The Principality of Andorra and the United Kingdom have reached a significant milestone with the signing of the Double Taxation Avoidance Agreement (DTA), a treaty that will strengthen economic ties between both jurisdictions. This agreement aims to eliminate double taxation, prevent tax evasion and avoidance, and provide a more stable and attractive framework for investors, businesses, and expatriates.
How Was This Agreement Reached?
Negotiations for this treaty began in 2023, aligning with Andorra’s strategy to expand its network of tax treaties and reinforce its international positioning. Finally, on February 20, 2025, the agreement was signed in Andorra la Vella by:
Noëlia Souque, current Secretary of State for International Financial Affairs of the Government of Andorra.
James Murray, UK Secretary of State for Treasury.
This agreement marks a crucial step in consolidating Andorra as a transparent and competitive fiscal destination while fostering legal certainty for businesses and individuals with interests in both countries.
Key Aspects of the DTA
Although the official text has not yet been published, it is expected that this agreement will follow the OECD Model Convention, addressing the following points:
Tax residence criteria: Rules to determine where individuals and businesses should be taxed based on their effective residence.
Methods to avoid double taxation: Implementation of mechanisms such as exemptions or tax deductions for taxes paid in the other jurisdiction.
Exchange of tax information: Cooperation between tax authorities to combat tax evasion.
Anti-abuse clauses: Measures to prevent the misuse of the treaty for unjustified tax advantages.
These provisions are essential for companies with international operations, investors, and British expatriates in Andorra, allowing them to optimize their tax planning with greater certainty.
When Will It Come Into Effect?
For the agreement to be fully applicable, it must go through the following steps:
Parliamentary Ratification:
In Andorra: It must be approved by the General Council.
In the United Kingdom: It must be scrutinized and approved by the UK Parliament.
Sanction and Official Publication:
In Andorra, the DTA will be sanctioned by the Co-Princes and published in the Butlletí Oficial del Principat d’Andorra (BOPA).
In the UK, it will be published in the UK Treaty Series (UKTS).
Exchange of Ratification Instruments:
Once all formalities are completed in both countries, the agreement will come into effect on the stipulated date, typically at the start of the next fiscal year.
Once the final text is published, the full scope and impact of the agreement will become clearer, allowing stakeholders to assess its advantages.
Why Is This Agreement So Relevant?
The signing of agreements like this not only strengthens trade relations between countries but also has a direct impact on businesses and investors.
For Andorra, this agreement enhances its international recognition and integration into global markets.
For investors and businesses, the reduction or elimination of double taxation facilitates capital mobility and international operations between both countries.
For British expatriates in Andorra, this treaty may result in lower tax burdens on UK-source income, such as:
Dividends with reduced or eliminated withholding taxes in the UK.
Capital gains, which may be taxed only in the country of residence (i.e., Andorra).
Pensions and other income, potentially subject to lower taxes at source.
Given Andorra’s significant British community, this agreement may even increase interest among UK citizens in relocating to Andorra or investing in the country.
Conclusion:
A Key Step for Andorra’s Fiscal Environment
The signing of this Double Taxation Avoidance Agreement between Andorra and the United Kingdom represents a crucial step in improving legal certainty and competitiveness in the Principality. Once in force, businesses, investors, and British expatriates will benefit from a clearer and more efficient tax environment.