on the final tax liability. Selling a few months before or after a statutory threshold can sometimes change the applicable regime. However, this question must be weighed against changes in the property's value, financing costs, holding costs and the owner's personal plans.

Tax status should also be verified before the sale. Someone who has just moved to Andorra, a long-established resident and a property owner who remains tax resident in France should not base their calculations on the same assumptions.

Finally, when an exemption related to a main residence is being considered, the reinvestment timetable and occupancy requirements should be incorporated into the project before the sale. Proper tax planning therefore begins with a simulation based on the rules applicable on the planned transaction date and on the taxpayer's actual documentation.