The process of changing tax residence to Andorra requires careful consideration and adherence to certain requirements. At Navas & Cusí Abogados, a renowned law firm specializing in tax and fiscal law, we provide expert assistance in facilitating this transition.
The decision to change tax residence to Andorra is often motivated by the high tax burden faced by individuals in countries such as Spain, which ranks among the European Union nations with the highest taxation for its citizens. This burden encompasses various forms of direct taxation, including Personal Income Tax, Wealth Tax, and Corporate Tax, as well as indirect taxation such as VAT and ITP, in addition to numerous local and municipal taxes. Consequently, an increasing number of individuals, particularly those subject to heightened scrutiny from tax authorities due to their higher incomes, have expressed interest in relocating their tax residence to Andorra. The globalization of many professions and job opportunities has diminished the significance of physical location within Spain for delivering services to Spanish citizens or businesses, thereby enhancing the appeal of this option.
Contrary to popular belief, Andorra is not classified as a tax haven. However, it does offer significantly lower tax rates than Spain, particularly in terms of direct taxation. Personal income tax and corporate tax in Andorra are set at a flat rate of 10%, in stark contrast to Spain’s rates of 50% for personal income tax and 25% for corporate tax. Furthermore, Andorra does not impose a wealth tax. These factors, combined with the allure of the country itself, have led to an escalating interest among individuals in considering Andorra as a viable option for changing their tax residence.
Requirements for Establishing Tax Residence in Andorra instead of Spain
It is important to note that a mere change of domicile to Andorra does not automatically terminate tax residency in Spain. To cease being a tax resident in Spain and establish tax residence in Andorra, specific requirements must be met. In accordance with Spanish domestic regulations, an individual is considered a tax resident in Spain if:
- They spend at least 183 days in Spain.
- The center of their economic interests, even if residing in Andorra, remains in Spain.
- The center of their personal and family interests, even if residing in Andorra, remains in Spain.
The reality is that the Tax Agency possesses the necessary resources to determine an individual’s whereabouts during those 183 days. In the event of an inspection, the Tax Agency may request various forms of information, such as credit card transaction records, documentation related to children’s education, employment contracts, rental agreements, or utility bills for the Andorran residence. These details are scrutinized to ascertain whether they correspond to those of a typical inhabited home.
Therefore, prior to pursuing a change of tax residence to Andorra, it is crucial to be aware of these requirements and the measures implemented by the Tax Agency to monitor compliance. This understanding will enable individuals to make informed decisions and navigate the process of establishing tax residency in Andorra effectively.
Requirements for Tax Residency in Andorra
Furthermore, it is essential to consider that the Principality of Andorra imposes certain requirements for an individual to be recognized as a tax resident in the country.
Additionally, there exists an Agreement to avoid Double Taxation between Spain and Andorra. This agreement clarifies the tax obligations of individuals who meet the criteria for tax residency in both countries, establishing the country in which taxes should be paid.
Given the intricacies inherent in both national and Andorran tax regulations, our specialized team in the field of fiscal and tax law is equipped to provide assistance tailored to your specific circumstances. We understand that these regulations entail nuanced considerations that necessitate thorough examination and analysis.
Experts in Tax Inspections Related to Change of Tax Residence
In addition to our expertise in facilitating the change of tax residence to Andorra, we possess specialized knowledge in tax inspections pertaining to Spanish citizens who have opted to relocate their tax residence to Andorra.
Therefore, if you find yourself subject to a tax inspection or administrative procedure, we can provide comprehensive support by leveraging our extensive understanding of inspection procedures and international taxation. Our services extend to representing you throughout the tax procedure, ensuring that your rights and interests are effectively safeguarded.
At Navas & Cusí Abogados, our team of specialists possesses extensive knowledge and experience in facilitating the process of changing tax residence to Andorra and tax inspections. We understand the intricacies involved and can guide individuals through the necessary steps and requirements to ensure a smooth transition. By leveraging our expertise, clients can confidently navigate the complexities of tax law and maximize the benefits associated with changing their tax residence to Andorra or other countries offering a more favorable tax burden.
