Newspaper article International Herald Tribune

Home Buyers Still Turn to Andorra despite Income Tax Change ; Relative to Other Havens, Prices Are Low and the Lifestyle Is Less Flashy

Newspaper article International Herald Tribune

Home Buyers Still Turn to Andorra despite Income Tax Change ; Relative to Other Havens, Prices Are Low and the Lifestyle Is Less Flashy

Article excerpt

Real estate agents feared that new taxes taking effect in 2016 would compound the property slump in the country, but there has been no evidence of such effects.

One of the world's most lenient tax havens, the principality of Andorra, announced in June that it would collect its first income tax in 2016.

It is just one of the changes that the tiny country, on the border of France and Spain, has made over the past two years. But it was one that real estate agents feared would compound the property slump in Andorra since the beginning of the 2008 financial crisis.

Yet there has been little evidence of further trouble because of this tax, said Roger Munns, owner of Tribune Properties, a British agency specializing in sales in Andorra.

"We've sold properties with a combined value of over EUR 2 million" -- about $2.7 million -- "since the confirmation of income tax being introduced," Mr. Munns said. "Which, I think, shows that Andorra is still a serious contender for those wanting to lower their tax bills."

After all, he noted, someone with residency in Andorra earning EUR 100,000 a year would pay EUR 6,800 in taxes.

Andorra's main industry is tourism. The country attracts around 10 million visitors each year to its 468 square kilometers, or 180 square miles. Its lack of income tax has also attracted many wealthy people who are not citizens but who make up more than 50 percent of Andorra's population of 85,000.

Many have chosen Andorra over better-known havens like Monaco because of lower property prices. These start at around EUR 1,000 per square meter, or $124 per square foot, and rise to around EUR 7,0000 per square meter. In Monaco, the average price per square meter is EUR 38,000, a level that is starting to challenge even the wealthiest buyers.

In Andorra's ski resorts of Soldeu, La Massana and Ordino, prices are from around EUR 165,000 for a two-bedroom apartment of 87 square meters, with luxury chalets or apartments of four to five bedrooms ranging from around EUR 1 million to EUR 3.5 million.

Homes in Andorra rarely offer the level of finishing and fixtures that is available to buyers in the super-prime markets of Monte Carlo, Hong Kong or London. Because sales have been at a near standstill since 2008, there has been little new construction, so the market now is mainly resales.

Andorra announced its income tax after pressure from the Organization for Economic Cooperation and Development. The organization, based in Paris, is helping to streamline aspects of global economic policy and had requested greater transparency in Andorra's tax laws.

The new tax will apply to anyone who lives in the principality for at least 183 days in a calendar year. The first EUR 24,000 of income will be tax free, with the next EUR 16,000 taxed at 5 percent. The balance of income exceeding that initial EUR 40,000 will be taxed at 10 percent, which is still less than most West European countries and even some countries in Eastern Europe. …

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