Cryptocurrencies and Blockchain in Andorra
Business activities linked to Blockchain technology through its different applications, cryptocurrencies and tokens are purely digital and do not require a permanent physical location, so Andorra is somewhere worth considering for developing this type of technology.
Currently, Andorra stands out within Europe as one of the countries encouraging new technologies. For this purpose, it is opening up internationally to attract the most innovative sectors and activities such as e-sports, Big Data, A.I. or Blockchain. Remember that many of these technologies are used together in projects such as e-sports and Blockchain.
In this article, we will explain the situation and advantages of running a business based on new technologies in the Principality, in the following sections:
Blockchain and cryptocurrency legislation in Andorra
Currently, Andorran legislation regulates and defines Blockchain systems, cryptocurrencies and the components of a Blockchain network through Law 9/2021, of 29 April, amending Law 35/2024, on Electronic Trust Services, becoming the Law on Electronic Certification and Trust.
This is one of the first laws on an international level that regulates the various components of a Blockchain network and facilitates the development of businesses in Andorra that are based on this technology. This is a first step to allowing the incorporation of companies dedicated wholly or partially to developing such technology, establishing use cases or trading linked to cryptocurrencies within a more secure legal context.
Moreover, it is expected that regulations will be approved over the next few years with incentives to attract and facilitate projects based on Blockchain technology, such as NFTs, DAOs, ICOs or other kinds of projects with a technological and financial component, considering the draft Law on Digital Representation through the Use of Cryptography and DLT Technology.
It is important to highlight the importance of compliance with all Andorran regulations applicable to the activities you wish to carry out.
Blockchain mining and trading
In Andorra, mining various cryptocurrencies such as Bitcoin, Ethereum and Altcoins is interesting because electricity prices are among the lowest in Europe. The price in this small principality is €0.134 per kWh, while the average in Europe is somewhat higher at €0.20 / kWh.
Moreover, the development of mining activities in a regulated environment and with lower infrastructure costs is an incentive for miners to live in Andorra, either through self-employed residence or by setting up their own company.
Together with the legal certainty, geographical environment and capacity of the telecommunications network, there are the tax advantages and low tax rates existing in Andorra, plus the advantage of being able to deduct expenses related to the activities.
Cryptocurrency traceability and origin of funds
We must not forget that, as with most regulations, Andorra is a country with anti-money laundering and terrorism financing regulations. After the legislative reform in this field, providers of virtual asset services are considered to be reporting persons under Law 14/2017, of 22 June, on preventing and combatting the laundering of money or securities and terrorism financing.
For this reason, companies or persons that decide to develop a business providing virtual asset services must comply with all the regulations concerning anti-money laundering and terrorism financing.
On the other hand, anyone who invests or carries out an activity using cryptocurrency must consider the importance of being able to trace the ongoing investments, and the use of exchanges that implement anti-money laundering and terrorism financing regulations within Europe.
Cryptocurrency taxation in Andorra
In Andorra, there is no specific cryptocurrency tax regulation, so they are considered to be another normal asset. Therefore, as an individual, they are taxed under the IRPF (personal income tax) savings tax base as capital gains, i.e. 10% of the net gain with €3,000 exempt income. In the case of a company, the tax base is 10%.
So, gains obtained from trading cryptocurrency in Spain are subject to IRPF at a rate of between 19%-26% (following the tax increase in 2022), whereas the maximum applicable rate in Andorra is 10%. Less than half, undoubtedly a significant saving.
Moreover, in Andorra, as there is no wealth tax, simple ownership of such assets is exempt from wealth tax.