Two radically different tax structures

Comparing the tax systems of Andorra and France is like comparing two opposing philosophies of taxation. France has built its system on progressivity and redistribution, with high tax rates on the highest incomes and wealth. Andorra has built its system on simplicity and stability: a single tax rate, few exceptions, few tax loopholes, but a structurally low tax level.

Andorran IRPF—the equivalent of income tax—has only existed since 2015. It was designed from the outset with a 10% cap and a tax-exempt threshold of €24,000, in order to preserve the territory’s attractiveness without maintaining the 0% tax regime, which the OECD no longer tolerated. Andorran corporate income tax followed the same logic: a general rate of 10%, with no substance requirements and no minimum presence requirement for executives.

What fundamentally distinguishes Andorra from France is not just the level of tax rates. It is the absence of several entire taxes: no real estate wealth tax, no inheritance tax on direct descendants, no special tax on high incomes, and no trade tax. The total tax base is structurally narrower.

The 2015 France-Andorra Agreement — The Legal Framework of Reference

Since the Franco-Andorran tax treaty came into effect in 2016, bilateral tax relations have been governed by a specific agreement that defines the rules for allocating the right to tax based on the nature of the income. This treaty—available on the BOFiP website—is an essential prerequisite for a French national to safely relocate to Andorra for tax purposes. In particular, it defines the criteria for tax residency, the withholding tax rates on dividends and interest, and the mechanisms for eliminating double taxation.

It does not provide unconditional protection: it contains an anti-abuse clause and a provision allowing France to tax its nationals as if the convention did not apply, under certain conditions. These clauses have not yet been invoked—but they serve as a reminder that tax residency in Andorra must be genuine and substantial, not merely administrative.

Position-by-Position Comparison — 2026 Data

Sources: Law 5/2014 (Personal Income Tax), Law 95/2010 (Corporate Income Tax), CGI 2026. The “Andorra” column corresponds to Engage’s area of expertise. Each financial situation requires an individualized analysis.

Andorran Income Tax in Detail: What the 10% Rate Really Means

The 10% rate provided for in Article 43 of Law 5/2014 is a flat rate, not a progressive one. It applies to the general taxable income and savings income after deducting the personal exemption. Specifically: the first €24,000 of annual income is not taxed—this threshold rises to €40,000 when the spouse has no income to report.

Above that amount, the tax rate is a flat 10%. There is no 30% tax bracket, no 41% tax bracket, and no 45% tax bracket. An Andorran resident reporting €200,000 in annual income will pay 10% on the portion exceeding €24,000, or approximately €17,600. In France, that same income would result in a tax bill of approximately €67,000, excluding social security contributions. The difference on this single item alone exceeds 49,000 € per year.

Dividends — the most decisive advantage

Article 5.j of Law 5/2014 expressly exempts dividends and other income derived from a share in net assets from personal income tax (IRPF) when paid by entities that are tax residents of Andorra or by collective investment undertakings governed by Andorran law, provided that such entities are subject to Andorran corporate income tax. In other words: an Andorran resident who is a shareholder in an Andorran SL pays no tax on the dividends he or she receives from it.

In France, these same dividends are subject to a 30% flat tax—12.8% income tax and 17.2% social security contributions. On one million euros in distributed dividends, the difference between the two tax regimes amounts to a tax burden of 300,000 euros for this item alone.

These estimates are provided for illustrative purposes only. The figures for France exclude social security contributions to facilitate comparison. Each actual situation requires an individualized calculation.

Andorran income tax — 10% with no hidden fees

The general Andorran corporate income tax rate is 10% (Law 95/2010, Art. 41). This rate applies to net income without any specific economic substance requirements under BEPS standards—provided that the company has a genuine registered office, effective management, and a justified economic activity within the territory. To date, Andorra has no “cost-sharing” or minimum human presence requirements comparable to those imposed in the free zones of the United Arab Emirates.

The difference from the French tax system is structural: a 25% corporate income tax rate in France versus 10% in Andorra—a 15-point gap. On a profit of €500,000, this difference amounts to €75,000 in additional corporate income tax in France. Combined with the flat tax on dividends—which does not exist in Andorra for residents—Andorran corporate income tax makes the Andorran structure roughly twice as tax-efficient for an entrepreneur who distributes profits as dividends.

IFI and inheritance tax—two taxes that don't exist

In France, the Real Estate Wealth Tax is levied on net real estate assets exceeding 1.3 M€ according to a progressive tax scale ranging from 0.5% to 1.5%. Real estate assets worth 5 M€ result in an annual tax liability of approximately 55,000 €, regardless of any income stream. In Andorra, no equivalent tax exists.

Inheritance taxes on direct descendants in France can be as high as 45%. In Andorra, Article 5.l of Law 5/2014 expressly exempts income arising from transfers upon death—and Article 5.m extends this exemption to gratuitous inter vivos transfers in favor of relatives up to the third degree. For wealthy families, this dual exemption can amount to tens or even hundreds of thousands of euros over a single generation.

Andorran Tax Residency: Practical Requirements and Pitfalls to Avoid

Article 8 of Law 5/2014 defines the criteria for Andorran tax residency: more than 183 days of physical presence on Andorran territory, or the location of the “main center” of economic activities or interests in Andorra. The 183-day requirement is calculated cumulatively, including sporadic absences—unless the taxpayer can prove tax residency in another country.

Article 8 also provides for a presumption of Andorran tax residency when the spouse (with whom the taxpayer is not separated) and minor children themselves meet the criteria—which aligns the Andorran system with the practice under major international tax treaties and simplifies the situation for transferred families.

For passive residency—available to individuals with sufficient resources who do not engage in local economic activity—the residency requirement is a minimum of 90 days per year (not 183), with a mandatory investment in Andorran assets of at least €400,000 (which can be reduced through the Housing Fund) or €1,000,000 under the standard framework.

What "real and substantial" means in practice

The French and Spanish tax authorities actively monitor transfers of residence to Andorra. A solid case must demonstrate: documented physical presence (phone records, local bank transactions, electricity usage, calendar), an actual permanent residence (occupied housing, not sublet), economic activity carried out from within the country, and, if possible, children enrolled in school in Andorra.

The risk of “false residency”—maintaining predominant family, professional, or economic ties in France while claiming residency in Andorra—is the main grounds for reassessment. The 2015 Franco-Andorran agreement sets out a hierarchy of tie-breaking criteria (permanent home, center of vital interests, length of stay, nationality) that allow the French authorities to reclassify residency as being in France if the Andorran element is insufficient.

Exit tax: the hurdle that anyone moving to Andorra must anticipate

Leaving France for Andorra may trigger the Exit Tax for any taxpayer who has been a French tax resident for at least six of the ten years preceding departure and who holds equity interests with a total value of €800,000—or representing 50% of the rights to a company’s profits. This mechanism, provided for in Article 167 bis of the General Tax Code (CGI), imposes a tax on the value of unrealized capital gains at the time of departure.

The good news is that, since Andorra has signed a debt collection assistance agreement with France, an automatic payment deferral applies. The exit tax is not due at the time of departure, but only upon the subsequent sale of the assets. A tax reduction is possible if the sale is made at a lower effective rate.

The bad news: “automatic” does not mean “without formalities.” The reporting form (Form 2074-ETD) must be filed in the year of the transfer, and annual reporting obligations remain in France until the assets have been sold. Failure to comply with these obligations may result in significant penalties—including the revocation of the deferral.

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