Concept
For decades, Andorra was a duty-free zone without income tax, but under pressure from the EU and OECD it transitioned to a normal, albeit very soft, tax system. Today it is a jurisdiction with income tax no higher than 10 percent, the lowest VAT in Europe, and a complete absence of wealth and inheritance taxes. The price of entry is passive residency, and in 2026 it increased significantly.
Income Tax up to 10%
IRPF, the local income tax, is structured in three tiers. The first €24,000 of annual income is not taxed, income from €24,000 to €40,000 is taxed at 5 percent, and everything above €40,000 is taxed at 10 percent. This is the ceiling: the maximum rate for an individual in Andorra is 10 percent. Corporate income tax is also 10 percent.
VAT 4.5% and No Capital Taxes
The indirect tax IGI, the equivalent of VAT, stands at 4.5 percent—this is the lowest standard rate in Europe, even lower than Switzerland's. At the same time, Andorra has no net wealth tax, no inheritance tax, and no gift tax. For a family that relocates both income and capital here, the total tax burden is among the lowest of countries with a genuine, partner-recognized tax system.
Passive Residency: Threshold Raised in 2026
Wealthy non-residents enter Andorra through passive residency, which does not require working in the country. Since February 2026, the minimum investment for this route has been raised to €1,000,000 with a six-month investment period; if the funds are directed to the state Housing Fund of Andorra, the threshold is reduced to €400,000. Additionally, a non-refundable deposit of €50,000 is made to the financial authority AFA and €12,000 for each dependent. Maintaining the status requires presence in the country for at least 90 days per year.
Transparency and CRS
🔗 Related
Andorra Residence Permit · Tax Residency: Basics · Spain: Tax Residency · Monaco: Tax Regime · CRS: Overview
Andorra has long ceased to be a closed haven. The country participates in the automatic exchange of financial information under the CRS standard and exchanges data with more than a hundred jurisdictions. An Andorran resident's account is visible to their former tax authority, and real benefit comes from an honest change of tax residency, whereas attempting to simply hide assets is pointless.
⚙️ The Andorran rate functions as a full-fledged tax regime with reporting and CRS exchange. The benefit goes to those who actually relocate their center of life here and pay the local 10 percent, while their former country ceases to consider them its tax resident.
🍓 Andorra offers income tax no higher than 10 percent, VAT of 4.5 percent, and no wealth, inheritance, or gift taxes. Access is through passive residency, which became more expensive from February 2026 at €1,000,000 investment or €400,000 through the Housing Fund plus a €50,000 deposit. The country is fully within CRS, so only an honest change of tax residency makes sense.
This material is of an expert-analytical nature and does not constitute individual legal or tax advice.
Key factual claims
- The indirect tax IGI, the equivalent of VAT, stands at 4.5 percent—this is the lowest standard rate in Europe, even lower than Switzerland's.