Published on and written by Cyril Jarnias
Real estate in Andorra is increasingly attracting French investors, drawn by low tax rates, the absence of wealth tax on real estate (IFI) and inheritance taxes, as well as a legal framework stabilized by a tax treaty with France. But behind the image of a “tax haven,” the reality is more technical: double taxation, exit tax, taxation in France of French properties, surtax on foreign investments, specific rules on capital gains… For a French taxpayer, buying or holding real estate in Andorra is not something to improvise.
This article details Andorran local and national taxes, the treatment of rental income and capital gains, the application of the Franco-Andorran tax treaty, and the consequences on the French side: income tax, social security contributions, capital gains, IFI, inheritance tax, exit tax, as well as the actual cost of buying real estate in Andorra.
A very attractive but regulated Andorran tax framework
Andorra has deeply modernized its tax system over the last ten years. It now applies a personal income tax (IRPF), a corporate income tax, a non-resident income tax (IRNR), and a general indirect tax (IGI, equivalent to VAT). But the overall pressure remains much lower than in France.
The Andorran IRPF rate is capped at 10%, well below the French progressive rate that can reach 45%.
Andorra has no wealth tax on real estate (IFI), no wealth tax at all, no inheritance or gift taxes, no surtax on high incomes, and no CSG/CRDS on capital income. It applies a corporate income tax of 10% (compared to 15% or 25% in France) and a local VAT (IGI) of 4.5%, the lowest in Europe.
A wealthy French person can save up to 78% on income tax, 60% on corporate tax, 77% on VAT, 51% on social charges, and 100% on IFI and inheritance taxes, provided the assets are located in Andorra and Andorran tax residency is recognized.
But this attractiveness is now part of a strict international framework. Andorra is not on the OECD list of non-cooperative jurisdictions, applies automatic exchange of information (CRS), and has signed a tax treaty with France, in force since 2015, based on the OECD model.
The France–Andorra tax treaty: a game changer for the French
The tax treaty between France and Andorra, signed in Paris in 2013 and in force since 2015, is the first double taxation avoidance treaty ever concluded by Andorra. It aims to allocate taxing rights between the two states and to eliminate double taxation, while combating tax fraud and evasion.
It applies to direct taxes on income and corporate taxes, on both the Andorran and French sides. The IFI, inheritance or gift taxes remain completely outside its scope. The treaty relies mainly on the tax credit method, without any full exemption mechanism on the French side.
A French resident receiving Andorran income (e.g., rent from a property located in Andorra) must declare it in France. The tax paid in Andorra gives entitlement to a tax credit in France, equal to either the French tax due on that income or the Andorran tax actually paid, depending on the category of income. In Andorra, Law 5/2014 provides for a foreign tax credit capped at the theoretical Andorran tax on that same income.
Another key point for real estate: the treaty enshrines the classic principle that real estate income and capital gains are taxable in the state where the property is located. An apartment in Paris held by an Andorran resident therefore remains taxed in France on rental income and capital gains from the sale. Similarly, a property in Andorra held by a French resident is taxed in Andorra on rental income and capital gains, but must nevertheless be declared in France, with a tax credit.
The treaty includes an anti-abuse clause and a provision that allows France to tax its nationals even if the treaty applies, in certain cases. Although not yet used in the Franco-Andorran context, these clauses show France’s intention to prevent artificial relocations.
Transfer tax, IGI, and surcharge on foreign investment: the cost of buying in Andorra
For a French person buying a property in Andorra, the first issue is the entry cost: transfer duties, tax on foreign investment, notary fees, agency fees.
When an individual buys an existing property from another individual, they are subject to the tax on property transfers (ITP/ITPI), equivalent to French transfer duties. This tax amounts to 4% of the actual value of the property, split between the state and the municipality (Comú). The municipal share can go up to 3%, with the state share being 1%. All parishes currently apply the maximum municipal rate, leading to a total rate of 4%. A reduced rate of 3% is however provided if the property is rented as a principal residence for 5 years.
For new homes sold by a developer, the transaction is subject to IGI at 4.5% (local VAT) instead of ITPI, with possible reduced rates (3.5% for example if the property is used for long-term residential rental). The IGI then completely replaces transfer duties.
Added to this is a decisive element for non-residents and new residents: the tax on foreign real estate investment, introduced between 2024 and 2026. It applies to:
– non-resident buyers,
– residents who have been living in Andorra for less than 3 years (out of the last 10),
– foreign companies,
– and Andorran companies that are at least 50% owned by non-residents.
This tax is calculated on the actual value of the property and must be paid before signing at the notary’s office. Since the so-called “Omnibus 2” reform that came into force in 2026, the rates have been significantly increased: 6% for the first property and 10% starting from the second. A specific rule maintains the 6% rate when the investment does not exceed one dwelling and its outbuildings (maximum three parking spaces and three storage units), with all other cases taxed at 10%. A 90% reduction is possible if the property is rented as a principal residence for 10 years, under strict conditions.
A French non-resident buys an apartment worth €800,000 as their first property in Andorra. They pay 4% ITPI (€32,000) and 6% foreign investment tax (€48,000). Excluding notary fees, the tax bill reaches €80,000, i.e., 10% of the price, before agency and financing costs. In total, the entry cost can vary between 10% and 16% of the price depending on the configuration.
Ancillary fees however remain competitive compared to France. Notary fees generally represent 0.5% to 1% of the price, land registration less than 0.1%, a foreign investment authorization costs €300, loan application and appraisal fees each around 0.25% of the price. Real estate agencies typically charge between 5% and 10% of the price. By comparison, transaction costs in France are often estimated between 15% and 20% of the price.
Summary comparison of purchase costs
| Real estate purchase cost items | Andorra (non-resident) | France (order of magnitude) |
|---|---|---|
| Transfer duties (existing residential) | 4% (ITPI) | 5–8% depending on department |
| VAT / IGI on new | 4.5% (IGI) | 20% VAT (with reduced cases) |
| Foreign investment surcharge | 6–10% | 0% |
| Notary + registration | ~0.5–1.5% | ~1–2% |
| Agency fees | 5–10% | 4–8% |
| Typical total cost | 10–16% | 15–20% |
For a French person planning to settle permanently in Andorra and become a tax resident, this foreign investment surcharge is a crucial parameter. Simply obtaining a residence permit is not enough to avoid it: they must prove three years of actual residency within the last ten years to be fully exempt.
Local taxes and absence of IFI: holding real estate in Andorra
Once the property is acquired, the annual holding cost is very low in Andorra. There is no property tax nor any IFI-type wealth tax at the national level. The only recurring property tax is the “Foc i lloc,” a traditional municipal tax levied by the parish where the property is located.
The tax is generally set at around 0.1% of the average net value of the property, varying by municipality.
Furthermore, to combat housing hoarding, a tax on vacant homes exists. It applies to properties left unoccupied for more than two years without a valid reason, at a rate of €5.05 per square meter of usable floor area, with possible exemptions (secondary family home, professional use, health reasons).
In contrast, Andorra levies no wealth tax, whether on real estate, movable property, or mixed. An Andorran resident owning substantial real estate in Andorra bears no annual taxation analogous to the French IFI.
For an Andorran resident, the IFI applies to their real estate properties located in France if their net value exceeds €1.3 million. The progressive scale ranges from 0.5% to 1.5%, i.e., about €55,000 per year for €5 million in assets. The Franco-Andorran tax treaty does not cover this tax, which remains governed by French domestic law.
Real estate holding and wealth: France vs Andorra
| Wealth tax / levy | Andorra (resident) | France (non-resident, properties in France) |
|---|---|---|
| Real estate wealth tax | No IFI | IFI on French properties > €1.3M |
| Property tax | Very modest “Foc i lloc” | Local property tax sometimes high |
| Vacant home tax | Yes (€5.05/m² after 2 years vacant) | Yes in certain high-demand areas |
| Principal residence occupancy tax | Does not exist | Abolished on principal residence |
For a French person who moves their center of life and investment to Andorra, the complete disappearance of the IFI and Andorran inheritance taxes on their Andorran assets represents a major long-term advantage, provided they keep little or no significant real estate in France.
Rental income: IRNR for non-residents, IRPF for residents
Rental income from a property located in Andorra is taxable in Andorra, regardless of the owner’s country of tax residence, in accordance with the tax treaty. How it is taxed varies depending on whether the owner is an Andorran tax resident or not.
For non-residents, the non-resident income tax (IRNR) applies. The general rate is 10%, but with a flat 20% deduction on gross rents for rental income, which brings the effective rate to 8% of gross rent. In practice, the tax is calculated on the rent received, reduced by 20%, without detailed deduction of expenses. Declarations are generally made quarterly, and a withholding tax may dispense with the annual declaration if everything is properly deducted.
For Andorran tax residents, rents from a property located in Andorra are taxed under the IRPF. The tax rate is capped at 10% after a personal allowance of €24,000, with a moderate rate sometimes ranging between 0.4% and 4%. Actual expenses such as insurance, renovations, loan interest, and management fees are deductible from the rental income.
No social security contributions like CSG or CRDS are added. The Andorran system does not layer income tax and social contributions on capital income, unlike France where rents are subject to both income tax (progressive scale) and 17.2% social contributions for non-residents not entitled to European social protection, or 7.5% solidarity levy for those affiliated with an EEA or Swiss scheme.
Rents received by an Andorran resident for a property located in France are taxable in France (property income for bare rental, industrial and commercial profits for furnished rental, with social contributions). They must also be declared in Andorra, but a tax credit avoids double taxation, with the main burden remaining in France.
Rental income from an apartment in Andorra
| French owner’s situation | Tax in Andorra | Effect of the France–Andorra treaty |
|---|---|---|
| Non-resident (France) | IRNR 10% on net base (20% deduction), i.e., 8% effective | Income taxed only in Andorra, not in France (property located outside France) |
| Andorran tax resident | IRPF up to 10%, after €24,000 allowance and deduction of expenses | Income also declared in France only if French resident (which is no longer the case) |
Rental income from an apartment in Paris held from Andorra
| Owner’s situation | Tax in France | Tax in Andorra |
|---|---|---|
| Andorran tax resident | Income tax + social contributions under micro / actual regimes | Mandatory declaration, tax credit equal to theoretical Andorran tax (generally €0 additional) |
For a French person targeting rental income, Andorra is therefore fiscally very advantageous for properties located in Andorra, but does not profoundly change the tax burden on rental properties remaining in France.
Real estate capital gains: very favorable Andorran regime and treaty
The taxation of real estate capital gains is a central point for any investor. In Andorra, a specific system for taxing real estate capital gains has existed since 2006. It was deeply reformed by Law 5/2023, in force as of January 1, 2024, which integrated these gains into the IRPF, corporate income tax (IS), and IRNR frameworks.
For an Andorran tax resident individual, not a real estate entrepreneur, the capital gain on a property located in Andorra is taxed at a rate that depends on the holding period. The rules may be presented slightly differently depending on the source, but the framework is as follows:
In case of sale within the first 2 years, the gain is taxed at 15% (10% + 5% speculative surcharge). Between 2 and 5 years, the rate is 10% with no surcharge. After 5 years, coefficients progressively reduce the taxable base. After 10 years of ownership, the gain is fully exempt (effective rate of 0%).
Before this reform, the scale typically ranged from 15% in the first year to 1% in the tenth year, then 0% beyond. The principle remains: the longer the holding period, the lower the taxation, up to a full exemption after about ten years for residents.
For companies subject to corporate income tax and for non-residents, the regime is stricter. Real estate capital gains are generally taxed at 10% regardless of the holding period, with a 5% surcharge in case of very quick resale (less than two years), i.e., 15% in these cases. For these categories, there is no mechanism for reducing the base through progressive coefficients.
Exemption cases exist for residents:
In Andorra, the capital gain from the sale of a principal residence is exempt if the proceeds are reinvested in another principal residence within 6 to 24 months depending on the transaction. Also exempt are transfers in the context of divorce or division between former spouses, as well as transfers to close relatives through inheritance or gift, the latter being also exempt from transfer duties.
Finally, Andorran taxpayers can increase the cost basis of their property by the amount of works and improvements, provided they can justify the invoices (originals required), which reduces the taxable capital gain.
The capital gain on the sale of a property in Andorra by a French non-resident is taxed in Andorra at 10% or 15% in case of very short-term resale. The buyer must withhold 5% of the sale price and pay it to the Andorran Treasury, without exempting the seller from the final calculation of the gain.
The Franco–Andorran tax treaty reserves the taxation of real estate capital gains to the state where the property is located. In other words, France is not supposed to tax the capital gain on a property located in Andorra, even if the seller remains a French resident, subject to a detailed analysis of French internal rules on foreign-source gains and anti-abuse rules. Conversely, an Andorran resident who sells a property located in France remains fully subject to the French regime for non-resident capital gains.
Real estate capital gains scale: Andorra vs France (property located in each country)
| Key parameter | Andorra (property in Andorra, Andorran resident) | France (property in France, non-resident) |
|---|---|---|
| Holding period < 2 years | ~15% (10% + 5% speculative) | 19% + 17.2% social contributions (subject to partial exemptions) |
| Holding period 2–5 years | 10% | 19% + SC, with progressive allowances |
| Holding period 5–10 years | Decreasing effective rate (coefficients) | Allowances for duration, full IR exemption after 22 years, SC after 30 years |
| Holding period ≥ 10 years | 0% (full exemption) | Gain still taxable up to 22 years for IR, 30 years for SC |
We can see that Andorra offers a full exemption horizon after about 10 years, even for substantial properties, whereas France requires a period of 22 years to eliminate income tax on the gain and 30 years to completely erase social contributions.
France: taxation of French properties held from Andorra
For a French person who moves to Andorra and keeps real estate in France, the treaty does not “protect” against French taxation on these properties. On the contrary, it confirms the principle that:
– rent from a property located in France is taxable in France,
– capital gains from the sale of this property are taxable in France,
– IFI remains due on French real estate assets exceeding €1.3 million in net wealth,
– French inheritance tax may apply to these assets or to heirs residing in France.
French rental income remains taxable in France, even if the owner is a non-resident. Depending on the type of rental (bare or furnished), the micro-landlord, actual, or industrial and commercial profits regime applies. A minimum rate of 20% (or 30% beyond a threshold) applies, unless opting for the average worldwide rate. Social contributions are added: 17.2% outside the EEA, or 7.5% for EEA/Swiss regimes, with exemption from CSG/CRDS.
Real estate capital gains on a French property held by a non-resident are taxed at 19%, plus 17.2% social contributions (subject to adjustments for certain EEA or Swiss residents who benefit from a reduced social rate of 7.5%). Progressive allowances apply from the 6th year of ownership, leading to a full exemption from income tax after 22 years and from social contributions after 30 years.
Minimum net real estate wealth threshold in euros above which IFI applies in France.
Finally, France maintains an “exit tax” mechanism, provided for in article 167 bis of the French General Tax Code (CGI), targeting taxpayers who transfer their tax residence outside France while holding significant shareholdings: at least 50% of the rights to profits in a company, or a portfolio of securities with a total value of at least €800,000. This mechanism taxes latent capital gains on these securities at the time of departure. It is not an Andorran tax, but a French charge that may accompany a move to Andorra. The recovery assistance agreement between France and Andorra allows for an automatic deferral of payment, with the tax becoming due notably upon the subsequent sale of the securities.
Transfer and inheritance: the huge Andorran advantage, and the French limitation
In terms of wealth transfer, Andorra is exceptional. There is no inheritance tax, no gift tax, and no wealth tax. Law 5/2014 provides for the exemption of income from transfers upon death (article 5.l) and gratuitous inter vivos transfers in favor of relatives up to the third degree (article 5.m). Concretely, all inheritances and gifts are exempt from Andorran taxation, whether they involve real estate, financial portfolios, or shares in companies, provided the deceased or donor is an Andorran resident and the assets are located in Andorra.
The absence of taxation allows for the gradual transfer of company shares or real estate to children with no local tax cost, which is a pillar of attractiveness for wealthy families.
However, the France–Andorra tax treaty does not cover inheritance and gift taxes. France therefore retains all its taxing power over transfers that have a territorial link with France under article 750 ter of the CGI: death of a French tax resident, heir or donee who is a French tax resident, or assets (movable or immovable) located in France. An Andorran resident who leaves assets in France to heirs residing in France is thus exposed to French inheritance tax, possibly up to 45% in the direct line, with no possibility of a tax credit for any Andorran tax since none exists.
A French heir receiving assets from a parent who is an Andorran resident remains fully taxable in France on those assets, if they have been a French tax resident for at least six of the ten years preceding the transfer, according to article 750 of the CGI.
Wealth transfer: potential gains and limitations
| Situation | Andorra (resident, assets in Andorra) | France (heirs / assets in France) |
|---|---|---|
| Direct line inheritance | 0% inheritance tax | 5 to 45% depending on brackets, per heir |
| Direct line gift | 0% | Similar scale, €100,000 allowance per child |
| Transfer of real estate wealth | No IFI, no death/gift transfer duties | IFI potentially, progressive transfer duties |
| Inheritance including French asset(s) | No local Andorran tax | Full French taxation (outside treaty) |
For a French person organizing their succession, Andorra allows for very strong optimization of the transfer of assets actually relocated to Andorra. But it does nothing to neutralize French taxation on assets remaining in France nor on heirs who remain French tax residents.
Andorran tax residency: conditions and recognition by France
Since the treaty came into force, Andorran tax residency is fully recognized by France, provided it is real and substantial, not merely administrative. Under Andorran law, a tax resident is:
– an individual who stays more than 183 days per year in Andorra,
– or someone whose center of economic interests is located in Andorra.
There exists in Andorra a ‘passive residence’ regime requiring only 90 days of physical presence per year, subject to a significant investment (currently €1,000,000 in Andorran assets, including real estate with a minimum of €800,000 per housing unit) and sufficient resources. However, this does not prevent French tax authorities from evaluating all residence criteria (home, main place of stay, professional activity, center of economic interests) to determine if tax residency has genuinely shifted.
In case of a residency conflict, the treaty refers to the classic “tie-breaker” criteria of the OECD model: permanent home, center of vital interests (personal and economic ties), habitual abode, then nationality. The center of vital interests—that is, the place where the person has their family ties, main activity, and the largest part of their wealth—plays a determining role.
For a French real estate investor wishing to settle in Andorra, buying an apartment and obtaining a residence permit is not enough: they must also reorganize their center of life, including enrolling children in school, winding up or transferring French professional activities, and partially divesting French assets, otherwise their tax residency may be challenged by France.
Andorra, France, and real estate: how to articulate wealth strategy and taxation
For a French person, real estate taxation in Andorra offers clearly superior advantages over France on several key fronts: no IFI, no inheritance and gift taxes, low rates on rental income and capital gains, taxation capped at 10% on all income, no social contributions on capital, IGI at 4.5%, very low local holding costs.
In return, several structural limitations must be integrated into any strategy:
Properties located in France remain subject to French tax (income, capital gains, IFI, inheritance tax), the tax treaty provides a tax credit without full exemption, exit tax may apply upon departure, France retains rights via IFI and inheritance on French assets or resident heirs, and Andorra applies a surcharge on foreign real estate investments.
For a French real estate investor considering an Andorran relocation, a coherent strategy often consists of:
To optimize your tax situation when moving to Andorra, it is advisable to: plan the departure from France in advance by anticipating the exit tax; shift part of French real estate toward Andorran assets or other international asset classes to reduce exposure to IFI and French inheritance tax; structure Andorran acquisitions taking into account the foreign investment surcharge, housing limits per non-resident, and passive residence conditions; and organize future transmission mainly through assets located in Andorra, taking advantage of the exemption on local gifts and inheritances.
Andorra is no longer part of the gray areas of international taxation. Its system, now aligned with OECD standards, nonetheless offers the French a powerful lever for wealth optimization, provided they accept a genuine relocation of their center of life and careful management of the interplay between French law, Andorran law, and the tax treaty.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
