France Could Tax Nationals in Andorra via Dormant Treaty Clause

A clause in the double taxation agreement between Andorra and France could allow the French state to tax certain French nationals residing fiscally in the Principat, even though the provision remains inactive at present.

The warning comes from French legal portal Village de la Justice, where expert François-Laurent Paoli examines overlooked aspects of the bilateral treaty signed in 2013. The agreement includes a specific provision enabling France, under certain conditions, to impose taxes on its nationals despite their residence in Andorra. Although not currently enforced, the clause forms part of the ratified text and could be activated without renegotiating the deal.

Paoli notes that France maintains an expansive view of its tax links to nationals, unlike the general citizenship-based taxation model used by the United States but distinct from most European countries. The clause targets income such as assets or certain capital gains for French citizens based in Andorra. Activation would require only a political or administrative decision in France, rather than treaty amendments.

The lawyer describes the risk as structural rather than immediate. It challenges the assumption among residents that taxation follows the principle of residence, applying solely in Andorra. This could unsettle fiscal planning for those who relocated under that expectation.

The analysis arrives amid rising European pressure on tax bases and heightened scrutiny of residency shifts with fiscal impacts. While the clause affects French nationals directly, it also raises questions about the perceived stability of Andorra's tax framework. In international law, Paoli emphasises, a signed and ratified provision can be implemented without major reforms, regardless of its dormant status.

Authorities have provided no comment on potential activation, leaving the measure's future application unclear.