How to become a digital nomad in Andorra in 2023

How to become a digital nomad in Andorra in 2023

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Introduction

If you’re looking for a new career, you might want to consider becoming a digital nomad. It’s an exciting way to travel the world and make money at the same time.

Andorra is a small country in the Pyrenees mountains of Spain. It’s known for its beautiful mountainside views and pristine natural environments, but it also offers some of the best the digital nomad lifestyle can offer.

The country is currently in the process of implementing a digital nomad visa to attract remote workers that make their income over the internet.

The effort, as announced in 2021, was aimed at attracting and retaining talent that will spur Andorra’s digital economy and help innovation in the digital space.

In this article, we’ll explain how you can live as a digital nomad in Andorra.

Why should you become a digital nomad in Andorra?

Andorra, officially named the Principality of Andorra, is a small country nestled in the Pyrenees, bordered by Spain and France.

It’s one of Europe’s least-populated countries with a population of only around 79,000 people in 2021, making it the sixth smallest state in Europe with an area of 468 square kilometers or 181 square miles.

Andorra is considered one of Europe’s most peaceful places to live—for very obvious reasons. The mountainous terrain makes it difficult for anyone to enter without alerting the established militaries from either Spain or France. Andorra also has some of the lowest crime rates in the world.

One of the reasons why you should consider becoming a digital nomad in Andorra is the taxation system.

While Andorra is no longer considered a tax haven as it was in the past, the country still has much lower taxes than the many European nations that surround it. In fact, it has some of the lowest tax rates in the world.

How will I be taxed as a digital nomad in Andorra?

Keep in mind that this is not formal tax advice. When dealing with taxes, it is always best to consult a tax lawyer or speak with the relevant government authorities themselves.

The Andorran personal income tax is one of the lowest in Europe, with a maximum rate of 10%. In addition, there is a € 24,000 exempt minimum and a 50% rebate for rents between € 24,000 and € 40,000 when applied to earned income.

The Principality does not anticipate raising taxes in 2023 since doing so would reduce the region’s investment appeal. In fact, they may preserve the same tariffs in an association agreement with the EU (perhaps except some special ones such as tobacco). The goal is to maintain low taxes to draw money from overseas and prevent weakening the Andorran economic model while also bringing positions closer to the European Union.

Not only that, with discounts for startup companies, unique taxing regimes, and exclusions to prevent double taxation, Andorra’s general corporation tax rate of 10% becomes even more alluring.

This makes it easier for startups and other businesses with high growth potentials because they can easily afford paying lower taxes than their counterparts elsewhere across Europe or even around the world!

Finally, the Andorran indirect tax, known as IGI, is notable for being straightforward and simple for bidders to pay. The standard rate is 4.5%, however there are other rates of 0%, 1%, 2.5%, and 9.5%.

Becoming a digital nomad in Andorra then means living in one of the richest areas in Europe with minimal taxes. More details on these taxes are discussed below.

What is the General Indirect Tax (IGI) or VAT in Andorra?

The primary indirect tax in Andorra is the Impost General Indirecte (IGI), which is equal to the VAT (Value Added Tax) levied by EU member states. Similar to its European equivalent, the IGI comes in a variety of forms based on the goods or services that are taxed.

The average tax rate is 4.5 percent. equivalent to 23% in Ireland, 21% in Germany, 20% in France, and 21% in Spain.

Certain medical and educational services, housing rentals, stamps, and investment gold all have super-reduced rates of 0%.

Food intended for human consumption, water used for irrigation and drinking as well as books, periodicals, and newspapers all fall within the 1% reduction category.

The 2.5% special rate is applicable to transportation (excluding cable), libraries, and archives, and then to art and cultural institutions such museums, historical sites, monuments, theaters, music venues, and collections of works of art or antiquities, etc.

The 9.5% tax rate rise solely applies to banks and financial services.

What is the income tax rate for digital nomads in Andorra?

While there are no set laws in place yet for digital nomads, you would be happy to know that the personal income tax in Andorra is among the lowest in all of Europe. Similar to neighboring nations, it is a tax made up of many portions that are levied on the tax base.

To simplify, from 0 to €24,000 of the annual personal income is taxed at 0%; going higher from €24.000 to €40.000 the rate is 5%; and finally, any amount over € 40,000 receives the general 10% rate.

In comparison, income tax rates in neighboring Spain and France are 45% and 40% respectively at maximum.

Another intriguing feature is that any dividends received from Andorran companies are taxed in Andorra at a rate of 0%, preventing double taxation. Which brings us to the main draw of becoming a digital nomad in Andorra.

What is the corporate tax rate for digital nomads in Andorra?

Andorra’s move to offer digital nomad visas to foreign workers is aimed at attracting foreign talent, particularly those in the digital space, into the country.

As such, digital nomads in Andorra who can use their talents to set up technology start-ups and digital companies are the government’s main targets.

These companies can enjoy the IS or impost of societats, which has a set universal rate of 10%, as the equivalent of corporate taxes in Andorra.

What this basically means is that any taxpayer receives a 50% settlement fee reduction during the first year of business.

For those who are labeled as “new entrepreneurs of a new business or professional activity” and who have income less than 100,000 euros: The tax rate subsequently that applies during the first three years of activity is 5% applied to the portion of the tax base that ranged from 0 to 50,000 euros; and 10% on the basis of taxation remaining.

What should I know about Andorra’s digital nomad visa?

The new digital nomad law, according to Andorran government officials, will make investment possibilities, innovation, sustainability, and e-commerce the cornerstones of Andorra’s future.

The government is welcoming new forms of investors, from YouTubers, social media influencers, and other new professions, and will provide them with a legal framework thanks to the legislation.

To note, there are already a not insignificant number of digital nomads in the sector already that have claimed their tax residency in Andorra in order to avoid paying taxes in Spain or France.

The most recent framework should control issues like e-residency, the emergence of virtual financial institutions, artificial intelligence, etc. One of the pillars of the plan the Andorran government is developing to encourage innovation and diversify the economy.

The plan also calls for the development of a technology park and other measures to control the market and offer assurances to draw in investment in the digital sector.

The Minister of Presidency, Economy, and Enterprise of Andorra has explained in reports that drafts that have already been provided provide legal clarity to investors, such as the one that controls virtual assets, blockchain technology, or e-sports, with the same goal of luring foreign investment.

If you’re planning on becoming a digital nomad in Andorra, it is best to wait until these laws are in place for you to have an easier transition. You can also apply for any other residence permits in the meantime as you get accustomed to Andorra’s laws and customs.

The active residency programs in Andorra are designed for anyone who want to live and work there. Active citizens, as opposed to passive inhabitants, are supposed to live and work primarily in Andorra and take part in local activities.

There is also the option of becoming a passive resident. While active residents cannot leave the nation for less than 90 days, visa holders with passive residency can. For all intents and purposes, active residents must make Andorra their “principal place of abode”.

There are a few legal conditions you must meet in order to begin working in Andorra as a foreign employee.

Obtaining a work permit is the first and possibly most crucial criteria you must meet. You also must submit an application to the official government immigration office and the supporting documentation, such as:

• original and photocopy of your valid passport
• apostilled certificate of criminal records (police report) of your country of origin, within three months since being apostilled.
• document showing proof of accommodation
• marriage certificate
• curriculum vitae

Keep in mind that Catalan is Andorra’s official language and that it is required that all documentation and legal applications be submitted in Catalan.

What should I know before working as a digital nomad in Andorra?

Digital nomads can live very comfortably while working remotely from this tiny European enclave.

The main appeal of becoming a digital nomad is making the most of the opportunity to live and work abroad, and Andorra is one of the best places to do so.

With its small population, high quality of life, and location in Europe’s cultural triangle between France and Spain, this little country has become a popular destination for digital nomads who want to escape their typical humdrum of modern life.

Even if you’re just working as a digital nomad in Andorra temporarily, you’ll get to enjoy all the benefits of living there, such as a low cost of living, a first-rate healthcare system, a highly safe residential areas, beautiful landscape, and more.

Of course, it also comes with the issue of obtaining a rental property which has been difficult in recent years.

If you can figure out a place of residence there, you must also keep track of the many labor laws in place to protect Andorran workers.

Andorra has very strict labor laws that are outlined in the Labour Relations Code. These include stipulations such as the requirement that employees must receive at least one full day off each week in addition to at least 12 hours off each day.

The typical workweek in Andorra is legally standardized to be 40 hours long. A person is only permitted to labor beyond this point if they are compensated for their extra time. No employee is permitted to put in more than 12 hours in a single day.

If you are working for an Andorran company, you are entitled to a 30-minute break if your workday is six hours or longer.

Any change in the schedule or working hours requires between 8- and 15-days’ notice, with the exception that executives and managers could be expected to adapt more readily to the needs of their organization.

There is also a daily limit of two hours of overtime, a weekly cap of 15 hours, a monthly cap of 50 hours, and a yearly cap of 426 hours.

For a specific week, overtime pay is paid as follows: 25% more for the first four hours, 50% more for the next four, and 75% more after the ninth hour.

If you want to set up a business as a digital nomad in Andorra, it is best you consult with experts in the field or a personal financial planner before starting your operations to fully implement the requirements set by the government there.

Conclusion

To be a digital nomad is to be an entrepreneur who chooses to be your own boss and operate under no one’s thumb, away from the constraints of 9-5 jobs or office walls.

This means that you don’t have to worry about commuting, finding an apartment in a new city or town, paying rent or finding roommates—you can just pack up your laptop and go!

Digital nomads have many options when it comes to where they want their business conducted: coffee shops, libraries, coworking spaces, hotels, beaches, parks and so on. The possibilities are endless.

And with the relatively low cost of living, low taxes, excellent healthcare benefits, safety and quality of life, becoming a digital nomad in Andorra is a great option.

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Adam is an internationally recognised author on financial matters, with over 668.8 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.