To establish your tax residency in Andorra, it is essential to obtain a type of residence permit that allows you to live in the country. There are different types of permits:
- Active residencies, for employees or self-employed individuals.
- Passive residencies, ideal for investors, athletes, or scientists.
- Residencies for digital nomads and entrepreneurs.
However, having a residence permit does not automatically guarantee tax residency, a point that often creates confusion among newcomers to Andorra and even among some local advisors.
What does tax residency imply?
Tax residency implies that the citizen has the obligation to declare their personal taxes in the country where they are considered a tax resident upon acquiring taxpayer status. Generally, it is defined by the time spent in a location and the economic, family, and social connections one has in the country.
For example, imagine you are a self-employed professional residing in Andorra, but most of your income is generated in Spain. Despite having your residence in Andorra, your primary economic activity still lies in Spain, so your tax residency would be established in Spain, not Andorra.
How is tax residency determined in Andorra?
According to Andorra’s tax law, someone is considered a tax resident if they meet these criteria:
- Spending more than 183 days a year in Andorra. Temporary absences are also considered as days stayed in Andorra.
- Having the core of your economic activities or interests in Andorra (majority of income or assets).
For instance, if you spend most of the year in Andorra, and your main source of income comes from Andorra, you will be considered a tax resident in Andorra.
There’s a legal presumption to also be considered a tax resident in Andorra if your spouse or dependent children are residents in Andorra; it is presumed that you are tax resident as well.
Having a residence permit in Andorra does not automatically grant you tax residency in the country but is subject to meeting the aforementioned requirements.
Is it possible to be a tax resident with only 90 days in Andorra?
No. Even if you hear someone say that 90 days in Andorra achieve tax residency, this is not correct. For instance, if you spend 90 days in Andorra and the rest of the year in Switzerland, your tax residency would be in Switzerland, not Andorra.
How to change tax residency to Andorra?
Obtaining tax residency in Andorra goes beyond simply obtaining a residence permit in Andorra. In many cases, it is necessary to conduct a prior analysis of your situation to assess the feasibility of changing tax residency. Do not hesitate to contact our professional advisors to fully understand the implications and avoid future issues.