The Principality of Andorra, with its natural beauty and booming economy, has become an attractive destination for foreign real estate investors. However, Law 16/2023, of September 7, on the temporary suspension of foreign investment in real estate, marks an important turning point in the investment landscape in Andorra. In this article, we will look at the reasons behind this new law and the possible effects it will have on real estate investors.
Law 16/2023, promulgated on September 7, 2023, aims to redefine foreign investment in Andorra to ensure sustainable development of the country. After years of growing foreign investment in real estate, the Andorran authorities have decided to focus on high value-added foreign investment that meets environmental sustainability standards and directly feeds back into the national economy.
The law temporarily suspends the granting of new foreign real estate investment authorizations for non-resident foreign individuals and legal entities, including those with foreign capital. This suspension aims to give time to the preparation of measures that will tax this type of investment in the near future.
Applications for foreign investment in real estate submitted before the entry into force of the law will be processed according to the regulations in force at the time of submission. For those investments that already had a purchase and sale agreement with an economic transaction before the date of entry into force of the law, these will remain subject to the previous regulations. However, new requests are automatically denied and considered unfiled.
Law 16/2023 entered into force on the same day of its publication in the Official Gazette of the Principality of Andorra, on September 7, 2023.
For real estate investors, it is crucial to keep abreast of these changes and seek professional advice to understand how they will affect their investment plans. Andorra remains an attractive market for investors, and these regulatory changes can be an opportunity for a more sustainable and long-term investment.
One of the most significant changes in the new Foreign Investment Law in Andorra is the planned tax on foreign real estate investment, which will range between 3% and 10%. This tax seeks to promote responsible investment and avoid speculation in the real estate market, while contributing to the increase of State resources for public expenditure.
This tax will be progressive and will be based on the real value of the foreign real estate investment. Individuals and companies will have to pay a fee according to the number of homes purchased. It starts with 3% for the first single-family home and increases to 5% for the purchase of between 2 and 5 flats. From the sixth home, the tax rises to 8%, and for urban or real estate developments, or from the tenth real estate unit, the tax applied will be 10% of the real value of the investment.
However, the new regulations reward foreign investment whose purpose is the creation of rental housing for habitual and permanent residence, with a 90% bonus in the tax quota. This bonus applies when the foreign investment has a minimum commitment of ten years in this type of housing.
This tax will be applied to both natural and non-resident legal entities, to Andorran legal entities with foreign participation greater than 50%, to natural persons with less than 3 years of residence in the Principality, and to Andorran legal entities participating for non-residents or residents of less than 3 years with a share between 5% and 50%.
Law 16/2023 marks an important change in the environment of foreign investment in real estate in Andorra. While this temporary suspension may pose initial challenges for investors, it may also open the door to more sustainable and beneficial investment for the country's economy. With the entry into force of this new Law, the temporary suspension of the purchase of real estate for foreign investors will be lifted, opening new horizons for real estate investors in Andorra. Stay up-to-date and explore the opportunities and challenges these changes may bring to your investment strategies.
Superior Real Estate offers a team of real estate experts with a personalized treatment, discover the individualised concierge service, accompanying you throughout the process and improving your experience in Andorra.