I. Why Leave Monaco? The Real Factors Behind the Decision

Monaco is a sovereign principality covering 2 square kilometers, whose tax appeal rests on a single pillar: the absence of income tax for non-French residents. This pillar is real—but it masks several structural constraints that are prompting a growing number of residents to consider relocating to Andorra.

The French Convention: the 1963 Agreement

Any French national who left French territory after October 13, 1957, remains subject to French income tax, even if legally residing in Monaco. The 1963 Franco-Monegasque treaty establishes this unequivocally. For this group—which represents a significant portion of the Principality’s residents—Monaco offers no tax advantages on income. The only potential benefit lies in inheritance tax, which can still be substantial depending on the composition of the estate.

Andorra, which has been covered by a double taxation treaty with France since 2022, offers a clear advantage: Andorran tax residency is recognized by the French tax authorities, and income is taxed in Andorra at a rate capped at 10%. It is the only destination in Europe that combines this level of taxation with full legal certainty for French citizens.

The cost of moving to and living in Monaco

Monaco residency requires an actual presence of 183 days per year in a territory with the world’s most expensive real estate market—ranging from €40,000 to €100,000 per square meter depending on the area. Purchasing a property in Monaco requires the investor to tie up a considerable amount of capital in a market that is liquid but concentrated within an area of just 2 km². The rent for a home that establishes credible residency typically ranges from €8,000 to €15,000 per month for a luxury family apartment.

In Andorra, passive residency requires a minimum investment of €400,000 in the Housing Fund, or €1,000,000 in other Andorran assets (real estate, company shares, debt instruments issued by Andorran entities, life insurance products from Andorran entities, non-interest-bearing deposits with the AFA)—a threshold that constitutes a genuine investment, not a mere expense. The required presence is 90 days per year, which is half that of Monaco.

Regulatory pressure on active structures

Monaco does not tax resident companies that operate exclusively outside the Principality—but this rule is subject to increasingly strict requirements regarding local economic substance. The French and Spanish tax authorities closely monitor arrangements where a company is domiciled in Monaco while effective management is exercised from France or Spain. Andorra offers a 10% corporate income tax rate without comparable substance requirements, with an Andorran SL (Societat Limitada) that can conduct international business in a manner compliant with OECD standards.

II. Tax Comparison: Monaco vs. Andorra — 2026 Data

Data updated in May 2026. Each financial situation requires a personalized analysis—rates and terms are determined on a case-by-case basis depending on nationality, income structure, and asset composition.

The specific case of French nationals

For a French citizen, moving from Monaco to Andorra is not a choice between two favorable tax systems—it is a shift from the French tax system applied in Monaco to Andorra’s reduced-rate tax system. Andorran personal income tax is applied according to a progressive scale: 0% on taxable income up to €24,000, 5% on income from €24,001 to €40,000, and 10% on amounts above that. For an executive or investor earning €300,000 per year, switching to the Andorran income tax system represents a substantial savings compared to the French progressive tax scale, which reaches 45% in its top bracket.

The issue of unrealized capital gains

Any French tax resident who moves from Monaco to Andorra must verify whether the exit tax applies to assets held at the time of the change of residence. The 2022 Franco-Andorran treaty addresses this issue—but the timing of the move and the nature of the assets (corporate securities, fund shares, equity interests) determine the actual tax liability. A preliminary analysis is essential before taking any steps with the Andorran Immigration Service.

III. Obtaining Andorran residency from Monaco: the three available categories

The Andorran Immigration Act, in its consolidated version resulting from Law 9/2012 and its subsequent amendments, distinguishes between several categories of residence permits for non-working residents. Monegasque residents relocating to Andorra generally fall into one of the following three categories.

1. Residence without gainful employment (passive residence)

This is the status best suited to individuals with significant assets: investors, retirees, annuitants, and heads of households who are retiring from their professional careers. It requires:

• A substantial presence in Andorra sufficient to establish one's primary residence there
• Sufficient financial resources, supported by documentation
• Health, disability, and old-age insurance valid in Andorra
• A dwelling (owned or rented) that meets the minimum standards for habitability
• An investment in Andorran assets of at least €1,000,000 (or €400,000 if the investment is made in the Andorran Housing Fund)
• A non-refundable deposit of €50,000 with the Andorran Financial Authority (AFA), plus €12,000 per dependent

The AFA deposit is paid in full to the Andorran government—it is non-refundable, unless the initial authorization is denied. The investment in Andorran assets must be made within six months of the approval decision, which may be extended by an additional six months in cases of force majeure.

2. The residency program for professionals with an international focus

This status is intended for business owners, consultants, and senior executives whose professional activities are primarily conducted outside Andorra (at least 85% of income must be earned abroad). It offers the same tax benefits as passive residency, with identical residency requirements. It is intended for individuals whose business activities continue—such as active business owners or executives of international groups—without establishing the company itself in Andorra.

3. Residence and Work (Self-Employed)

For entrepreneurs who wish to conduct business in Andorra through an Andorran SL. This status requires a stake of more than 34% in the Andorran company, as well as the exercise of a directorship and effective management. It requires a €50,000 deposit with the AFA (non-refundable after approval) and sufficient presence to demonstrate actual management of the entity. This is not a passive residency status—it is a status for active executives.

Conditions applicable to all articles of incorporation

All applications for Andorran residency require: a clean criminal record in the applicant’s country of residence and country of nationality; proof of housing; and registration with the comú (municipality) within three months of the authorization being granted. Municipal registration is mandatory and a prerequisite for maintaining the authorization—failure to register within the specified time frame results in automatic revocation.

IV. Investing in Andorran Assets: Procedures and Key Considerations

The mandatory investment for passive housing (Article 96 of the Consolidated Law 9/2012) can take six different forms. Each has its own specific requirements.

A Monegasque resident who owns real estate in Monaco cannot count this asset as an Andorran investment. The asset must be physically located in Andorra or issued by an entity resident in Andorra. The sale of Monegasque real estate for the purpose of reinvesting in Andorra must be planned well in advance, particularly to manage any capital gains from the sale and the time required by banks to repatriate funds.

Foreign investment in Andorran real estate: the cap under Law 5/2025

Law 5/2025 of March 6, 2025, introduced restrictions on foreign real estate investment in Andorra. A foreign investor may not acquire more than one single-family home, or two apartments/studios with their ancillary spaces (limited to 3 parking spaces and 3 storage units per property), or 6 parking spaces. This limit applies for 10 years from the date of the last acquisition. Real estate development remains prohibited for foreign investors, with limited exceptions (affordable rental housing, parishes that have revised their Land Use Plan). These restrictions shape the acquisition strategy for passive residents who wish to invest through real estate.

V. Wealth Planning: Andorran Limited Liability Company, Holding Company, and Income Streams

Residency in Andorra alone is not enough to optimize a complex financial situation. It provides the legal foundation—but structuring income, dividends, capital gains, and estate planning requires careful consideration.

The Andorran SL as an operational tool

Andorran Societat Limitada (SL) companies are subject to a 10% corporate income tax on profits. They may conduct international business and invoice foreign clients without local substance requirements comparable to those in Dubai’s free zones. Its incorporation requires a minimum capital of €3,000, and its management must be carried out from within Andorra—a condition that reinforces the manager’s actual presence in the territory.

For a Monegasque resident who operated a company in Monaco (with a 0% corporate tax rate on activities outside Monaco), switching to an Andorran SL entails a 10% corporate tax rate—but without the substance requirements and with a bilateral tax treaty that safeguards cash flows. The difference narrows considerably when one factors in the cost of Monaco’s demanding compliance requirements and the risks of reclassification by the French or Spanish tax authorities.

Andorran holding companies: optimizing dividends and succession planning

An Andorran holding company may receive dividends from foreign subsidiaries at a reduced tax rate under the Andorran participation exemption regime. Capital gains on the sale of qualifying equity interests are partially exempt. This structure is suitable for investors who hold equity interests in French, Spanish, or international operating companies—the Andorran holding company allows dividends to be centralized in a jurisdiction with a 10% corporate income tax rate before distribution to the resident.

Passive Income and Andorran Income Tax

Dividends, rent, and investment income received by an Andorran resident are subject to personal income tax (IRPF) according to the general tax rates (0%, 5%, 10%). For a €2,000,000 portfolio generating €80,000 in annual income, Andorran personal income tax amounts to approximately €5,600—compared to €30,000 to €35,000 under a standard French tax regime. The difference is substantial and permanent, with no time limit.

Inheritance: No Inheritance Tax for Direct Descendants

Andorra does not impose any inheritance tax on transfers between parents and children. For an estate worth €5,000,000, this advantage represents savings of between €1,500,000 and €2,500,000 compared to the French system, depending on the composition of the estate and the degree of kinship. For clients whose primary objective is estate transfer, this factor alone justifies structuring their estate through Andorra.

VI. What Andorran residency status are you eligible for based on your profile from Monaco?

Isabelle is a 54-year-old French woman who left Paris in 2017 to settle in Monaco. She owns a French holding company whose operating subsidiaries generate approximately €420,000 in annual dividends, as well as a real estate portfolio in France and Belgium. Her Monegasque residency was legally valid—183 days of documented presence—but her tax attorney had misadvised her regarding the scope of the 1963 treaty. Her French dividends remained fully subject to the French tax regime.

In 2023, she contacted Engage for an initial analysis. The assessment concluded that her Monegasque residency had no tax implications for her, and that her situation was equivalent to that of a French tax resident subject to a 30% flat tax on her dividends—amounting to €126,000 in annual taxes. The chosen strategy includes: obtaining passive residency in Andorra, establishing an Andorran holding company between the French holding company and the subsidiaries, gradually repatriating dividends to the Andorran holding company, and then distributing them to the resident in accordance with Andorran personal income tax (IRPF).

The residency application is submitted in March 2024. Authorization is granted in August 2024. The mandatory investment—€1,000,000 in shares of an Andorran limited liability company (SL) established for this purpose—is made within the regulatory timeframe. For the 2025 tax year, the first full tax year under the Andorran regime, the personal income tax (IRPF) due on dividends received is €37,800, compared to €126,000 under the previous regime.

VII. The 7 Steps to a Successful Relocation from Monaco to Andorra

Tentative Schedule

VIII. Mistakes to Avoid When Moving from Monaco to Andorra

FAQ — Leaving Monaco for Andorra in 2026