The 90% tax reduction on foreign real estate investment in Andorra

Reading time: 10 minutes

🏁 Introduction

In recent years, access to housing has become one of the most sensitive issues in Andorra’s economy.

The increase in foreign investment — particularly in the real estate sector — has boosted the market but also pushed rental prices to historic highs.

To balance economic openness with social cohesion, the Andorran Government has introduced a new legal framework that links foreign real estate investment to affordable housing.

This system is built on two fundamental pillars:

• Law 3/2024, of 1 February, and its Decree 76/2024, which create the tax on foreign real estate investment.
• Law 5/2025, on sustainable growth and the right to housing, implemented through Decree 137/2025.

Both regulations are complemented by the official data from SICAR and ECVIL, which the Government uses each year to determine the reference rental values.

➤ To understand the broader legal framework governing foreign investment in the Principality, we recommend reading The Foreign Real Estate Investment Tax in Andorra: purpose, structure and practical application.

💰 90% reduction: long-term investment and rental

Law 3/2024,, of 1 February, established the Foreign Real Estate Investment Tax to levy acquisitions of property by individuals or companies with foreign capital.

However, Article 10 introduces a 90% tax reduction in a specific scenario:

👉 When the investment is aimed at acquiring or building housing intended for habitual and permanent rental for at least ten years.

🔷 Basic conditions:

• The property must be used as a habitual and permanent residence (in accordance with Law 15/2022, on urban leases).
• The lease agreement must be registered and maintained for ten years.
• If the use changes before this period, the reduction is lost and the amount must be repaid with interest.

🔷 Regulatory development (Decree 76/2024):

• The application for the reduction must be submitted before paying the tax.
• Each year, the taxpayer must provide proof of effective rental.
• A grace period of up to 360 days may be granted to place the property on the rental market.

➤ For a broader view of tax obligations in Andorra, you can read Taxation in Andorra: structure, rates and real advantages.

📈 From openness to sustainability

Between 2012 and 2022, Andorra encouraged almost total openness to foreign capital through Law 10/2012, which allowed investments with very few restrictions.

The result was a massive influx of capital — but also a sharp increase in rental prices.

In 2023, Law 16/2023 temporarily suspended new authorisations for foreign real estate investment to redesign the system.

That reform culminated in Law 5/2025,, which introduced the principle of sustainable growth, linking foreign investment to housing and social cohesion objectives.

🏡 What is considered “affordable housing”?

Law 5/2025 and its regulation (Decree 137/2025, 9 april) clearly define the concept of affordable rent using objective criteria.

📖 Article 9.2 of Decree 137/2025:

The Government determines each year the “affordable price” based on:

• The average market price, calculated from SICAR data and reduced by 25%.
• 35% of the median household income, according to the ECVIL survey.

In other words:

• SICAR shows the average rental price per square metre on the market.
• ECVIL provides the median income of Andorran households.
• The Government compares both indicators and applies the lower value as the official reference for affordable rent.

📊 How reference values are calculated

🔹 Market price (SICAR)

SICAR compiles all registered rental contracts across the seven parishes and publishes annual reports with average rental prices by parish and property type.

Example:
If the average rental price in Escaldes-Engordany is €16/m²/month, the affordable price will be €12/m²/month (75% of that figure).

🔹 Median household income (ECVIL)

The Survey on Living Conditions and Household Income (ECVIL) reports the median annual income of Andorran households.

If the median income is €45,000 per year, 35% equals €15,750 per year, or €1,312 per month.
This means that an average family should not spend more than that amount on rent.

📍 Official source: https://www.estadistica.ad

🔹 Annual publication

Each year, between May and July, the Government publishes a resolution or technical annex to Decree 137/2025 indicating:

• The official affordable rental prices by parish.
• The reference values for household spending capacity (income percentage).

❗See the 2024 publication in the official database.

🧾 Practical application and administrative control

When a foreign investor requests the 90% reduction, the administration verifies that:

• The property is effectively used for long-term habitual rental.
• The rental price does not exceed the official affordable price limit.
• The lease contracts are registered with SICAR and maintained for ten years.

For real estate developments financed with foreign capital (Law 5/2025 and Decree 137/2025), at least 50% of the total area must be allocated to affordable housing during the same period.

➤ To learn how Andorra’s rental system has evolved, you can read Property rental in Andorra: from rigidity to flexibility.

⚠️ Calculation criteria: one or two conditions?

Article 9.2 of Decree 137/2025 specifies that the Government considers both references (SICAR and ECVIL) and applies the most restrictive one.

👉 Therefore, a rental is only considered affordable if it meets the lower threshold of the two formulas.

In practice, these are not cumulative but comparative requirements:
the Government calculates 75% of the SICAR price and 35% of the median household income, and applies whichever value is lower as the official limit.

🎯 Social and economic purpose

The goal of this system is not only fiscal but also structural and social:

• Ensure access to housing, preventing rental prices from exceeding the population’s purchasing power.
• Discourage speculation, linking fiscal advantages to a genuine social function of the property.
• Align investment with the public interest, encouraging projects that generate housing and employment.
• Promote sustainability and long-term market stability.

This principle is also reflected in the preamble to Law 5/2025 and Decree 316/2024, which regulates Andorra’s public stock of affordable housing.

Conclusion

The 90% reduction in the Foreign Real Estate Investment Tax is not automatic.
It is only granted when the property is rented as a habitual residence for at least ten years and the rent complies with the official affordable housing limits.

The Government relies on two indicators — SICAR and ECVIL — and always applies the lower value to determine the maximum allowable price.
It is therefore essential to check the official annual publications before planning any real estate investment.

Furthermore, investors must periodically certify compliance with these conditions and ensure proper registration in SICAR.

Ultimately, this system turns foreign investment into a tool for social balance and sustainability:
those who seek fiscal benefits must also contribute to maintaining a fair, transparent and accessible rental market in Andorra.

📞 If you are considering a real estate investment or development project in Andorra, you can request your personalised consultation below or contact us via the form.

Last updated: October 2025