| The Andorra government has introduced Capital Gains | | | | ten years, the capital gains tax will be five per cent of |
| Tax in a move that has surprised many in the tax | | | | the property price increase. If someone stays a |
| industry. | | | | resident for fifteen years there will be no capital gains |
| Andorra is a well known European tax haven, and | | | | tax at all to pay on the increase of their property |
| residents benefit from a zero rated income tax and | | | | value.' |
| inheritance tax. | | | | Buying a property in Andorra is often seen as a route |
| The reason for the introduction of the capital gains tax | | | | to residency, which entitles people to live in Andorra |
| according to the Andorra authorities is to try to slow | | | | and benefit from her tax haven status. |
| down the high property inflation seen in the principality | | | | To obtain residency in Andorra, applications need to be |
| in recent years. | | | | submitted in Catalan. A notarised copy of the |
| Property prices have risen an average of ten per cent | | | | applicants passport, birth certificate and a certificate of |
| over the last decade, but this has been increasing | | | | good conduct from the home country are submitted at |
| recently with a 19 per cent rise recorded in 2005, and | | | | the same time. According to a local travel guide |
| 16 per cent in 2006, leading to worries that locals might | | | | residency normally takes between three and six |
| be priced out of the market. | | | | months to be approved. |
| As well as the local market, Andorra property sells to | | | | Once residency is granted, residents are supposed to |
| second home buyers and international buyers wanting | | | | spend six months a year in Andorra, but this isn't |
| residency. With property prices a quarter of rival tax | | | | policed. |
| haven Monaco, demand has increased from | | | | One of the drawbacks for those looking to become a |
| international buyers. | | | | resident in a tax haven when considering Andorra has |
| But any hope of the new capital gains tax dampening | | | | been that the country has no airport of its own, and is |
| property prices is unlikely to work, according to | | | | unlikely to have ine future given that it is located in the |
| Andorra property companies. | | | | Pyrenees. The nearest airports are Barcelona and |
| 'While there is a large disparity between Europe's top | | | | Toulouse. |
| two tax havens - Monaco and Andorra - in property | | | | Recent improvements in the road from Barcelona to |
| prices, the advantages of buying a property in | | | | Andorra though have cut the travelling time by some |
| Andorra, gaining residency and having no income tax | | | | thirty minutes to two hours fifteen minutes. |
| far outweighs any capital gains taxes', they say, | | | | 'Given the tax advantages Andorra has', note the |
| pointing out that Andorra prices are a quarter of those | | | | travel guide, 'A two and a quarter hour trip to the |
| of Monaco's. | | | | nearest international airport could be viewed as a small |
| Long Term Benefit | | | | price to pay for those who will be saving substantial |
| 'Besides the increase in property prices that offset any | | | | amounts of money in tax. Especially when you |
| Capital Gains Tax', they continue, 'It's on a sliding scale, | | | | consider that their properties could be rising in value |
| with one per cent reduced for each year of residency. | | | | quite significantly in the years to come, and for those |
| So for example if someone maintains residency for | | | | who like skiing it's a holiday and tax paradise in one! |