Foreign investment in property in Andorra is taking an important turn with the entry into force of the new law on sustainable growth and the right to housing. On 16th April, 2025, this regulation introduced restrictions on the purchase of residential property by foreign investors, with the aim of reducing pressure on the local housing market and guaranteeing access for the local population.
The measures promoted by this new legal framework represent a turning point in the Andorran property scenario, and introduce a more balanced, accessible and sustainable model. The new law has also approved a new regulation covering foreign direct investment and property.
Table of contents:
- The reasons behind this new legal framework for housing and sustainability
What changes in foreign property investment?
Changes to foreign investment tax
More supervision and control in the foreign investment regulations
The main legislative changes in the sectors concerned
A new scenario for investment and housing in Andorra
The reasons behind this new legal framework for housing and sustainability
Law 05/2025, of 6th March, on sustainable growth and the right to housing, arrives at a time when Andorra is facing an imbalance between housing supply and demand. In recent years, the market has been affected by several factors, such as demographic growth, economic development and the presence of foreign investment. Together, these factors have contributed to increased pressure on the supply of housing.
Against this background, the new regulations introduce reforms in key areas such as taxation, the property and tourism sectors, immigration law and foreign investment in property. The aim is twofold: to guarantee residents’ right to housing and to promote more balanced and sustainable demographic and territorial growth.
This new law, which came into force on 16th April, 2025, will mark a change in the way in which access to housing and property investment is regulated in the Principality.
What changes in foreign property investment?
One of the most significant changes introduced by the new regulation is the restriction on the acquisition of property by non-residents. From the date of entry into force of the law, purchases will be restricted to:
- A maximum of 2 apartments with their annexes, not exceeding 3 parking spaces and 3 storerooms (or similar) per apartment.
- Up to 6 parking spaces.
- A single-family home.
In addition, property developments by foreign investors must allocate at least 50% of the units built for affordable housing as principal residence.
The new law expands the concept of foreign investment. Under the new law, the acquisition of property by residents who cannot prove at least 3 years of effective residence in Andorra in the past 10 years will be regarded as foreign investment.
Changes to foreign investment tax
The entry into force of the new Law 05/2025 also entails an amendment to Law 3/2024, of 1st February, on the taxation of foreign property investments in the Principality of Andorra. This revision reinforces control over investments and establishes new fiscal obligations for property transactions carried out by foreign individuals and entities.
• New taxable profiles
The tax applies to non-resident individuals as well as to residents who cannot prove 3 years of effective residence in the past 10 years.
• Tax rates according to investment
Depending on the type and size of the investment, the tax rate is adapted as follows:
- 3% for a first dwelling (a single-family home or an apartment with annexes).
- 5% for a second similar property.
- 10% for investments that exceed the established limits or do not comply with the legal requirements.
• 90% subsidy for affordable rented homes
The subsidy for investments in affordable rented homes as habitual residences for 10 years is maintained. However, the new law tightens the requirements and stipulates that the subsidy must be repaid with interest in the event of non-compliance.
Read our article on thetax on foreign real estate investment here.
More supervision and control in the foreign investment regulations
The Foreign Investment Regulation, derived from the law, establishes procedures to strengthen the control and monitoring of approved projects with foreign capital.
Its main contributions include:
• Prior checking of applications
The Foreign Investment Registry must verify that the transactions do not conflict with the general interest or adversely affect areas such as public authority, national security, economic order, the environment, health, the housing market or access to strategic resources.
• Formalisation before a notary
The regulation specifies how investments are to be formalised once they have been approved, as well as the exchange of information between notaries and the administration.
• Subsequent monitoring
New investors have to demonstrate within a maximum period of 18 months that they are carrying on an effective economic activity, complying with requirements such as registration in the Register of Commerce and Industry, achievement of a minimum turnover and compliance with fiscal and accounting obligations.
The main legislative changes in the sectors concerned
The new law introduces important changes in other areas in addition to the regulation of foreign property investment:
• Empty dwellings
As already provided for in the bill, empty dwellings will be defined as those that have not consumed energy for at least two years. The government will be able to dispose of these properties and use them for social housing for a period of up to five years, in exchange for financial compensation to the owner.
• Rented accommodation for tourists
No new licences will be granted for tourist apartments or studios. Existing licences can only be renewed if at least 30% of the building is used for this purpose.
• Immigration Law
The law introduces specific changes in the area of immigration to strengthen controls, correct the misuse of permits and adapt the rules to the current social and employment situations.
• Taxation
The law increases taxes on capital gains from property to discourage short-term speculation, but maintains fiscal benefits for residents, such as exemption from Property Transfer Tax on the purchase of a first habitual residence worth up to €600,000.
A new scenario for investment and housing in Andorra
The entry into force of this regulation is a change in Andorra’s growth model. With a more balanced and sustainable approach, the country is committed to guaranteeing access to housing for its inhabitants, strengthening control over foreign investment and promoting economic development that prioritises the general interest. In any case, Andorra continues to be an attractive country for many companies and individuals who choose to live or do business here. If you too would like to take this step, contact us and we will inform you about all the procedures.