Andorra and the United Kingdom sign the Double Taxation Agreement

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A convention of strategic relevance

The Principality of Andorra and the United Kingdom have reached a new milestone with the signing of the Convention for the Avoidance of Double Taxation (DTC), a bilateral agreement that strengthens economic and tax cooperation between both jurisdictions.
Its main objective is to eliminate double taxation, prevent tax evasion and provide a more stable and attractive framework for companies, investors and expatriates.

This convention consolidates Andorra’s position as a transparent tax jurisdiction, fully aligned with OECD standards, reinforcing its legal framework and international competitiveness.

How the agreement was reached

Negotiations began in 2023, as part of Andorra’s strategy to expand its network of international tax treaties and strengthen its reputation in tax matters.

The agreement was signed in Andorra la Vella on 20 February 2025 by:

• Noèlia Souque, Secretary of State for International Financial Affairs of the Government of Andorra.
• James Murray, UK Treasury Minister.

With this signature, Andorra consolidates its position as a reliable and transparent partner for Western European countries and the Anglo-Saxon sphere.

Key aspects of the DTC

The Convention for the Avoidance of Double Taxation between Andorra and the United Kingdom consists of 27 articles, with no separate additional Protocol, and closely follows the standard structure of the OECD Model Tax Convention.

The text is organised into several functional blocks that allow for a clear, systematic and predictable application of the treaty:

• Scope and definitions
  Determines who may benefit from the convention and defines key concepts such as tax resident, permanent establishment, associated enterprise or recognised pension fund.
• Taxation of income
  Establishes which State may tax the different categories of income, including dividends, interest, royalties, capital gains, salaries, pensions and real estate income.
• Methods for eliminating double taxation
  Sets out the mechanisms for tax credit or exemption depending on the type of income and the taxpayer’s State of residence.
• Special and final provisions
  Includes the non-discrimination clause, the mutual agreement procedure for resolving disputes between tax authorities, and Article 25 on the exchange of tax information, in line with OECD standards.

The convention covers taxes on income and on capital, establishing a modern, transparent tax framework fully aligned with international standards.

The DTC also regulates the taxation of dividends, interest, royalties, capital gains and pensions, reinforcing legal certainty and mutual confidence between both jurisdictions.

These provisions are particularly relevant for companies with international operations, investors and UK expatriates with interests in Andorra.

➤ To better understand how Andorran tax treaties are structured, you may consult Double taxation treaties: the key to determining where international income is actually taxed

🔹 Residence conflicts

One of the main purposes of DTCs, in addition to reducing withholding taxation at source (the country where the income arises), is to prevent residence conflicts between the contracting States.
In practical terms, the signing of this DTC prevents a taxpayer from being regarded as tax resident in both jurisdictions simultaneously.

If you wish to explore this issue further, we recommend Tax residence conflicts: what to do if two countries consider you a tax resident at the same time

Entry into force

For full application, these agreements must complete the usual steps in both countries:

• Parliamentary ratification.
• Formal approval and official publication.
• Exchange of the instruments of ratification.

In this respect, it should be noted that the DTC entered into force on 22 December 2025, once all required formalities had been completed.

Its entry into force can be verified in the corresponding publication of the BOPA.

Key clauses of the Andorra–United Kingdom DTC

Although the entire convention contains relevant provisions, the following articles are the most significant in practice and have a direct impact on day-to-day tax planning for individuals and companies.

🔹 Tax residence (art. 4)

Clearly defines residence criteria and prevents undesired situations of double tax residence between the two States.

🔹 Dividends (art. 10)

• Full exemption at source as a general rule.
• Maximum withholding tax of 15 % only in very specific cases:
  • Dividends derived from real estate investment vehicles.
  • Where the underlying real estate income is exempt.

👉 In practice, the convention is highly favourable for standard corporate structures.

🔹 Interest (art. 11)

• Exclusive taxation in the State of residence of the beneficial owner.
• 0 % withholding tax at source (a common approach in many jurisdictions).

This provision is particularly relevant for intragroup financing, loans and holding structures.

🔹 Royalties (art. 12)

• Exclusive taxation in the State of residence.
• No withholding tax at source.

A clear advantage for activities linked to intellectual property, software, licences or know-how.

🔹 Capital gains (art. 13)

• Immovable property: taxable in the State where the property is located.
• Shares deriving more than 50 % of their value from real estate: may be taxed in the State where the property is situated.
• Other movable capital gains: exclusive taxation in the State of residence.

Except for real estate held directly or indirectly — which benefits from specific treatment — the overall regime is highly favourable.

🔹 Employment income (art. 14)

• General rule: taxable in the State where the employment is exercised.
• The 183-day exemption applies provided that:
  • The employer is not resident in the other State.
  • There is no permanent establishment.

🔹 Pensions (art. 17)

Exclusive taxation in the State of residence of the recipient.

🔹 Elimination of double taxation (art. 22)

• Andorra applies the tax credit method for tax paid in the United Kingdom.
• The United Kingdom allows:
  • A tax credit for Andorran taxes paid.
  • Exemption of dividends when the conditions of domestic law are met.
  • Exemption of profits attributable to permanent establishments in Andorra.

🔹 Capital (art. 21)

This is one of the few conventions that explicitly addresses capital.
However, its practical impact is nil, as neither country levies a tax on net wealth.

Should such a tax exist, taxing rights would belong exclusively to the State of residence.

🔹 Anti-abuse clause (art. 27)

The convention incorporates a general anti-abuse clause (PPT):

• Treaty benefits will not be granted where one of the principal purposes of an arrangement is to obtain an undue tax advantage.

This reflects the OECD’s core principles.

Exchange of tax information

Article 25 establishes an exchange of information mechanism based on “foreseeably relevant” information, in line with OECD standards:

• No bank or fiduciary secrecy may be invoked.
• Strict confidentiality safeguards apply.
• Applicable to taxes of any kind.

This framework strengthens transparency and rules out any “opaque” interpretation of the convention.

It should also be noted that the CRS (Common Reporting Standard or automatic exchange of information) is already in force in both countries.
➤ You can read more in Common Reporting Standard (CRS): the global standard for tax transparency and its impact in Andorra

Economic and tax impact

The entry into force of the DTC results in:

• Stronger integration of Andorra into the Anglo-Saxon tax environment, facilitating Andorran investment in that context.
• Increased attractiveness for UK companies and international professionals considering investment in Andorra (even though the regime was already favourable for non-residents).
  ➤ Learn more in The Non-Resident Income Tax (IRNR) in Andorra
• Enhanced legal certainty for investment and wealth-planning structures.

Together with the DTCs signed with Spain and France, this agreement is among the most relevant from a practical standpoint.

To see the full list of countries with an effective DTC with Andorra, consult Double taxation treaties (DTCs) in Andorra

Andorran taxation

To better understand the general framework, you may read Taxation in Andorra: structure, tax rates and real advantages.

For a comprehensive overview, we recommend Taxation in Andorra: a practical guide to understanding taxes, obligations and real risks

Strategic importance for Andorra

The DTC between Andorra and the United Kingdom is a technically solid, modern and highly competitive treaty, particularly with regard to:

• Dividends
• Interest
• Royalties
• Capital gains
• International structures

Beyond eliminating double taxation and clearly allocating taxing rights — the essence of any DTC — it establishes a no-withholding framework between States that facilitates investment flows and allows capital to circulate without unnecessary tax friction.

📞 Would you like to know how to apply this DTC to your specific situation?

At ELYSIUM, we help you properly structure your tax residence, your company or your investments between Andorra and the United Kingdom.

You may contact us via the contact form or book your meeting just below this article.

Last review: January 2026