QROPS Andorra | Pension Transfers to Andorra
UK pension transfers to Andorra are not possible as there are no QROPS in Andorra, however, you can move a UK pension to EUR and into a tax optimal scheme.
Andorra is not considered part of the EEA when it comes to pension transfers. Andorra is not part of the EU, EFTA or the Eurozone. Andorra is not a member of most of the major European associations. Even though they use the EUR, they are not technically part of the Eurozone. They are in a customs union with the EU and follow EU rules for trade, but not agriculture nor finance. Andorra, Liechtenstein, Monaco, San Marino, and the Vatican City remain outside the Union, mainly because of the cost of membership as the EU has not been designed with microstates in mind. Andorra is, by population, the largest of the 5 microstates with 78,115 according to a census taken in 2011.
If you come from Andorra and have worked in the UK or if you have moved to Andorra, you may wish to transfer your UK pension offshore or move it into EUR via an International SIPP.
QROPS Post April 6th, 2017
Any UK pension transfers to QROPS after April 6th, 2017 will now face a 25% exit tax if you live in Andorra. This is because Andorra is not part of the European Economic Area (EEA) and you cannot transfer a pension to Andorra itself. So, any UK pension transfers to Gibraltar, Malta, NZ or Australia would face a 25% exit tax.
In which case, a UK pension transfer to a QROPS is not tax efficient. You are better off transferring your pension to a SIPP. The UK doesn’t have a Double Taxation Agreement with Andorra, so your pension is taxed in the UK.
The effect of the no double taxation doctrine under the IRPF (l’Impost Sobre la Renda de les Persones Físiques or personal income tax) in that those earning salaries or pensions which are taxed at source in their country of tax domicile will most likely pay no tax in Andorra.
QROPS Before April 6th, 2017
For those who moved a UK pension to a QROPS in the Isle of Man or Guernsey before April 6th, 2017 or another QROPS destination, you may want to review your tax position.
Malta signed a Double Taxation Agreement with Andorra, but it is yet to be ratified. It was signed on 16th December 2016 after two days of meetings. The agreement was signed by the Director General for Legal and International Affairs within Malta’s Inland Revenue Department, Aldo Farrugia and Andorra’s Secretary of State for International Affairs, Claudia Cornella. The treaty will come into effect as soon as both countries finalise their domestic ratification procedures.
At the end of October 2017, the Andorran Government approved an amendment to the Andorran Automatic Exchange of Information Act that entered into force at the start of this year. The Andorran tax information exchange agreement will eventually cover 73 countries.
Expats who are tax resident in Andorra and already have a QROPS which was moved before 6th April 2017, can move their UK pensions to Malta for tax optimisation.
A Malta QROPS would face zero tax in Malta and 10% flat rate tax on income in Andorra.
A Gibraltar QROPS would face a flat 2.5% income tax in Gibraltar and perhaps no tax in Andorra. You would need to seek clarification from an Andorran tax specialist who speaks French. Also, these may change over time.
Income Tax in Andorra
Who is liable to income tax?
Any individual who is a tax resident in Andorra is deemed to be liable to personal income tax. To qualify as a “tax resident in Andorra”, an individual must meet either of the following criteria:
a) they must reside for more than 183 days a year in Andorra; or
b) the centre of their activities or economic interests must be situated in Andorra, whether directly or indirectly.
What is the personal income tax rate?
The general tax rate is 10%.
a) If your net income is below 24,000 euros (exemption threshold), you are not liable to tax;
b) If your net income is between 24,001 and 40,000 euros, the effective tax rate is 5% (a reduction of 50% is applied to 10% of the general rate, subject to a maximum of €800); and
c) If your net income is above 40,001 euros, the tax rate is 10%.
As far as savings income is concerned, a tax rate of 10% applies, bearing in mind that the first 3,000 euros are exempt and therefore not liable to tax.
What is exempt from income tax in Andorra?
Foreign pensions which are taxed at source. So, a Malta QROPS would be taxed in Andorra, whereas a Gibraltar pension scheme would be taxed in Gibraltar and a UK pension scheme taxed in the UK. Please seek clarification from an Andorran tax specialist.
QROPS Andorra Summary
Post April 6th, 2017
- 25% exit tax on any UK pension transfers to a QROPS
- A move to an International SIPP in EUR is a better option and avoids the exit tax
- A SIPP is taxed in the UK only
- A SIPP is taxed between 20% – 45% on income and also taxed on death after age 75
Before April 6th, 2017
- If you have a QROPS before April 2017 (e.g. Isle of Man QROPS), you can move it to a QROPS in Malta
- 0% tax on a Malta QROPS, no tax on income, growth or death if you are tax resident in Andorra
- You pay 10% income tax in Andorra; no tax on growth or death if you remain tax resident in Andorra
- or you can move it to a Gibraltar QROPS with a flat rate of 2.5% income tax and maybe no tax in Andorra
If you are just looking to retire abroad with no tax on your pension income, the main options left now are Australia and New Zealand. But, you can explore more options here for retirement destinations with low tax.Pension Transfers to Andorra | QROPS Andorra by Richard Malpass