Forecast of the new Foreign Investment Law in Andorra: Opportunities and Challenges for Real Estate Investors
- The Objective of Law 16/2023
- The Temporary Suspension of foreign investment in real estate
- Effects on Applications in Process
- Entry into Force
- Opportunities and Challenges for Real Estate Investors
- The New Lien: Promoting Responsible Real Estate Investment
- A Progressive Tax to Encourage Rental Housing
- Bonus for Long Term Rental Housing
- Scope of Application of the Law
- Conclusion
The Principality of Andorra, with its natural beauty and booming economy, has become an attractive destination for foreign real estate investors. However, Law 16/2023, of September 7, on the temporary suspension of foreign investment in real estate, marks an important turning point in the investment landscape in Andorra. In this article, we will look at the reasons behind this new law and the possible effects it will have on real estate investors.
The Objective of Law 16/2023
Law 16/2023, promulgated on September 7, 2023, aims to redefine foreign investment in Andorra to ensure sustainable development of the country. After years of growing foreign investment in real estate, the Andorran authorities have decided to focus on high value-added foreign investment that meets environmental sustainability standards and directly feeds back into the national economy.
The Temporary Suspension of foreign investment in real estate
The law temporarily suspends the granting of new foreign real estate investment authorizations for non-resident foreign individuals and legal entities, including those with foreign capital. This suspension aims to give time to the preparation of measures that will tax this type of investment in the near future.
Effects on Applications in Process
Applications for foreign investment in real estate submitted before the entry into force of the law will be processed according to the regulations in force at the time of submission. For those investments that already had a purchase and sale agreement with an economic transaction before the date of entry into force of the law, these will remain subject to the previous regulations. However, new requests are automatically denied and considered unfiled.
Entry into Force
Law 16/2023 entered into force on the same day of its publication in the Official Gazette of the Principality of Andorra, on September 7, 2023.
Opportunities and Challenges for Real Estate Investors
p>The changes in the law represent a significant change in the environment of foreign investment in real estate in Andorra. This can have several consequences for investors. On the one hand, the temporary suspension can provide time for the review of investment policies and ensure that new projects are in line with future regulations. On the other hand, the prospect of a future tax on foreign investment in real estate may affect investment decisions.
For real estate investors, it is crucial to keep abreast of these changes and seek professional advice to understand how they will affect their investment plans. Andorra remains an attractive market for investors, and these regulatory changes can be an opportunity for a more sustainable and long-term investment.
The New Lien: Promoting Responsible Real Estate Investment
One of the most significant changes in the new Foreign Investment Law in Andorra is the planned tax on foreign real estate investment, which will range between 3% and 10%. This tax seeks to promote responsible investment and avoid speculation in the real estate market, while contributing to the increase of State resources for public expenditure.
A Progressive Tax to Encourage Rental Housing
This tax will be progressive and will be based on the real value of the foreign real estate investment. Individuals and companies will have to pay a fee according to the number of homes purchased. It starts with 3% for the first single-family home and increases to 5% for the purchase of between 2 and 5 flats. From the sixth home, the tax rises to 8%, and for urban or real estate developments, or from the tenth real estate unit, the tax applied will be 10% of the real value of the investment.
Bonus for Long Term Rental Housing
However, the new regulations reward foreign investment whose purpose is the creation of rental housing for habitual and permanent residence, with a 90% bonus in the tax quota. This bonus applies when the foreign investment has a minimum commitment of ten years in this type of housing.
Scope of Application of the Law
This tax will be applied to both natural and non-resident legal entities, to Andorran legal entities with foreign participation greater than 50%, to natural persons with less than 3 years of residence in the Principality, and to Andorran legal entities participating for non-residents or residents of less than 3 years with a share between 5% and 50%.
Conclusion
Law 16/2023 marks an important change in the environment of foreign investment in real estate in Andorra. While this temporary suspension may pose initial challenges for investors, it may also open the door to more sustainable and beneficial investment for the country's economy. With the entry into force of this new Law, the temporary suspension of the purchase of real estate for foreign investors will be lifted, opening new horizons for real estate investors in Andorra. Stay up-to-date and explore the opportunities and challenges these changes may bring to your investment strategies.
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