Foreign Investment in Andorra After the Approval of the Llei Òmnibus

The newly approved Llei Òmnibus introduces a comprehensive set of transversal measures aimed at regulating foreign real estate investment in Andorra, addressing vacant housing, regulating tourist-use housing, enhancing administrative coordination, and introducing various fiscal, immigration, and urban lease reforms. Its main goal: to ensure access to dignified, affordable housing while promoting sustainable demographic, tourism, and territorial growth.

Key Changes to the Legal Framework

The Llei Òmnibus repeals and fully replaces the previous Foreign Investment Law (Law 10/2012) and amends Law 3/2024 concerning the tax on foreign real estate investment. The new framework introduces significant structural and substantive changes.

Definition and Scope of the Foreign Investment in Andorra After the Approval of the Llei Òmnibus

Foreign investment now includes:

• Non-resident individuals (except Andorran nationals)
• Resident individuals who are not Andorran nationals and have not resided in Andorra for at least 3 of the past 10 years (previously required uninterrupted 3-year residence)
• Foreign legal entities and public entities
• Andorran legal entities with direct or indirect foreign ownership of 50% or more

Entities with foreign ownership between 5% and 50%, or investments financed by foreign investors, are no longer classified as foreign investments.

Foreign Investment Categories in Andorra

The law now recognizes only two types of foreign investments:

1. Direct investments
2. Real estate investments

The categories of portfolio investments and other forms are eliminated. Investments through entities holding more than 50% of assets in Andorran real estate are explicitly included.

Requirements for Direct Investment

• Prior authorization is needed for direct or indirect foreign ownership exceeding 10%, or when collective foreign ownership reaches 25%.
• Andorran companies receiving foreign investment must initiate economic activity within 18 months, comply with commercial registration, file annual accounts, and meet regulatory thresholds for business activity.
• Foreign direct investment alone does not grant residency; it is just one condition among others within a 6-month immigration application window.

Real Estate Investment Limits in Andorra

New legal limits apply to foreign individuals, who may only acquire:

• One plot with a single-family home
• Up to two housing units (apartments/studios) and associated spaces (max. 3 parking spots and 3 storage rooms)
• Up to six parking spaces

These limits apply only to acquisitions made after the law’s entry into force. Properties held prior are not counted. Properties for long-term affordable rental (10+ years) are exempt.

After 10 years, investors may reapply for authorization under the same conditions.

Special Cases and Exceptions

Foreign companies or Andorran companies with over 50% foreign ownership can invest in real estate if:

• The property is for a self-employed commercial activity
• Ownership is by a single individual or related individuals (family, partners, etc.)

These entities may invest without being subject to the commercial-use requirement, provided the ownership structure meets the criteria.

Prohibited Investments

Foreign real estate investment is prohibited for:

• Property development for resale
• Vacation or tourist housing
• Lease-to-own schemes or rentals involving related parties, deemed fraudulent

Exceptions apply if developments are 100% for long-term rentals and at least 50% are at affordable prices, or located in parishes with updated urban plans.

Monitoring and Sanctions

• Authorized investments will be monitored biannually or as requested by authorities.
• Non-compliant or fraudulent investments are void.
• New sanctions apply for non-disclosure, false reporting, or registry failures.

Real Estate Investment Tax (IEI)

• The taxable definition now aligns with the new law.
• Exemptions include inheritance and matrimonial regime liquidations.
• Tax rates:
  • 3% for first unit (house or apartment + annexes)
  • 5% for second unit (same criteria)
  • 10% for any additional properties or when exceeding legal limits

To qualify for a 90% tax reduction, the property must be rented long-term (10+ years) at affordable prices.

Transitional Regime

Three situations:

1. New investments post-law fall under the new regime.
2. Pre-agreed transactions (with proof of deposit and contract) may follow old rules if formalized within 6 months.
3. Previously authorized investments remain governed by the old law, even if executed later.

Conclusion

The Llei Òmnibus marks a shift from a liberalized to a more regulated foreign investment regime, particularly in real estate. It establishes quantitative limits, introduces strict conditions, adjusts tax rates, and imposes monitoring and penalties – all aimed at achieving sustainable growth and preserving housing access for residents.

If you would like to obtain further assistant about Llei Òmnibus and foreign investment in Andorra, you can contact us using the contact form.