If you’re looking for a worthy investment and, possibly, a place to call home, real estate investment in Andorra might be the perfect route for you.  

According to a report by Andorra Sotheby's International Realty, the average Andorran property has increased in value by more than 300% in the last 20 years.

For your convenience, our WorldPassports team has compiled everything you could possibly need to know to make an informed decision about real estate investment in this beautiful European country.

Let’s take a look together…

*Disclaimer: All amounts mentioned in this article were correct at the time of publication and might have shifted since.  

Why Should I Consider Investing in Real Estate in Andorra?

You should consider investing in real estate in Andorra because it offers several advantages to investors, such as a stable economy, low taxes, and a high standard of living.

With a thriving real estate market, buying property in Andorra provides an excellent opportunity to diversify your investment portfolio.

Andorra real estate is widely regarded as a stable and growing market, at 1.5% per annum.¹ 

What’s more

With an increasing demand for property in the region, this real estate market presents an excellent opportunity for capital appreciation in the long term.

How Does the Real Estate Market in Andorra Compare With Other European Countries?

Compared with other European countries, Andorra's real estate market is unique due to several factors, such as its location, its status as a tax haven, and its natural beauty. 

Here's a comparison of Andorra's real estate market with other European countries:

• Size and Accessibility: Andorra’s unique location offers a mix of cultural influences, stunning mountain views, and ski resorts, making it an attractive destination for holiday home seekers and nature enthusiasts. In contrast, larger European countries like France, Spain, and Italy have more diverse real estate markets with various property types across urban, suburban, and rural areas.
• Property Prices: Compared to major cities in other European countries, property prices in Andorra can be relatively more affordable. Prime property in Andorra is significantly cheaper per square meter compared to similar properties in Paris, London, or Rome. However, when compared to smaller towns or rural areas in other European countries, Andorran property may be comparatively pricier.
• Taxation: Andorra is known as a tax haven with low income tax rates, which can make it appealing to high-income individuals and retirees. In contrast, other European countries have higher and more complex tax structures, which can impact the net returns from real estate investments.
• Rental Yield: Rental yields in Andorra can be quite competitive, especially for properties near ski resorts, which can be rented out to tourists during the ski season. However, the small size of the country and its reliance on tourism can make the rental market more volatile compared to more diversified economies.
• Foreign Ownership: Andorra used to have restrictive laws regarding foreign property ownership, but these have been relaxed in recent years, making it easier for non-residents to invest. Some other European countries, like Switzerland, still have stringent restrictions on non-residents owning property.
• Market Maturity: Compared to real estate markets in countries like the UK, Germany, or France, Andorra's market is less mature. This can mean less competition for investors but also potentially fewer resources, less liquidity, and greater uncertainty.

As with any investment, it's essential to thoroughly research and consider your personal circumstances and investment goals.

Which Regions of Andorra Are Best for Real Estate Investment? 

Certain areas of Andorra are particularly attractive for real estate investment. 

Here are some of the best regions that our team would like you to consider:

• Andorra la Vella: As the capital and the largest city in the country, Andorra la Vella is often the most popular choice for real estate investment. The city's urban environment, shopping facilities, restaurants, and services attract both locals and tourists. Prime property here can yield good rental returns, especially for short-term lets.
• Escaldes-Engordany: This parish is home to the famous Caldea thermal spa complex and many shopping centers, making it popular with tourists. It is also near the capital, adding to its attractiveness for those who prefer a mix of city life and relaxation.
• La Massana: Known for its ski resort, Vallnord, and a gondola link from the town directly to the ski slopes, properties in La Massana are attractive to those who enjoy outdoor sports, especially skiing. This area can be ideal for holiday rentals in the winter season.
• Ordino: This is one of the most attractive parishes in Andorra, known for its natural beauty, historical sites, and well-preserved Andorran architecture. It's quieter than the capital and can appeal to those looking for a second home or retirement property in a peaceful location.
• Canillo: This parish is home to Grandvalira, the largest ski area in the Pyrenees, and the Ice Palace, a popular leisure center. Properties here can also be good for holiday lets, particularly during the ski season.
• Sant Julià de Lòria: Located in the southernmost area of Andorra and close to the Spanish border, this region benefits from slightly warmer temperatures. It also hosts the University of Andorra and attracts students and academics, providing a potential rental market.

Before investing, it's important to consider your goals, whether it's rental yield, capital appreciation, or personal use. 

It's also beneficial to visit the areas in different seasons, talk to local real estate agents, and possibly hire an attorney who specializes in Andorran property law.

Andorran Real Estate for Citizenship & Residency

If you’re keen to find out if buying real estate in Andorra will help you in your citizenship and/or residency journey, you’re in the right place. 

Take a look.

Can I Get Citizenship If I Invest in Andorra Real Estate?

No, investing in real estate won’t give you immediate citizenship by investment in Andorra, as it’s only one of various prerequisites for citizenship in Andorra.

You need to maintain residency status in Andorra for 20 years to apply for citizenship by naturalization.

Andorra doesn’t recognize dual citizenship, so you'll be expected to renounce your existing citizenship(s) in order to become an Andorran citizen. 

Will I Need to Become an Andorran Resident to Buy Real Estate There?

No, you won’t need to become an Andorran resident to buy real estate, because non-residents are allowed to buy real estate in Andorra.

However, you’ll have to apply for authorization from the government of Andorra if you don’t have residency status.²

Does Owning Property in Andorra Facilitate the Pathway to Residency?

Yes, owning property in Andorra does facilitate the pathway to residency.

You can obtain permanent residency status in Andorra through its Golden Visa program by making an investment of approximately US$400,000 in real estate.

What Type of Real Estate Ownership Is Required to Qualify for Residency by Investment in Andorra?

To qualify for residency by investment in Andorra, you’re required to invest in residential real estate with the intent for it to be used as your primary residence. 

Specifically, the real estate investment must amount to a minimum of US$428 416,00.

Is There a Minimum Holding Period on the Purchased Real Estate to Qualify for Eventual Citizenship?

Yes, there’s a minimum holding period on the purchased real estate to qualify for eventual citizenship.

To qualify for citizenship in Andorra, the property must be held for a minimum of 10 years. 

This is a government requirement to ensure that foreign investments in Andorra's real estate market are for the long term and not just a short-term investment. 

Are There Any Restrictions on Foreign Investment in Real Estate in Andorra?

Yes, there are a few restrictions on foreign investment in real estate in Andorra. 

In some instances, foreign investors are required to receive permission from the Andorran government to invest in residential and commercial real estate. 

Another restriction concerns the location of the property. There’s a policy in place called “national preference”, which gives Andorran citizens priority when it comes to purchasing property in certain areas of the country, meaning non-Andorran individuals and companies may not be able to purchase real estate in certain areas. 

There are also restrictions on the size of property you may invest in. In particular, there’s a limit on the amount of land that can be built on.

Finally

Restrictions exist on the types of property foreign investors may purchase in Andorra. 

For instance, foreign investors aren’t permitted to purchase agricultural land. 

What’s the Process to Buy Real Estate in Andorra? 

The process of buying real estate in Andorra isn’t necessarily difficult, but it does require you to follow some specific steps and regulations, particularly if you’re a foreign investor.

Follow our 6-step guide to ensure your process of buying real estate in Andorra goes smoothly.

Step 1: Open a Bank Account 

To begin the process, an initial step is to deposit funds into an Andorran bank account. 

Setting up an Andorran bank account is a quick process that can be completed in as little as 30 minutes. 

Documents required for foreign investors include a copy of your passport and a minimum deposit of around US$107.

Bank passbooks are typically issued by your chosen bank within days, and there are no limits on the amount you may deposit.

Step 2: Sign a Commitment Contract

Once you come across a property listing that interests you, the next step involves signing a commitment agreement between the seller and buyer, known in Andorra as a "Promesa de Compra-Venda" or a "promise to buy and sell."

This agreement establishes the obligations of both parties and enforces accountability for meeting them. 

Note this

In addition to outlining the payment terms, the buyer must make a non-refundable 10% deposit based on the purchase price.

It’s also essential to consider the real estate agent's commission when purchasing a property, as you’ll likely be responsible for their 5-10% commission on the initial asking price. 

Step 3: Make a Non-Refundable Deposit

To proceed with the sale, the buyer must submit a non-refundable deposit of 10% to the seller. 

The deposit safeguards both parties against any issues that may arise should the buyer choose not to proceed with the purchase or should the seller receive a more favorable offer for the property.

Step 4: Obtain Permission to Purchase

The next step is to obtain official authorization to purchase from the government.

The application form, known as "suplica," must be completed in Catalan and submitted to the relevant government office.

The processing time for this authorization typically takes between 7 and 14 days.

Step 5: Obtain a Habitability Certificate 

Once you have the necessary permission to purchase property in Andorra, the next step is obtaining a Habitability Certificate (“Certificat D’Habitabilitat”). 

In this process, the seller is required to approach a local architect to inspect the property and ensure that it meets all Andorran habitability requirements.

Upon completion of this inspection, the architect will issue the Habitability Certificate to the seller, who will then deliver it to the buyer.

Step 6: Finalize the Sale Through a Notary

The final step is to finalize the sale with a notary. 

At the notary office, the buyer and seller will be required to sign a legal document called "Escriptura Publica," which certifies the legal transfer of ownership of the property.

Following the completion of the documentation process, the seller will receive payment through either a check or bank wire transfer, and the keys will be handed over to the new owner. 

What Costs Are Involved in Investing in Andorra Real Estate? 

As a foreign investor, it's important to be mindful of the associated costs when investing in Andorran real estate to ensure you’re planning and budgeting for a successful investment.

Some costs may include a US$107 deposit, real estate agent commissions, bank fees, and property tax, to name a few. 

So let us walk you through some of the costs you need to be aware of when investing in Andorran real estate.

Transaction Costs

As an investor, there are several transaction fees you should be aware of when investing in Andorran real estate. 

Here are a few transaction costs to be aware of: 

• Legal fees: These will vary depending on the specific legal services you require. For instance, a real estate lawyer may charge for services related to application processes, contract negotiations, and legal review.
• Bank fees: Bank fees may include international transfer fees, currency exchange fees, and account management fees, which are determined by your bank.

Tax on Property Sales 

As an investor purchasing real estate in Andorra, you should be aware of the applicable property transfer tax rate and any other taxes that may apply.

In Andorra, the purchaser is responsible for paying property transfer tax, which is typically 10% of the purchase price.

In addition 

Investors may also have to pay an additional 2% stamp duty as well as taxes on capital gains from property sales. 

It's advised to seek legal advice before embarking on any property investment in Andorra in order to ensure that you’re compliant with all applicable taxation requirements.

Notary Fees

In Andorra, the notary's role is to certify all legal documents associated with a property purchase or sale. 

Typically, the government sets its fees based on the value of the property. 

The notary fee usually ranges from 1-2%, depending on the transaction value as well as any additional services required, such as registration in the property registry. 

Please note

Foreign investors may be required to pay additional fees, such as translation services and accountant fees, in order to successfully navigate legal and financial requirements. 

Real Estate Agent’s Fees

In general, real estate agents in Andorra charge a commission on the transaction, which may range from 5-6%, depending on the agent's experience and success rate. 

This fee is usually split between the buyer and seller but can vary based on individual negotiations.

Additionally, some agents offer additional services such as legal advice and financial planning assistance, which can increase your overall real estate fees.

Habitability Certificate 

As a foreign investor, you must obtain authorization to purchase property in Andorra. 

Depending on the situation, you may have to pay fees associated with obtaining residency or authorization.

The cost of obtaining this certificate can range from US$107 to US$160, depending on the size and condition of the property. 

However

This fee may vary from one municipality to another. 

Additionally, some local councils may charge extra taxes or fees on top of the cost of obtaining the certificate.

What Are the Tax Implications of Investing in Andorra Real Estate?

As a foreign investor looking to purchase real estate in Andorra, it’s important to be aware of the associated taxes. 

The most common taxes are stamp duty and property transfer tax, both of which are based on the price paid for the property. 

Additionally, there may be local taxes or fees imposed by individual municipalities that should also be taken into consideration.

For your convenience, we’ll walk you through all the taxes you should be aware of as a prospective investor in Andorran real estate.  

Tax Residency 

As an investor in Andorran real estate, you’ll likely need to pay at least 2 types of taxes for residency. 

The first type is stamp duty, which is a tax levied on the total purchase price of the property and is calculated at 3% for non-resident buyers. 

Property Transfer Tax (PTT) is another common tax that needs to be paid by both residents and non-residents when purchasing property in Andorra. 

This tax is usually between 1% and 2% of the purchase price.

Rental Income Tax

Rental income tax is another tax you should be aware of as an investor in Andorran real estate. 

This is a flat tax rate applied to all rental income derived from the property and is set at 10%.

It’s also important to note that property owners are liable for tenant damages incurred during tenancy and may need to pay additional fees such as trash collection costs or maintenance services.

Property Tax

Property tax is a flat rate applied to properties over a certain value and is based on the land registry valuation. 

The property tax rate can range from 0.25% to 1.1%, depending on the municipality where your property is located. 

It should also be noted that dependent relatives may receive a 50% discount on property taxes, whereas foreign investors may be subject to additional taxes such as real estate transfer tax or patrimonial capital gain tax.

Tax on Built Up Real Estate 

Tax on built-up real estate is an additional tax that applies when you purchase a built-up property in Andorra and can range from 1% to 2%. 

This tax can’t be offset against other taxes due on the purchase, but there may be certain exemptions available for certain types of assets.  

Therefore, we strongly suggest you liaise with local real estate professionals to make sure you understand all applicable regulations and fees before investing in any property in Andorra.

Tax on Foreign Income 

Tax on foreign income is charged at a flat rate of 10%.

It’s applicable to rental income, dividends, and royalties earned outside of the country and is payable regardless of whether this income is subject to taxation elsewhere.

How Can I Minimize My Taxes in Andorra?

While you may be liable for various taxes as an investor in Andorran real estate, there are viable and legal steps you can take to minimize your taxes. 

Let’s take a look at a few steps you can take to minimize your tax liability in Andorra:

1. Research any applicable exemptions and deductions that may be available to you: For instance, Andorra doesn’t have any inheritance, gift, or net worth taxes, which can be a significant saving for investors. In addition, certain real estate transactions may be exempt from transfer tax under certain circumstances, such as purchases by close members of the family or by a holding company with a substantial share capital.
2. Structure your investments efficiently: For instance, if you make investments through a holding company with substantial share capital, you may be eligible for certain tax benefits. Similarly, if you set up an international trust, there may be additional tax savings available depending on the jurisdiction of the trust. 
3. Look into offshore banking options or international trusts: For instance, if you set up an offshore bank account, you may transfer funds from other countries, and the gains may not be taxable in Andorra. An international trust may also offer tax benefits depending on the type of trust established

As every case is unique, it's important for you to explore the available exemptions and deductions with a tax professional or a specialized attorney to remain compliant with the law. 

Common Questions

In Conclusion

At WorldPassports, we understand that navigating the complex world of international real estate investment can be daunting, which is why we aim to provide you with the most up-to-date and accurate information possible.

We hope that our comprehensive guide has equipped you with valuable insights and knowledge about this exciting opportunity to become an Andorran citizen through real estate investment.

If you feel that real estate in Andorra might not be the best fit for you, feel free to check out our other real estate investment articles.