Temporary suspension of foreign investment in property                               

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Impuestos Andorra 2º Trimestre

2020 Andorra Tax Calendar – 2nd quarter

Below we detail the most important events on the Andorra taxpayer’s calendar for the second quarter of 2020, as well as the forms that should be submitted in each case,…

The Andorran Government has announced the temporary suspension of foreign investment in property. This initiative, which has already been approved by the Andorran parliament, is intended to alleviate the national problem of a lack of affordable housing for renting. It has been introduced as a transitional measure pending the introduction of the tax on foreign investment in property, which is expected in the autumn.


Table of contents:

  1. Moratorium on approvals for foreign investment in property
    Draft law reforming the law on foreign investment
    The current state of foreign investment in property
    How can I invest in Andorra?
    Measures to alleviate the shortage of affordable housing
    Knowledge of Catalan for residents
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Moratorium on approvals for foreign investment in property

The Andorran Government announced the moratorium on 4th September, as a temporary measure. Three days later it was approved by a large majority of the parliament.
This temporary suspension is a precursor to the introduction of a new tax on foreign investment in property purchases by non-residents. The intention is that the proceeds of this new tax will be used for affordable housing and economic diversification (in no way does it wish to discourage this type of foreign investment).
The moratorium will affect both non-resident foreign individuals and Andorran legal entities with foreign participation. However, it will not affect property transactions for which a preliminary contract has already been signed, and in which a deposit was paid before 5th September.
The main objective of this initiative is to ensure sustainable growth in the country and to curb speculative buying and selling. It is a one-off measure that will help to address the country’s current problem of a shortage of affordable housing for renting.

Draft law reforming the law on foreign investment

At the same time as it announced the moratorium, the Government also stated that while the new tax is being established, it will work on updating the law so that it will be ready in the first quarter of 2024. Last year, it unveiled a reform project (on which we reported here).
The current foreign investment law dates from 2012 and is an amendment to the 2008 text. The 2012 framework completely changed the Andorran economic model. Its approval allowed total economic openness with the entry of 100% foreign capital, whereas previously only 49% could be held in national companies. This change has succeeded in attracting investors and companies wishing to establish themselves in Andorra in order to benefit from the country’s favourable fiscal conditions, while at the same time generating wealth for the country.
This temporary suspension will allow the criteria for foreign investment in the property sector to be reviewed in order to ensure balanced and sustainable growth in the country. It will also make it possible to adapt the current parameters to guarantee their proper functioning, keeping them up to date and homogeneous with those of other countries.

The current state of foreign investment in property

To give an idea of what it contributes to the country, here are some data extracted from the annual summaries of the Andorran Government’s statistics department:
• During 2022, 500 foreign investment applications for the acquisition of property, worth almost 183 million euros, were approved.
• In total since 2016, some 4,527 applications have been registered, amounting to some 1.131 billion euros.
Since 2016, a total of 7,528 applications for foreign direct investment have been registered, in order to create a company or participate with at least 10% in an Andorran company. This represents a volume of 2,357 million euros. In 2022, the sector that stood out most in terms of volume was the provision of services.
In this article, we discuss the growth of authorisations in 2021.

How can I invest in Andorra?

Although the Andorran Government has suspended property acquisitions on an ad hoc basis, there are other ways to invest in Andorra. Applications for foreign investment authorisation are still open for:
• Setting up a new company
• Participation in Andorran companies
• Portfolio investments
• Or other types of investment such as foundations, co-operatives, communities of owners…
As mentioned above, the Andorran Government’s intention is not to restrict foreign investment, but to ensure that it functions properly so that the housing market for Andorran residents is not affected.

Measures to alleviate the shortage of affordable housing

The high demand from people wishing to move to Andorra has meant that, as in other European cities, prices have risen and it has become more difficult to find affordable housing.
In the past year, the average price per square metre has increased by 9.41%, from €3,845 per m2 to €4,207 per m2 (data from August 2023). Rents, on the other hand, have increased by 30.53%. In August 2023, the price per square metre was €17.87, while in the same period of 2022 it was €13.69, according to data from the Indomioproperty portal.
In this context, it has been necessary for the Andorran Government to implement a series of measures (including a moratorium on foreign investment in housing) in order to curb the rise in prices and facilitate access to housing for Andorran residents.

Knowledge of Catalan for residents

There are other important aspects to consider when renewing or obtaining residence in Andorra.
A new law is currently being drafted that will require residents to have a minimum knowledge of Catalan, the official language of the country. If they cannot prove this (it is a very basic level, below A2), they will have to complete a 30-hour course. This law will apply both to new residents and to those renewing their permit, but will not apply to passive residents (residents without a work permit), to the self-employed or to seasonal or cross-border workers.
The text is expected to be ready at the beginning of 2024 and will affect the next renewals, i.e. about 3,000 people. The aim of this law is to guarantee public services in the Catalan language.

If you are considering investing in Andorra, Advantia Assessors will guide and advise you throughout the process, adapting ourselves to your specific situation.
We understand that there are many challenges and obstacles to undertaking a project, especially in a country different from your own. But with our advice you will be able to deal with them efficiently and successfully. We will provide you with accurate information and guidance on residence procedures and taxation in Andorra.
Don’t hesitate to count on us. Together, we will help you achieve your goals.