Are you thinking about buying property in Andorra? It’s important to understand the legal, tax, and economic factors that can influence your decision. Below, we will address three key questions that many buyers ask us before taking the plunge:
Should you buy through a company or as an individual?
This is one of the most common questions when it comes to purchasing property in Andorra, especially for those who residents are not. The decision to buy through a company or as an individual depends on several factors, such as the type of investment you want to make and your tax profile.
- Buying as an individual: If you are a resident in Andorra, you can buy property directly in your name. However, if you are not a resident, you will need to meet certain requirements to purchase property. In this case, you will need to pay the property transfer tax (ITP), which is around 4% of the purchase price, plus other associated expenses.
- Buying through a company: Buying through a company can be a more attractive option, especially if you intend to buy several properties or do so as a business investment. In this sense, anonymous companies (SA) or limited liability companies (SL) allow you to limit personal liabilities and sometimes offer tax advantages. Furthermore, if there is an economic activity related to the property, it might be beneficial to do so through a company. It’s important to note that other taxes may apply.
It is important to know that everything will depend on who is the seller of the property and the circumstances of each case, as IGI, ITP, etc. could apply.
Who must pay the tax on real estate acquisitions?
They should know that the tax on real estate acquisitions is 3%, 5%, 8% or up to 10% of the total value of the purchase. This tax is applied in certain situations, mainly when the buyer is not resident or has been resident for less than 3 years in the Andorran principality.
Are there any tax incentives for renting out the property?
Yes, Andorra offers some tax incentives for those who decide to rent out their property, especially if it is intended for long-term rental. These incentives are designed to encourage the supply of rental housing and can vary depending on the legislation in force. For this reason, it is important to consult with a tax advisor, as the conditions may change.
Conclusion
When acquiring property in Andorra, it’s important to consider various factors, such as whether to buy through a company or as an individual, the 3% tax, and possible tax incentives for renting out the property. Every situation is unique, so it’s advisable to consult with a tax expert who can provide advice based on your specific needs.
