New Regulation on Foreign Investment in Andorra: Balancing Growth and Access to Housing

On March 26, the Law 5/2025 of March 6, also known as the Omnibus Law, was officially published in the Official Bulletin of the Principality of Andorra (BOPA). This regulation addresses one of the most urgent social and economic challenges in the country: the difficulty in accessing housing amidst a backdrop of urban expansion and sustained foreign investment.

The new law is part of the Andorran government's broader strategy to ensure a more sustainable development model and to reinforce the right to decent housing. Below is a summary of the key changes introduced and how they may affect investors, residents, and professionals.

A New Framework for Foreign Real Estate Investment

One of the most significant measures of the Omnibus Law is the restructuring of the foreign investment regime. The aim is clear: to curb speculative property acquisitions and ensure that investments bring added value to Andorran society.

Key changes:

• Redefinition of the concept of foreign investor: stricter criteria are now applied to both individuals and legal entities.
• Restrictions on property purchases: quantitative limits are imposed on the number of properties foreign investors can acquire, including residential units, parking spaces, and commercial areas.
• Clear prohibitions: real estate development funded by foreign capital is banned, except for projects that offer affordable rental housing for a minimum of 10 years.
• New specific taxation: a progressive tax regime is introduced, with rates up to 10% depending on the type and volume of the investment.
• Strict penalties: fines and even investment nullification are foreseen in cases of fraud or legal non-compliance.

Tax and Housing Measures to Support Residents

To improve access to housing, several tax incentives have been implemented to deter short-term speculation and encourage real residential use through rental or ownership.

• Tax benefits on personal and corporate income for renting primary residences at affordable prices.
• Deductions for first-time homebuyers, up to €5,000 per year.
• New deduction for investments in properties intended for affordable rental housing.

The criteria to qualify for some tax exemptions, such as for the purchase of a primary residence, have also been tightened, with increased requirements for residency duration and thresholds for income and property value.

Changes in Immigration and Corporate Regulations

The Omnibus Law also brings significant changes to immigration policy:

• Stricter conditions for residence and work permits, for both self-employed and employed individuals.
• New requirements for passive residency, including a higher minimum investment in Andorran assets and stricter renewal rules.

Adjustments have also been made to corporate regulations and the startup regime, promoting business activity that aligns with sustainable and innovative economic development.