By Roger Munns,
Tribune Properties

welbeck36[at]hotmail.com

While Monaco is a well known European tax haven, Andorra has remained little known outside of the financial community - despite enjoying the same tax advantages and arguably more private banking than her better known rival.

In contrast to the similar financial benefits both Monaco and Andorra residents enjoy, the two small countries have quite different climates.

Monaco has good all year round weather and is located next to the French Riveria, while Andorra is in the Pyrenees and between early December and late April attracts nearly ten million tourists for ski holidays. Monaco has year round tourists, peaking twice a year in May for the Grand Prix, and September for the Yacht Show.

Neither Andorra or Monaco have their own airports – Nice airport has a helicopter link, a ten minute ride direct to Monaco, Andorra is not so fortunate and the nearest airport is Barcelona, a three hour drive away from the principality.

Both countries have opted to stay out of the EU, preserving their ability to maintain a no income tax policy.

The biggest difference is the entry price for becoming a resident – which entails buying or renting a house or apartment.

One bedroom apartments in Monaco start at 800,000 Euros, but in Andorra the same size apartment starts at less than a third of the price at 250,000 Euros. And while a house in Monaco is a rarity, there is a good choice of houses for sale in Andorra, with prices starting at under a million Euros.

Rising Prices

Given Andorra’s property price advantage for would-be residents choosing between Europe’s primary tax havens, it has come as a surprise to many that the closing costs for buying a property in Andorra has not only been less than half that of Monaco, but also less than buying a property in many other mainland European countries at around four and a half per cent.

But Andorra has just raised property closing costs by introducing a three and a half per cent sale of goods and services tax on property purchases from January 1, 2006 - bringing the tax haven more in line with neighbouring France and Spain.

Demand for property in Andorra and Monaco is unlikely to be affected by the recent increases though, according to European tax haven specialists Tribune Properties.

‘Andorra and Monaco have historically seen an increase in property activity and residency applications when taxes are increasing elsewhere. The new German government has recently increased the top rate of income tax and the United Kingdom has seen an increase in the number of indirect taxes, making the zero per cent personal income tax both Andorra and Monaco offer an attractive preposition to high income earners.

Andorra’s property inflation has been over ten per cent annually for the last three years, and when the 2005 figures are released we would expect it to be four years in a row, with no sign of a levelling off of demand for the year ahead.

With Andorra and Monaco’s high speed cable and broadband internet access more and more company owners are moving their residence to low and no tax countries and running their companies from a distance geographically, while being able to share information with their head office in real time’.

As well as buying a property in Andorra or Monaco, both countries require residency applicants to establish a local bank account and deposit around 50,000 Euros (Andorra) or 100,000 Euros (Monaco), take out private health insurance, and to live there for six months of the year.

Published - January 2006