Real Estate in Andorra ~ The Euro Tax Haven Threat

Media reporting of a new EU savings tax directive has left many people wondering whether European tax havens could soon become obselete. The July directive requires banks throughout Europe, including low and no tax areas such as Gibraltar, Monaco, Malta and Andorra, to disclose bank account owner information to their home country’s tax authority. But Roger Munns, Managing Director of tax haven property specialists Tribune Properties, says that some of the reporting has been less than accurate. ‘The purpose behind this directive is primarily aimed at those who hold illicit funds, such as drug dealers, who will need to look outside of the European banking system to place large cash deposits. The main attraction of Monaco and Andorra is the zero per cent income and inheritance taxes, and this remains intact and there are no plans whatsoever to change this’.

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Monaco and Andorra have long been favoured destinations for the well to do, but with new technology allowing businessmen and women to run their offices from anywhere in the world, operating from low tax bases has seen added interest for Europe’s primary tax havens, doubling property prices in the last ten years. Both Monaco and Andorra are outside the EU, and their signing of the directive voluntarily is often overlooked in the media’s analysis of any effects on the two small countries long term popularity. Property prices have risen steadily over the last decade, often topping ten per cent a year, but this year has seen a slow down of that increase.

Property Price Uncertainty

Both Monaco and Andorra’s property prices have seen a levelling off this year, according to Tribune Properties, but this can be explained by factors other than the new EU directive. Tribune say that in Monaco the passing of Prince Rainier earlier this year cast a shadow over the Principality while in Andorra the local market has slowed as Andorrans struggle to keep up with the price of property fuelled by buyers from around the world seeking residency.

Two other factors have contributed to the slow down in the first half of the year which could be reversed in the second half – the absence of UK buyers awaiting the outcome of their election in May which saw the Labour Government returned for a historic third term with Tony Blair as Prime Minister and possible tax rises in the pipeline, and buyers holding US dollars who were hit by the rise in value of the Euro – which has now peaked following the EU Constitution ‘No’ votes in France and The Netherlands in June.

Both Andorra and Monaco require new residents to live there for six months a year to maintain their residency (but Andorra doesn’t police this once residency is granted).

Andorra property prices start from just over 200,000 Euros for a one bedroom apartment, while Monaco is more expensive with one bedroom apartments from around 600,000 Euros.

Focus on Tourism in Andorra

European tax haven Andorra enjoys the same fiscal benefits as better known Monaco, adding to property demand from those looking for residency in a tax shelter as well as traditional ski chalet buyers who flock to the country between December and April each year., commodo vitae, metus. Sed dapibus urna at felis.

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A popular ski resort, Andorra struggles to meet demand for tourist accomodation during the winter.

When the ski season ends, overseas property owners have little prospect of rental income in the summer months.

But tiny Andorra, nestled between France and Spain in the Pyrenees mountain range and the sixteenth smallest country in the world, is increasingly attracting out of season tourists and property owners are seeing a rise in overall occupancy levels and return on their investment.

Cycling, pony trekking and hillwalking are some of the pursuits attracting tourists and potential property owners heading for the mountains outside of Andorra’s ski season. Andorra’s capital la Vella is full of duty free shops, restaurants, clubs and bars.

Coupled with the mountain scenery and lakes Andorra has seen a rise in the number of out of season tourists in recent years, and the letting season extend from just the winter months to include the spring and summer.

For a country with a population of 77,000 Andorra attracted a surprising nine million tourists last year, and with more visitors in the summer months predictions are that this will rise to ten million this year.

Ryanair and easyJet are two of the low cost carriers flying to Barcelona and Girona airports in Spain from European capitals, the onward journey time to Andorra’s capital la Vella is two and a half hours by coach or car.