Tax optimization Andorra: how to secure, pass on or benefit from your assets

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How to optimize your assets and income in Andorra?

Imagine being able to protect the value of your assets and gain greater freedom and quality of life.

This is what the Andorran tax system allows, and what we're going to tell you in detail in this guide for entrepreneurs who have accumulated wealth throughout their professional careers.

If you'd like to secure, pass on or simply enjoy your assets with the support of Engage, click here to book a strategic meeting with one of our team of advisors.

What Andorra has to offer in terms of taxation

Have you built your wealth? You made it yourself.

And now that you've reached your goals, you want to take advantage of them?

This seems to us to be completely legitimate.

But reaping the rewards of what you've built or invested in can come up against the spectre of taxes.

URSSAF, inheritance...

We're talking about levies that can represent up to 75% of the wealth created.

Against a backdrop of growing fiscal and political instability in France, the legal optimization of one's wealth is becoming a strategic necessity for all wealthy entrepreneurs approaching the time of transfer or retirement.

The Principality of Andorra lies on France's doorstep.

Andorra offers a tax, legal and personal framework that's unique in Europe, so you can enjoy a new stage in your life with peace of mind.

The Principality of Andorra, often misunderstood or caricatured, has established itself today as a modern, secure and tax-efficient jurisdiction in which to protect assets, organize succession and take full advantage of its new-found freedom.

This article offers a clear and rigorous analysis of the Andorran tax framework, its concrete opportunities, and the optimization levers available to the experienced entrepreneur who wishes to combine wealth performance, stability and quality of life.

At a time when taxes on capital in France are reaching record levels, it's essential to anticipate and arbitrate intelligently.

Let's see how :

•  Structuring a compliant tax residence
•  Using Andorran holding companies to your advantage
• Avoid double taxation, and secure your future in an environment that matches your ambitions.

Why optimize your assets in Andorra?

As you've no doubt noticed (and which is why you're reading our guide), the French tax environment has become more unpredictable, heavier too, even if this is nothing new, and marked by greater pressure on capital (and therefore yours).

Successful entrepreneurs and investors like you are therefore faced with a major contradiction: their success becomes a tax target.

This phenomenon particularly affects those who, after having built up and sold their business, find themselves having to choose between :

• Capital preservation,
•  Transmission to their families,
• Or simply the legitimate enjoyment of their fortune.

Andorra stands out on the one hand:

1. Through the stability and clarity of its tax system
2. But also through the coherence of a legal framework that does not penalize effort, transmission or initiative.

Important: choosing Andorra is not a "tax exile".

It's an asset continuity strategy.

Direct taxation in Andorra is :

• Moderate
•  And capped at 10%.

With targeted exemptions (dividends, capital gains, gifts, inheritance) that boost the efficiency of holding structures.

But beyond the rates, it's the tax philosophy that changes radically: here, we don't presume your tax guilt, we respect your right to freely dispose of the fruits of your labor.

A real breathing space for high net worth individuals who, after decades of constraints and risks, are obviously looking to secure, structure and pass on their assets under optimum conditions.

Not seriously considering the Andorran option today means potentially sacrificing 20-30% of your future wealth to a tax system that has become unstable, politicized and often out of touch with business reality.

Taking the pl unge requires a methodical approach - a well-defined tax residence, an optimized holding company, an anticipated succession strategy - but in the end you'll benefit from invaluable freedom.

It's not a gamble on today's tax rate, it's a rational decision to protect your assets against tomorrow's uncertainties, while gaining in quality of life, legal certainty and family peace of mind. 

The expert's opinion

For wealthy entrepreneurs in the process of selling, transferring or reinventing themselves, it would be a strategic mistake not to seriously consider the Andorran route today.

Tax optimization is not about shirking your responsibilities, but about aligning your assets, your life plan and the rules of the tax game.

Andorra is not a tax haven: it's a haven of stability, in the heart of Europe, where you can finally combine legal certainty, asset profitability and quality of life.

The case of Jean-Marc L., successful French entrepreneur, happy to enjoy his freedom thanks to Andorra

Background: Jean-Marc, 58, founded and ran a successful regional industrial group for 30 years.

He recently sold his shares to an investment fund for 12 million euros, via his French holding company.

Married, father of two adult children, before contacting us he wanted to :

1. Preserve the fruits of your labor,
2. Prepare to pass on to your children,
3. And give yourself a new life between sport and nature.

When he turned to Engage , his problem was this: between capital gains tax, dividend tax, cumbersome inheritance tax and political uncertainty, he risked losing over 45% of his wealth, without ever fully benefiting from it.

Problem: Jean-Marc felt "rich in theory but impoverished in practice", to use his own words:

• Each withdrawal from his holding was taxed at over 30%, with the fear that the IFI and then inheritance tax would end up cutting into what he wanted to pass on.
• He was torn between his attachment to France and his desire to find a solution to make the most of his 2nd life.

He was looking for a legal, structured, long-term solution without any "dubious set-up".

Proposed solution: Jean-Marc consulted our firm Engage, which specializes in Franco-Andorran international taxation.

Here's the strategy:

1. Creation of an Andorran holding company,
2. Contribution to this company of shares and assets (after purging capital gains in the French holding company),
3. Moving to Andorra with spouse: tax residence obtained, home in France sold, real and justified move,
4. Declarations made to the French tax authorities, in compliance with the double taxation agreement,
5. Optimization of income via tax-free dividends in Andorra,
6. Integrated estate planning: early partial donation to your children, in a country with zero transfer tax.

Results :

✔ Average effective tax rate reduced to 4% on all assets.
✔ Recovery of net funds in his Andorran company with 5% tax friction on French dividends, zero in Andorra.
✔ Early transfer of €3m with no tax friction or gift tax.
✔ New life in Escaldes-Engordany between skiing, golf, hiking and development of a private endowment fund.

We'll now look at the steps to follow if you want to go down the same road: they may seem complex at first, but it's a logical process that's obviously easier if you're given advice and support.

Contact Engage by clicking on this link if you'd like personalized support to help you smooth the process.

Step 1 - Global heritage diagnosis (France & international)

A sound approach to tax optimization begins with a detailed audit of your situation.

List your assets:

• What is the nature of your assets?
• What's their value?
• Are these assets liquid or not?
• Do you own any real estate?
• Do you own companies (or shares in companies)?
• Do you have any financial investments?
• How are your assets held (direct ownership, holding company, SCI)?

To move forward with your project :

1. Open a Word, Excel or Google Docs / Spreadsheet document.
2. Write down each of your assets on a line of your document.
3. In each case, indicate the nature, value and holding method of your assets.

Objective: this preliminary work will enable you to take stock of the assets for which Andorra represents an opportunity for tax optimization if you initiate expatriation on your own.

In all cases, this will facilitate the work of your consultancy firm, by clarifying future tax risks and identifying flows to be optimized if you ask for help in this process.

Engage is your partner for auditing and diagnosing your asset situation.

Let's now assess the timing needed to take advantage of Andorran legislation and make the transition to this new life.

Yes, optimizing your tax situation in Andorra goes hand in hand with a change of lifestyle.

Step 2 - Defining your life project and timing

Andorra is a tax jurisdiction offering a wide range of benefits, most of which require you to actually live in the country (and not just open a bank account or set up a company, for example).

As a result, this choice of lifestyle requires you to ask yourself the right questions:

1. Do you want to live in Andorra for more than 3 months or 6 months a year?
2. Are you planning to move to Andorra in the short, medium or long term?
3. What is the event in your life that allows you to regain your freedom today andconsider expatriation? (transfer or resale of a business, inheritance or annuity, retirement, emancipation of your children...)
4. Have you foreseen a future event that will prompt you to seek tax optimization solutions by expatriating to a jurisdiction where you can optimize your tax situation?
5. Does your current place of residence give rise to insecurity (legal, tax, personal...), making your expatriation plans urgent and necessary?
6. Have you secured the support of your family and friends for your move to Andorra?
7. What are the steps you need to take to get started, to determine the right timing for your installation project to be a success?
8. Is your estate territorially anchored in France or abroad, or can it easily be moved to another jurisdiction such as Andorra?

Objective: this work will enable you to anchor your tax strategy in a coherent personal trajectory, and find out whether you have sufficient motivation to make your project a success.

Engage is your partner in defining your life project and making it a reality.

Step 3 - Decide on the type of administrative authorization for residence in Andorra

During your stay in Andorra, you have tourist status under immigration law, which requires you to leave the country after a maximum of 3 months.

Your establishment therefore requires an administrative authorization that will allow you to stay in Andorra beyond this limit of 3 months per year.

Immigration law sets out a number of procedures for obtaining such authorization.

Your installation project must be based on a type of administrative residency authorization that will depend on both your profile and your project.

This choice is essential to meet your obligations and prevent your residency permit from being terminated.

Engage can advise you on these formalities.

Step 4 - Studying tax residency criteria under Andorran law

Your life project andexpatriation to Andorra will be a tax optimization solution, provided you meet at least the requirements set out in Andorran domestic law to be considered a tax resident in Andorra.

In concrete terms, these conditions are defined very simply by the law governing personal income tax as follows: 

1. Stay in Andorra for more than 183 days (it should be noted that sporadic absences are of course permitted and are not counted in the calculation of the number of days of residence in the year).

2. Have the center of economic interests located in Andorra (majority Andorran income + transferred assets).

Tip: If you meet just one of these two conditions, you will be considered a tax resident in Andorra under Andorran domestic law.

Another tip: By definition, a candidate for expatriation to Andorra does not have his or her "center of economic interest" there. There are, however, tax optimization strategies - notably through the creation of an Andorran holding company - that enable you to transfer your assets and income to Andorra and meet this condition.

Engage is your partner for studying your situation and defining the best strategy.

Step 5 - Anticipating the double taxation agreement

Once you have validated that you meet one of the two conditions laid down in national law for eligibility as an Andorran tax resident, you need to take the necessary steps to ensure that the candidate, and therefore you, lose your original tax residence.

There are two possibilities: 

1. There is a double taxation treaty between your current country of residence and Andorra, which is the case for France, for example. In this case, the tax residency dispute is dealt with under the treaty.
   
   
2. If there is no tax treaty, the loss of your original tax residence must be organized in accordance with the domestic law of your current place of residence.

Andorra has signed double taxation agreements with a number of countries (including France, Spain, Luxembourg, Belgium...) drafted in accordance with OECD standards.

These treaties provide criteria for arbitrating tax residency disputes.

These criteria are, in order of application: 

1. Permanent home
2. Center of vital interests
3. Usual place of residence
4. Nationality (ultimate criterion)

Tip: The analysis of the application of the criteria for arbitration of a tax residence dispute should be carried out by a tax advisor who is not only competent in your home jurisdiction, but also an expert in international tax matters (and more particularly with experience of Andorran specificities), in order to avoid the risk of requalification by the tax authorities of your home country.

Don't hesitate to ask Engage to put you in touch with its network of tax specialists.

Step 6 - Set up an Andorran company to structure your assets

Tax optimization strategies in Andorra most often involve structuring your assets through the incorporation of one or more Andorran companies.

To do this, you will need : 

1. First of all, set up an Andorran company with a corporate purpose that will enable you to carry out the activity you want and benefit from the favorable tax regimes provided for under Andorran law.
2. Then transfer all or part of your personal assets to the new Andorran company, after analyzing the tax implications in your home country.
3. Finally, take the necessary steps in the jurisdiction of departure and in Andorra to benefit from the tax optimization resulting from the asset structure envisaged. 

Objective: transform your company into a tool for optimizing and safeguarding your assets.

Engage is your partner for setting up your company in Andorra.

Step 7 - Transferring your tax residence legally

As well as securing your assets, you need to take all the necessary steps to fulfill your obligations regarding your change of tax residence.

This implies :

1. About your departure :
   
   

1. Take steps to ensure that you no longer have a home in your current country of residence, or - failing that - implement a strategy to ensure that your center of vital interests is no longer located there.
2. Complete all the administrative formalities to notify your change of residence.
3. Organize the transfer of all or part of your assets outside your home jurisdiction.
   
   

2. About your arrival :
    
   
   1. Secure your establishment in Andorra by legally consolidating the rental or purchase of your home.
   2. Complete the formalities and obligations concerning your administrative residence permit.
   3. Obtain residence permits for your relatives through family reunification.
   4. Implement your strategy to qualify as an Andorran tax resident.
   5. Complete your tax returns in your home country and in Andorra in line with your new tax resident status.

Objective: secure your change of tax status with regard to your country of origin.

Engage is your partner for transferring your tax residence to Andorra.

Step 8 - Managing optimization over time

If you've reached this stage, you can relax and start enjoying your new life.

Nevertheless, you should continue to seek advice on fulfilling your tax and administrative obligations as a tax resident in Andorra.

This advice will also enable you to adapt your situation to any legislative or regulatory changes.

Last but not least, assistance in your future endeavors will enable you to continue to benefit from the best tax optimization strategies.

‍It's at this point that you can consider new projects to optimize and secure the transmission of your wealth to your loved ones during your lifetime or on account of death.

Conclusion 

Act methodically: analyze your current tax situation and identify the optimization levers Andorra offers (tax residence, holding, dividends, transfer, etc.).

Structure before you move: prior wealth planning is essential if you are to take advantage of Andorra's tax benefits while complying with international tax treaties.

Surround yourself with the right experts: the success of your strategy depends on a dual skill set - Andorran law and international taxation. Avoid "general" or poorly researched approaches.

Look beyond taxation: political stability, a natural environment, security and a healthy lifestyle are also decisive factors in this new phase. We look forward to working with you to make your project a success.

Contact ENGAGE for a confidential asset diagnostic .

Click here to book a strategic meeting with a Franco-Andorran tax consultant.

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