The country, nestled against the French and Spanish border, has long been a favourite among investors thanks to its lenient tax laws – and its lower real estate prices compared to other tax havens, such as Monaco. Indeed, over half of Andorra’s population is made up of wealthy buyers who are not citizens.
But in June, Andorra announced that it would be introducing income tax for the first time from 2016 – a move that, the New York Times reports, sparked worries from estate agents that it would exacerbate the impact of the global financial crisis.
So far, though, the tax has failed to deter buyers, with agents telling the newspaper that sales have continued since the June announcement.
“We’ve sold properties with a combined value of over €2 million since the confirmation of income tax being introduced,” Roger Munns, owner of Brit agents Tribune Properties, told the paper. “Which, I think, shows that Andorra is still a serious contender for those wanting to lower their tax bills.”
The new levy will apply to anyone who lives in Andorra for more than 182 days per calendar year. The law will give a tax-free allowance of €24,000 and then charge a fee of 5 per cent for income up to €40,000. Any earnings above that will be taxed at 10 per cent, a rate that still remains below many European countries.
With many buyers looking for retirement homes, though, the demographic of the typical Andorra buyer – combined with the favourable rates – are causing little concern for local agents Finques 3 Cases.
Narcis Socias told the New York Times: “Most are retired with a good level of disposable income or people aged 40-plus with independent means, possibly from business ownership or finance-based work. Foreign investors in Andorra generally have between €500,000 and €2 million to spend on property. Andorra isn’t going to attract the same number of wealthy investors, top financiers or celebrities as other tax havens because it can’t offer the same lifestyle.”
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