Andorra launches five mutual-agreement tax procedures over residency disputes

Andorran tax authorities have activated five mutual agreement procedures with other countries to determine where certain residents should pay tax when their residency status is disputed. The mechanism, applicable with states that have a double taxation treaty with Andorra, was regulated in 2023 and allows administrations to negotiate which country has the primary taxing right when a taxpayer could be liable in more than one jurisdiction.

Government sources say such processes have been initiated since 2023 but none has yet been resolved. Officials declined to disclose which countries are involved or to discuss individual cases.

The demand for these procedures stems from a dispute involving a retired banker who claims residency in Andorra. The Catalonia High Court (TSJC) recently ordered him to pay Spanish personal income tax (IRPF) and a penalty imposed by the Spanish tax agency, amounting to just over €100,000. Spanish courts found that the taxpayer’s centre of vital and economic interests is in Spain rather than in Andorra.

Advisers to the 75‑year‑old retiree—who also acquired Andorran nationality and, according to the TSJC ruling, would retain dual nationality, a situation that would violate Andorran law—have expressed concern that the matter is being treated as settled. They note that Spain’s National Court (Audiencia Nacional) could still rule that the man should have been taxed in Andorra or could validate a potential agreement between the two administrations.

According to sources, the case was prompted in part by the taxpayer’s housing arrangements: he rented a flat in Sant Julià with an option to buy in 2017 and completed the purchase in 2018. The taxpayer argues that, for cost reasons and in all other respects, he should be considered resident in Andorra, including for tax purposes.

Spanish tax authorities and the courts above them have concluded that the taxpayer’s activities—pensions, various income streams and real estate holdings, largely concentrated between Pallars and Barcelona—indicate stronger ties to Spain than to Andorra, supporting Spain’s claim to tax him.