Andorra Economy Facts
Andorra has a small but thriving economy. Tourism is the country’s most important industry, and sales of duty-free goods are also a major source of income. In recent years Andorra has tightened its tax legislation so that it is no longer considered a tax haven.
Agriculture was the economic base until the mid-20th century. Subsequently, trade in cheap, duty-free consumer goods grew strongly. Together with good conditions for winter sports, the duty-free trade meant that tourism was soon to develop into the country’s most important industry.
- Countryaah.com: Major imports by Andorra, covering a full list of top products imported by the country and trade value for each product category.
Andorra also became known as an international banking and financial center. The strict banking secrecy and the absence of income and corporate taxes made the country a tax haven for well-off people. In recent years, Andorra’s economy has become less protectionist. Since November 2008, non-Andorran citizens have been allowed to own companies in the country without the reservations that existed previously. Before the law was changed, foreigners had to own only one-third of a company, and in order to own 100 percent of the shares in a company, they had to have lived in the country for at least 20 years. This is one of several economic reforms that the government has pushed to attract foreign capital and wash away the country’s stamp as a tax haven.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including AND which represents the country of Andorra. Check findjobdescriptions to learn more about Andorra.
Stricter tax rules
Andorra was in 2008 one of three countries that remained on the economic cooperation organization OECD’s black list of tax havens who did not want to cooperate for increased transparency in the financial sector. Andorra was removed from the list in May 2009 when the country had begun reforming its tax legislation. New company rules were introduced, where, for example, it became mandatory for companies to make public annual reports and to hire auditors.
As part of the transparency, Andorra has also had to accept the EU savings tax directive introduced in 2005. Since 2011, 35 percent has been deducted when EU citizens withdraw savings from Andorran banks. 75 percent of the tax goes to the country where the bank customer is a citizen.
The revenue for the country’s budget comes largely from import fees, excise taxes on petrol and stamps, and bank fees, among other things. In 2011, a 10 percent income tax was introduced for non-Andorran companies and private individuals operating in the country. Previously, Andorran citizens paid no income tax, but from January 2015 they also pay a so-called flat tax of 10 percent on income and capital gains. In 2013, a VAT of 4.5 percent was also introduced.
A special tax authority was also formed at the end of the 2010s to ensure that the tax collection in the country becomes more efficient so that the income can be used in the treasury.
Disputed banking system
One problem for Andorra is that the country is so strongly affected by the economic development of neighboring countries, as the crisis in Spain from 2008. For a few years Andorra’s international credit rating was written down. However, an upturn in the economy could be noticed from 2014.
At the same time, the stability of the banking system was questioned when US authorities in March 2015 accused one of the country’s largest banks, Banca Privada d’Andorra (BPA), of having laundered money for foreign, mainly Russian, criminals; three bank executives were dismissed and the highest bank director arrested. This was despite the fact that Andorra in 2011 committed itself to applying EU law on financial supervision to prevent fraud and money laundering as part of the introduction of the euro as the official currency (see Foreign Policy and Defense).
Andorra had previously had no currency of its own. The euro has been used since 2002, and before that there were both the French franc and the Spanish peseta. Since then, the country has used the Spanish and French euro coins, but in 2015 the Principality began to mark its own, Andorran euro coins.
FACTS – FINANCE
GDP per person
US $ 42,030 (2018)
US $ 3,237 million (2018)
1.6 percent (2018)
Agriculture’s share of GDP
0.5 percent (2017)
Manufacturing industry’s share of GDP
3.1 percent (2017)
The service sector’s share of GDP
79.3 percent (2017)