Concept
For decades Andorra ran as a duty-free zone with no income tax, but pressure from the EU and the OECD pushed it to assemble a conventional — if very light — tax system. Today it is a jurisdiction with income tax capped at 10 percent, the lowest VAT rate in Europe, and no tax at all on wealth, inheritance or gifts. Residency is what opens access to the regime, and in February 2026 the entry threshold for passive residents rose to €1 million.
From a Duty-Free Zone to a Tax System
Until the early 2010s Andorra managed without direct taxes, living off duty-free trade and a closed banking sector. Harmonisation with the EU and the OECD forced it to build a tax system almost from scratch: the indirect tax IGI was introduced in 2013, corporate income tax in the early 2010s, and the personal income tax IRPF took effect in 2015. The country wound down banking secrecy in 2017 and carried out its first automatic exchange of data under the CRS standard in September 2018. In a single decade a closed haven turned into a low-tax jurisdiction recognised by its treaty partners.
Income Tax up to 10%
IRPF, the local personal income tax, is built in three bands. The first €24,000 of annual income is exempt, income from €24,000 to €40,000 is taxed at 5 percent, and everything above €40,000 at 10 percent. That 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, Andorra's equivalent of VAT, stands at 4.5 percent — the lowest standard rate in Europe, below even Switzerland's; reduced rates of 2.5 and 1 percent apply to certain goods and services. Andorra levies no tax on net wealth, inheritance or gifts. When a family moves both its income and its capital here, the overall burden is among the lowest of any country with a real tax system — on this point Andorra is closer to Monaco than to the classic offshores, but it charges a moderate tax rather than none.
Passive Residency: Threshold Raised in 2026
Wealthy non-residents enter Andorra through passive residency, which carries no obligation to work in the country. Law 2/2026, in force since 13 February 2026, raised the minimum investment on this route from the previous €600,000 to €1,000,000 in Andorran assets — financial instruments, stakes in local companies, government bonds or insurance products. The alternatives are €800,000 in a single residential property or €400,000 contributed to the state Housing Fund, whose threshold was left unchanged. On top of this comes a €50,000 deposit with the financial authority (AFA) and €12,000 per dependent; the deposit used to be refundable but is now non-refundable once the status is granted. Residency is maintained by spending at least 90 days a year in the country.
Passive residency is not the only door. Active residency is taken out by those who genuinely work in Andorra or run a company here: no large investment is required, but it demands real economic activity, employment or self-employment, and more presence in the country. This route is chosen by entrepreneurs and freelancers for whom running a business from Andorra matters more than holding capital here.
Who Moves, and Why
The loudest example is Spanish bloggers and streamers. Rubén Doblas (El Rubius), TheGrefg, Vegetta777, Willyrex, Patry Jordan and dozens of less prominent creators moved to Andorra in the early 2020s. The logic is simple: in Spain income above €60,000 is taxed on a progressive scale of roughly 45–47 percent, while in Andorra the ceiling is 10. The mass exodus of 2021 triggered public debate in Spain and promises to tighten control over income shifting. Beyond media creators, the country draws traders, crypto entrepreneurs and owners of digital businesses, kept close by Barcelona two and a half hours away. For those who remain in Spain, the domestic alternative is the Beckham law, but its rate and duration are limited.
Transparency and CRS
Today an Andorran resident's account is visible to their former tax authority. The country takes part in automatic exchange under the CRS standard and shares data with more than a hundred jurisdictions. That is why an honest change of tax residency with a real relocation is what makes sense; this regime is no help in hiding assets abroad.
Andorra and the EU: What Comes Next
Andorra is integrating into Europe gradually and without EU membership. A trade agreement has been in force since 1990, a monetary agreement since 2011, and since 2013 the country has officially used the euro. The next step is an association agreement with the EU: negotiations concluded in December 2023, but the text has not yet been signed or ratified. Andorra promised to put it to a referendum; the timing slipped from late 2024, and the vote is being prepared for 2026. The outcome is not a foregone conclusion — polls suggest around 46 percent of residents lean towards voting against, out of concern for the low taxes and sovereignty. For prospective residents this means that Andorra's fiscal model is stable for now but may over time converge with the pan-European one.
This material is of an expert-analytical nature and does not constitute individual legal or tax advice.