Andorra or Spain: comparing taxation, residency and activity

The geographical closeness between Andorra and Spain makes travel, business dealings, and cross-border projects easier. It doesn't, however, make the tax rules interchangeable.

Andorra applies a relatively uniform national regime. In Spain, personal taxation can vary depending on the autonomous community, particularly for income tax, wealth tax, and inheritance.

For people retaining significant ties to Catalonia or another Spanish region, the move needs to be especially well documented. To review the tax framework applicable in Andorra, our dedicated guide covers each tax in detail.

In 2026, Spanish savings income is subject to a scale ranging from 19% to 30%. The standard corporate tax rate is 25%. Specific rates apply, in particular, to microenterprises, small businesses, and newly formed companies.

The standard Spanish VAT rate is 21%. For an investor with no local activity, see the investment required for passive residency.

How does Spain determine tax residency?

An individual may be considered a Spanish tax resident when they spend more than 183 days in Spain during the calendar year, or when the main centre of their economic activities or interests is located there.

The residency of a non-separated spouse and minor children can also create a presumption of residency, unless proven otherwise.

It therefore isn't enough to simply sleep in Andorra on a regular basis if:

• the family mainly lives in Spain;
• the company is managed from Barcelona or another Spanish city;
• services are actually carried out in Spain;
• most of the income comes from Spanish activities;
• the person retains genuinely available accommodation and their centre of life in Spain.

Why does the autonomous community matter?

Spanish income tax has both a national and a regional component.

Rules relating to wealth, gifts, and inheritance can also differ by region. A comparison against Catalonia therefore won't necessarily give the same result as one against Madrid, Andalusia, the Balearic Islands, or the Valencian Community.

Spanish wealth tax remains applicable, with details reflecting both national and regional rules. The temporary solidarity tax on large fortunes applies as an additional levy for certain net wealth above three million euros.

An Andorran company can work with clients based in Spain.

It's necessary, however, to look at:

• where services are actually carried out;
• the director's regular travel;
• whether there's an office or employees in Spain;
• reliance on one main Spanish client;
• VAT or IGI rules;
• whether a permanent establishment might exist;
• withholding taxes provided for under the treaty.

Being close to the border shouldn't lead to the company effectively being run from Spain in practice.

An Andorran resident can keep property in Spain. These assets nonetheless remain subject to Spanish rules on rental income, capital gains, certain filing obligations, and, depending on the case, wealth tax.

Inheritance tax also needs to be considered based on where the assets are located, the residency of those involved, the family relationship, and the rules of the relevant autonomous community.

The treaty between Andorra and Spain mainly covers the taxation of income. It shouldn't be read as automatically neutralising all rights relating to gifts or inheritance. The double taxation treaty between the two countries is indeed in force.

Which profiles might each country suit?

Andorra can suit an entrepreneur who genuinely relocates there, runs their business from the Principality, and works with clients spread across several countries.

Spain may remain more suitable for a business needing a large domestic market, sizeable teams, specific sector infrastructure, or a permanent commercial presence in a major city.

The decision therefore needs to factor in taxation, but also the market, hiring, family, accommodation, and operational organisation.

ProGestió examines your residency, activity, ties to Spain, and the make-up of your wealth before any steps are taken. Would you like your cross-border situation reviewed?

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