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Andorra
Practical comparison of active and passive residency in Andorra to help you pick the status that fits your profile and goals.
Content reviewed by the legal and tax team of ProGestió Andorra — Last updated:
Choosing between active residency and passive residency in Andorra is not just an administrative matter. This choice shapes your daily life, your tax obligations, your ability to work in the country, and the amount of investment you will need to plan for. A relocating employee, a business director, an investor or a retiree: each profile has different priorities, and the most suitable status is not always the one that seems most obvious at first glance. This article offers a practical framework for identifying the criteria that truly tip the balance, without claiming to replace a personalised assessment.
Active residency is aimed at people who carry out a professional activity in Andorra, whether as an employee of a local company, a director of an Andorran company, or a self-employed worker. It requires an effective presence in the country and genuine involvement in its economic life.
Passive residency, on the other hand, does not allow paid professional activity in Andorra. It is intended for people who wish to establish their tax residency in the Principality without working there: individuals living off investment income, retirees, investors living on capital returns, or people with income generated abroad.
This initial distinction shapes almost everything else: investment requirements, minimum presence in the country, related procedures, and compatibility with a professional project.
Before any other consideration, one simple question settles most cases: will your main income come from an activity carried out in Andorra?
If the answer is yes — setting up a company, holding a salaried position in an Andorran business, or practising a liberal profession locally — active residency is almost automatically the right choice. Passive residency does not allow this type of activity and would not be suitable.
If the answer is no — income comes from investments, property rented out abroad, a retirement pension, or dividends from a company with no operational activity in Andorra — passive residency becomes the logical route, provided the associated conditions are met.
Intermediate situations, particularly for directors who run an active company while also holding significant wealth income, deserve specific analysis, as the choice of status can affect how the entire estate is structured.
For an employee joining a company established in Andorra, or considering being hired there, active residency linked to salaried employment is generally the only relevant status. It requires an employment contract with an Andorran employer and enrolment in the local social security system.
This profile needs to anticipate certain steps: finding accommodation, actually securing the position before the application can be formalised, and the time required to obtain the necessary authorisations. The employee has no real choice between statuses: their professional situation directly determines the applicable regime.
Business directors are often at the heart of this decision. If they actively create and manage an Andorran company — whether an SL or an SA — self-employed active residency is the natural path. It requires investment in the company, genuine involvement in its management, and compliance with the obligations tied to this status.
Some directors, however, wish to separate their operational activity from their personal situation, for example when the company is managed by a third party or when the main activity remains abroad. In this case, passive residency may be considered, provided the income received in Andorra does not stem from a professional activity carried out locally.
This point deserves particular attention: the line between wealth management and professional activity can be thin, especially when structures such as a holding company are involved. A case-by-case analysis is recommended before deciding.
Investors who earn income from their assets — real estate, financial investments, or shareholdings in companies without operational activity in Andorra — generally lean toward passive residency. This status is specifically designed for this type of profile.
Passive residency does, however, impose conditions that should not be underestimated: a minimum investment in Andorra, a minimum physical presence in the country each year, and sometimes a security deposit. These requirements vary depending on the specific sub-category of passive residency and change over time; they must be checked precisely before making any commitment.
Investors who are also considering an economic activity in Andorra — such as setting up an asset-holding company or a holding company with genuine local substance — should reconsider active residency, particularly if this structure becomes their main activity.
For retirees receiving a pension who do not wish to carry out any professional activity in Andorra, passive residency is generally the best fit. It allows them to live in the country without the constraints of managing a local economic activity.
This choice still requires anticipating certain practical aspects: access to the Andorran healthcare system, the arrangements for transferring pension income, and compliance with minimum presence requirements. Retirees considering starting a supplementary activity, even a modest one, in Andorra should reconsider their status before committing.
| Criterion | Active residency | Passive residency |
|---|---|---|
| Professional activity in Andorra | Allowed and generally required | Not allowed |
| Target audience | Employees, directors, self-employed | Investors, rentiers, retirees |
| Financial investment | Varies by status and activity | Minimum investment often required |
| Minimum physical presence | Generally more demanding | Minimum threshold to meet each year |
| Link to an Andorran company | Common, particularly for directors | Possible without an operational role |
| Compatibility with foreign income | Possible as a supplement | Core of the model |
This table provides a general overview. Exact thresholds, investment amounts, and presence requirements evolve over time and must be confirmed when applying.
Residency status, whether active or passive, does not by itself determine the applicable taxation, but it directly influences the nature of the income received and therefore how it is treated. An active resident earning a salary or profits from an Andorran professional activity is taxed under the rules applicable to earned income. A passive resident, whose income comes mainly from their assets, falls under a different framework, particularly regarding the declaration of foreign-source income.
In both cases, Andorran tax residency requires formally breaking, under the applicable conditions, with a previous tax residency, particularly for people coming from France or Spain. This point is critical and must be carefully checked, as tax treaties and double-taxation rules vary depending on the country of origin.
Several recurring situations appear in the files of people planning to move to Andorra. The first mistake is choosing passive residency while actually intending to carry out paid work in the country. This inconsistency can undermine the entire application.
The second mistake concerns directors who underestimate the level of operational involvement required for active residency linked to a company, and who then struggle to demonstrate a genuine presence and effective management.
Finally, some passive residency applicants overlook the minimum presence requirements, which are nonetheless essential to maintaining the status over time. These obligations must be factored in from the planning stage, not discovered afterwards.
The initial choice is not necessarily set in stone forever. Someone settled under passive residency may later wish to set up a company and switch to active resident status. Conversely, a director may, after selling their business, wish to keep their residency under a passive form. These transitions are possible but require specific procedures and should be planned well in advance, particularly when structures such as a holding company or an asset-holding company are already in place.
Given the tax and administrative issues tied to this choice, personalised support helps avoid the most costly missteps. The analysis should take into account your current professional situation, projected income, country of previous tax residency, and medium-term plans, whether these involve setting up a company, structuring your assets, or simply relocating.
Can an active resident also have significant passive income? An active resident may receive additional income from their assets. What matters is the nature of the main declared activity and compliance with the rules specific to the chosen status. Individual analysis is recommended in cases of significant wealth income.
Does passive residency allow you to set up a company in Andorra? It does not allow paid, operational professional activity in the country. Holding shares without an active management role may, depending on the case, remain compatible, but this must be checked precisely before setting up any company.
How much time must you physically spend in Andorra depending on the status chosen? Minimum presence requirements differ between active and passive residency and change over time. It is essential to check the thresholds in force at the time of application rather than relying on general information.
Can an employee choose passive residency instead of active residency? No. Residency status is tied to the actual nature of the activity. An employee working in Andorra falls under active residency, regardless of personal preference.
What happens if the conditions of the chosen status are no longer met? Failing to meet the conditions attached to the status, whether regarding minimum presence, investment, or the nature of income, can jeopardise the continuation of residency. Regular monitoring of your situation is advisable to avoid this type of difficulty.
Does the choice of status affect the taxation of companies held abroad? Yes, indirectly. The nature of the residency status influences how income linked to these structures must be declared and treated in Andorra. A joint review of your personal situation and any structures you hold is recommended.
Can you change status after a few years of residency in Andorra? Changing status is possible depending on how your professional or wealth situation evolves, but it requires specific procedures and should not be improvised.
To find out more: Active residency in Andorra, Passive residency in Andorra, Becoming a tax resident in Andorra, Residency in Andorra, Support by profile.
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