Andorra Capital Gains Tax for Property
- elizabethhelenpier
- Dec 17, 2024
- 3 min read
Updated: Mar 8
Andorra is a low tax country overall and therefore offers a low capital gains tax system. This tax however did not appear until some 10 years ago much like the current entire Andorra tax structure. The reason for introducing capital gains on property was to slow down the property price inflation of the early 2000s and to dissuade the market buyers from flipping properties. The Andorran culture is a buy-to-keep market by nature, where cars are kept running for 40 years, and houses will stay in the same family for the turn of a generation. This is at the base as to why they had and still have little interest in people using their property market for flipping and quick economic gain. Read on to learn about how the Andorra capital gains tax works in Andorra.
Since 2006 there has existed a specific Andorra capital gains tax on property transactions. However, in early 2024 this law was modified. Although the rates to be paid are similar to the past, this Andorra tax has now become integrated into the structure of the IGI/IRPF/IRNR taxes and the percents have changed slightly.
As of 2024, on property sale you are subject to a maximum capital gain rate of 15%, as a person who is living in Andorra as a legal resident (vs. a corporate entity). This tax functions on a sliding scale that is dependent on the years of ownership of the property. 15% will only affect you if you sell within the first 2 years of buying a property in Andorra, posteriorly by the second year and one day of ownership, the Andorra tax rate upon sale drops to 10%, it remains at 10% for the following 3 years, until dropping to 8% for ownership of over 5 years. Every year it progressively drops by 2% from here on out until your 9th year of ownership, from which point you are left you paying 1-0% capital gains tax on your property sale. In 2025 a new law is coming into play that may increase these rates.
How to avoid Andorra capital gains tax or lower it?
You will avoid capital gains if you have been resident for 5 years minimum, this is your primary residence, and you go on to purchase another primary residence in Andorra within a 6 month period post sale of your first property.
You will avoid capital gains if the property is part of a divorce settlement.
You will avoid capital gains if passing or gifting the property to direct family members.
You will lower the capital gains by adding to the original purchase price any invoices of work done to the property or receipts of any integral materials bought for the property. You must show original copies of these invoices.
Corporate entities:
For corporate entities i.e. companies, the rates change. You will still be expected to pay the 15% rate for the first 2 years to dissuade price speculation, however, subsequently, you will pay a 10% flat rate no matter the years of ownership.
Non-residents:
For non-residents investing in Andorra, the rate is similar to companies with a 15% capital gains tax rate to pay in the first 2 years of ownership of the property and a flat rate of 10% for all the years following.
The reality is, considering the 10-15% yearly average price increase of property in Andorra over the last 5 years, even a 15% Andorra capital gains tax in the first 2 years of ownership is still not very dissuasive.
Other taxes and fees to pay upon sale of property in Andorra:
We have been through the capital gains to pay on property sale, but you may be wondering what other fees there are to pay in Andorra if you are the seller?
Besides Capital gains taxes, you will not be subject to any other government taxes upon selling property in Andorra for the indefinite future. Inheritance tax does not exist in Andorra so unless your heirs are based abroad you will not be subject to a tax of this type in case of your death and the consequent selling of the property. Nonetheless, as the seller, you do have to pay the full commission to the agency upon sale. This responsibility lies solely with the seller. Furthermore, you must acquire certain documents that come with a small cost (5-100€ each). These documents include various no debt certificates, a suitable-for-living certificate and an energy certificate.
