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🏛️ How the Andorran real estate framework really works

Real estate taxation in Andorra is not limited to calculating isolated taxes. It is a comprehensive system that affects the entire lifecycle of a property and combines state legislation, municipal regulation, banking requirements and compliance standards.
Understanding this framework is essential for making informed decisions, optimising costs and avoiding administrative blockages.

➤ To understand the territorial framework, you can refer to The parishes of Andorra: structure, functions and territorial characteristics.

Andorra’s tax system is structured around three distinct levels:

• The Government regulates state taxes: IRPF, Corporate Tax, IGI (VAT), state ITPI, Non-Resident Income Tax, among others. It is also the authority that grants—or denies—real estate acquisitions in many situations.
• Municipalities regulate local taxes: real estate ownership tax, rental income tax, capital gains, municipal fees and local obligations.
• Banking and notarial practice determines requirements, mortgage conditions, solvency analysis and documentation standards.
  This means that the same property may be taxed differently depending on the parish, on who owns it, and on the stage of the transaction.

🌍 Foreign investment authorisation and real estate taxation

🪪 When it is required and why it is the first step

Foreign real estate investment authorisation is the gateway to the entire Andorran real estate tax system. In Andorra, this requirement applies both to non-residents and to many residents who have not yet consolidated their residency status.
Authorisation is mandatory whenever foreign capital is involved, whether the buyer is:

• an individual
• an Andorran company with foreign participation
• a foreign company or an international investment vehicle
  Skipping this step makes it impossible to execute a purchase before a notary.

➤ You can explore this further in Foreign investment authorisation in Andorra: when it is required and how the process works.

💶 The foreign real estate investment tax

Once authorisation has been granted, the first tax applicable to non-residents comes into play: the foreign real estate investment tax.

This tax is independent from other indirect taxes such as ITPI and IGI, which are discussed later. It is settled at the time of acquisition and calculated on the value of the transaction.

The general tax rate ranges from 3% to 10%, although in certain cases a 90% reduction applies, particularly when the property is assigned to long-term rental.
For full details, you can read The foreign real estate investment tax in Andorra: purpose, structure and practical application.

If you wish to understand the reduction mechanism, see The 90% reduction on the foreign real estate investment tax in Andorra.

🏠 Taxes when purchasing property in Andorra (for everyone)

Once the foreign investment stage is completed, taxation depends on whether the property is a first or second transfer, on the profile of the seller and on whether construction or renovation qualifies as new development.

📘 ITPI and IGI: when each applies

In general:

• Second transfers are taxed through the Real Estate Transfer Tax (ITPI). The standard rate is 4%. For more details, refer to Real estate transfer tax (ITPI) in Andorra: structure, current rates and impact on property purchases.
• New construction and certain renovation scenarios fall under IGI (Andorran VAT). To understand its mechanics, you can consult VAT in Andorra: how the IGI works, rates and practical implications.

The applicable tax treatment varies depending on:

• whether the seller is an individual or a developer
• whether the renovation qualifies as new construction
• whether the property is linked to an economic activity

For an overall explanation of property acquisition, you can consult Taxes when buying a home in Andorra: real tax burden, total costs and how to optimise a purchase.

📝 Other acquisition-related costs

Any property purchase involves:

• notarial fees
• registration fees
• mandatory certificates (habitability and energy performance)
• potential brokerage fees

These costs are generally moderate, but they must be considered when calculating the total cost—and in particular, they must be available to complete the purchase.

🧩 Buying as an individual or through a company?

This is one of the most strategic decisions in the entire process.

🏢 What changes when purchasing through a company

Buying through an Andorran company may affect:

• deductibility of IGI paid on the acquisition, provided the property is linked to a taxable business activity
• depreciation of the property (building only, never land). For a full explanation of accounting rules, see Accounting depreciation in Andorra: criteria and application under the General Accounting Plan
• taxation of rental income and deductibility of expenses under the Corporate Tax regime
• succession planning and intergenerational structuring. See Holding companies in Andorra: taxation and key advantages
• banking analysis of risk (compliance, solvency, corporate structure) depending on the business activity. You can consult The Andorran banking system: banks, financial regulation and international presence
• international mobility of the owners, since the company retains its own tax residency independently

For a comprehensive overview of corporate taxation, see Corporate tax in Andorra: rates, special regimes and deductions.

If you want to know the company formation process, refer to Incorporating a Company in Andorra: Steps, Requirements and Key Advantages.

If you prefer a complete strategic overview, read Definitive guide to incorporating a company in Andorra.

👤 Buying as an individual

Many buyers choose to purchase in their personal name. This generally implies:

• a simpler structure
• easier access to mortgages for main residences
• taxation concentrated under IRPF or IRNR (depending on the buyer’s tax residency). For more detail, see Tax residency in Andorra: requirements and real advantages
• no company maintenance costs (accounting, annual accounts, compliance)
  The right choice depends on investment horizon, expected income, international positioning and succession considerations.

🏡 While you are a property owner: ongoing taxes and obligations

Andorra does not have a state-level property tax, but each municipality applies its own real estate ownership tax.
This municipal tax is paid simply for owning the property and is calculated primarily on square metres. The rate depends on:

• the use of the property
• the total surface area
• whether it is a primary residence
• whether the building is in disrepair or classified as rural

A notable fact: the parish of Canillo does not currently apply this tax under its existing municipal tax regulations.

➤ You can see full details in Property ownership tax in Andorra: how it works and how rates vary by parish.

📌 Other maintenance-related obligations

Depending on the use of the property, additional obligations may apply:

• municipal fees such as waste collection
• specific requirements for tourist accommodation (HUT)
• maintenance and technical compliance obligations (safety, accessibility)

🏘️ When you rent out property: taxation of rental income

Rental taxation involves two levels:

• the municipal rental income tax
• state-level taxation (IRPF, Corporate Tax or Non-Resident Income Tax)

💶 Municipal rental income tax

Most parishes apply a rate between 2% and 4% on the gross annual rental income. This applies to:

• residential properties
• commercial premises
• parking spaces
• storage rooms
• tourist accommodation (HUT), depending on the parish
  This tax applies even if the property owner is not a tax resident in Andorra.

➤ You can read the full analysis in Rental tax in Andorra: rates applied by each parish.

🧾 Taxation of rental income depending on the owner

Rental income is taxed differently depending on who owns the property:

• Resident individual → IRPF. See Personal Income Tax (IRPF) in Andorra
• Andorran company → Corporate Tax, with depreciation and deductions. See Corporate income tax (CIT) in Andorra: rates, special regimes and tax deductions
• Non-resident → Non-Resident Income Tax. See Non-Resident Income Tax (IRNR) in Andorra

The interaction between municipal taxation and state taxation determines the real net yield of the investment.

➤ For an overall view of the tax system, you can consult Taxation in Andorra: structure, tax rates and real advantages.

📈 When selling property: capital gains taxation

When property is sold, different tax obligations may arise.

The most important factor is identifying who the seller is:

• Resident individual → taxed under IRPF as a capital gain
• Andorran company → taxation under Corporate Tax, with the possibility of offsetting losses
• Non-resident → taxed under IRNR or the applicable Double Taxation Treaty

To understand how capital gains are taxed depending on the seller, see Real estate capital gains tax in Andorra

🧮 Tax optimisation and wealth structuring

In real estate taxation, there are no shortcuts — only structure and anticipation.
To make informed decisions, it is essential to:

• choose correctly who will purchase the property
• analyse whether IGI will be deductible
• evaluate the impact of depreciation
• integrate the property into a solid succession plan
• define the property’s role within the international structure
• determine the right timing for acquisition

In some cases, buying as an individual will be more efficient; in others, a specially designed company structure will be more advantageous.

It is also important to consider that foreign purchasers may have reporting obligations in their home country. For more information, see Declaring foreign assets: European obligations and what they mean for those relocating to Andorra.

🏦 Acquisition with mortgage financing

If the purchase requires financing, it is essential to understand the real lending conditions and associated costs. You can read more in Mortgages in Andorra: requirements, real loan-to-value ratios and banking conditions.

If you are an Andorran resident, you may qualify for a government programme supporting first-home acquisition. For more details, see First home access programme in Andorra: a new incentive for property ownership.

❗ Financial costs, such as interest, may be deductible under Corporate Tax or Personal Income Tax. However, limits apply. Contact us if you require specialised tax guidance.

⚠️ Frequent mistakes to avoid

The most common issues we observe in practice include:

• signing a purchase without analysing foreign investment requirements and its corresponding tax
• misunderstanding or disregarding the real estate market. In this sense, we recommend The Andorran real estate market (2019–2025): prices, new developments and access to housing
• underestimating the impact of ITPI/IGI and municipal taxes
• creating a company without real necessity — often due to non-specialised advice
• assuming, incorrectly, that Andorra has no taxes
• failing to declare the municipal rental income tax correctly
• improvising corporate structures without succession planning
• ignoring succession or wealth transfer costs. For more information, see Wealth tax in Europe: where it applies and why Andorra is an exception
• relying on incomplete, simplified or overly optimistic advice from intermediaries
• not knowing the real fiscal and transactional costs involved

To understand how external advisers should intervene correctly, you can consult Differences Between Managers, Advisors, and Consultants: Which one do you need for your business?

🤝 How ELYSIUM can assist you

Real estate taxation brings together civil law, state taxation, municipal regulation, banking criteria, international standards and notarial practice. A single mistake in any of these elements can block a transaction or significantly increase both present and future costs.
At ELYSIUM, we can help you:

• determine whether it is more advantageous to buy personally or through a company
• calculate taxes accurately in each phase so you know the total cost in advance
• structure real estate investments with a long-term succession perspective
• coordinate notaries, banks and municipalities
• integrate the property into your international strategy
• optimise your tax burden wherever possible
• negotiate more favourable financing conditions
• review purchase or lease agreements to ensure compliance and reduce legal risk

If you want to make informed decisions, it is far more efficient to design the structure before you buy than to attempt to correct it once the transaction has already taken place. You can outline your situation through our contact form.

If you prefer to discuss it confidentially from the outset with an expert, you can book your meeting at the bottom of this page or directly here.

We are driven by the commitment to guide our clients with clarity and precision. A satisfied client today is a trusted client tomorrow.

Last updated: December 2025