On February 1st, the parliament of the Principality approved new legislation that has sparked considerable debate in the country’s political and economic spheres. It’s the Law on the tax on foreign investment in real estate, a measure designed to address the growing phenomenon of foreign investment in the local real estate market.

This law arises in response to concerns about the increasing foreign investment in properties, as well as the need to establish a more balanced urban model. Additionally, it aims to tackle the marked shortage and rising costs of housing that have affected citizens and residents in recent years.

While the positive role of foreign investment in the country’s economic growth since the approval of the 2008 Law is acknowledged, its collateral effects have also become evident, especially in terms of housing costs and scarcity.

The majority parliamentary groups have supported this measure as a necessary step to control foreign investment in the real estate sector. The tax, ranging from 3% to 10% of the real value of the investment, will be applied progressively based on the number of real estate units acquired. It is expected that this measure will not only slow down foreign investment but also generate significant revenue for the state, estimated at five million euros for the year 2024.

One of the highlights of this law is its inclusive scope. It has been envisaged that all residents with less than three years of residency will be obliged to pay the tax, in order to prevent new residents from evading this tax obligation. Furthermore, Andorran companies with a significant participation of foreign investors will also be subject to this tax, as well as foreign companies that are part of the same business group.

This measure has been the result of intense work by the Government and the majority parliamentary groups to ensure its effective implementation. Mechanisms have been established to prevent tax evasion, and provisions have been made to ensure equitable treatment for all taxpayers.

Ultimately, this law not only aims to curb foreign investment in the real estate market but also to serve as a catalyst for investment in housing projects and economic diversification. It represents a concerted effort to address current challenges and lay the groundwork for sustainable and equitable growth in the future.