Andorra Expat Pensions

I. Principality

Andorra is an independent parliamentary European Co-Principality situated among the Pyrenees Mountains near France and Spain. With which countries it has close ties.

Andorra is the sixth-smallest state in Europe with an area of 468 square km’s and a population of 80.000. The capital is Andorra la Vella.

II. EU

Andorra is not a EU Member as the EU was not designed for small states. In 1989 the Principality signed an agreement with the European Economic Community to regularize trade relations.

III. Currency

Even though Andorra is not a EU member, the euro has been its primary currency as of 2002. In 2011 Andorra concluded a monetary agreement with the EU that made the euro its official currency even though Andorran cannot issue its own euro banknotes.

IV. Language

Andorra has a strong affinity with the region of Catalonia in northern Spain. Andorra’s official language is Catalan but Spanish and French are also spoken.

V. Tax System

(Only) In 2013 it was announced that Andorra intended to legislate for the introduction of an Income Tax as the EU was against the existence of tax havens among EU members. The EU welcomed the move as part of a process of Andorra bringing its taxation in line with normal standards.

There still is no sales/wealth/capital gains/dividend/inheritance tax. The corporate tax rate is 10% but the effective rate can be reduced to 0% through offsets/deductions.

VI. Cost of living

The cost of living in Andorra is comparable to Spanish cities like Barcelona and Madrid. Andorra's cost of living tends to be 30% lower than in the USA and what you'd expect in major world cities.

I. Three Ways

Due to the tax benefits, many people would like to retire in Andorra. 

From an immigration law perspective, this is possible in three ways:

• 1) To be united with immediate family;
• 2) Through Passive Residence.
• 3) There are bilateral agreements with EU Members like Spain, France, Portugal which allow to receive the pension and to retire in Andorra.

II. Requirements ‘Passive Residency’

As not everyone has a direct family member in Andorra, the usual way to access Andorra as a pensioner is through “Passive Residence”. Which allows residing in Andorra without working or even generating income in Andorra. This type of residence. does not even require contributions to the Andorran Social Security Fund (CASS).

Most relevant requirements for the Passive Residency:

• Non-Andorran retirees who decide to reside in Andorra have to invest at least € 400,000 in Andorra through purchase of real estate, establishment of a company or in a personal account in an Andorran bank.
• To deposit € 50.000 at the Andorran Financial Authority.
• To have private health coverage at entry.
• Not to have a criminal record.
• To have a valid passport.
• Confirm marital status at the corresponding office.
• Completion of a medical examination at the Immigration Medical Service, once in Andorra.
• Demonstrating an income of more than 300% of the minimum wage in Andorra.
• Residency in Andorra for at least 90 days during the year.
• Other certificates or documents that are requested in relation to the pension or medical insurance.
• A document for the “Declaration of work activity abroad” must be filled out and the corresponding process carried out through CASS.

I. CASS

CASS (Caixa Andorrana de la Seguretat Social) is the Social Security Organization of Andorra. It is empowered to apply the rules of international treaties relating to social security and may create the commissions deemed necessary for the performance of functions.

CASS has two sections:

• The General Section: Covers reimbursement benefits, temporary disability, maternity, paternity, risk during pregnancy, disability, death capital and orphan’s pensions.
• The Retirement Section: Covers the retirement pension and temporary and life widow’s and widower’s pensions.

II. Social Security Premium

22%

Andorra requires that all active persons need to pay social security contributions amounting to 22% of their gross salary.

Employer/Employee

Thus CASS collects 22% of the gross monthly salary from employees. Which amount is divided between the employee/employer:

• Employees must contribute 6,5% of their gross monthly salary to the CASS coffers: 3% to the general branch and 3,5% to the retirement branch.
• The company must contribute 15,5% of the gross wages (7% for the general branch and 8,5% for the retirement branch).

The company is responsible for paying the amounts directly to CASS each month.

Self-Employed

Self-employed workers are also subject to the social security system. They have their own system for paying the premium.

To achieve the initial purpose of the contribution being 22% of the gross wages, the minimum contribution base for a self-employed person is established at € 2.041,35  corresponding to the average wages as established by law. On that amount, this percentage is applied. Which results in a contribution of rounded € 460,- even though this contribution base changes every year.

Of this total amount, 10% is for the general branch and 12% for the self-employed worker’s retirement. Self-employed workers who meet certain requirements specified by CASS may benefit from reductions and pay less on a monthly bases.

Passive Residency

People who have entered Andorra on this status are exempted from paying any Social Security Premium and exempted from the related gains.

The main tax advantages for retirees in Andorra are:

• The non-requirement of wealth tax.
• The non-existence of inheritance and gift tax.
• The low taxation of the income that you can obtain from your assets (max 10% rate and in some cases total exemption ) and on the income received.

Regarding the taxation received from another country while living in Andorra, that will often be determined by international double tax treaties.

To be entitled to a pension the minimum or fixed contributions must have been paid for at least during 15 years.

Pension entitlements must be applied for in the months before a pension and there after twice a year you must continue to sign entitlement forms.

The pension initially must be applied for in person in Andorra but subsequently can be paid to anywhere without needing the pensioner to be here in Andorra in person.

There is also a scheme where you can be paid a Lump Sum in lieu of a monthly pension together with the inflationary increases during the contribution period. This is a one off payment to you and cannot be partial. It is useful if you have contributed more than 5 years (minimum) and less than 15 years pension (as the required minimum to receive the monthly pension).