Why I moved to Andorra

There is no perfect time, just do it

Summary

· For the last months I have been living in Andorra with my wife. In this report I will review the reasons as to why we moved to Andorra and how to move there.

· I have written this report as dozens of subscribers have asked me to do so. But it has very little to do with investing.

· There is also a bit of history in the report, as well as thoughts on private property, philosophy, and politics.

Introduction

For those of you new to the blog, here is a little bit of information on me that is relevant to this report: I started investing when I was 13 or 14 years old. When I was 20 years old, I discovered the uranium investment thesis, I invested all I had in uranium. And by the time I was 25 years old (2021) I had returned over 1000% on my portfolio. So, I became a full-time investor.

Bear in mind I am a frugal person, and with the money I had made in 2021 and 2022 I had more than enough to live with. But I am almost certain that a lot of people would not.

Tax situation in Spain versus Andorra

Since 2021 I had been planning to leave Spain due to many reasons. Primarily for tax reasons. Capital gains tax in Spain goes from 19% to 28%, and most of my income comes from capital gains. A portion of my income comes from dividends from stocks. Dividends in Spain are taxed at 19% flat tax. But companies in Spain are taxed 25% already for corporate tax. So, if I owned a Spanish stock I would be paying double taxes.

Ordinary income (wages) is taxed from 18% to 45% in Madrid, where I lived. If you live in other areas of Spain this tax can be even higher. VAT in Spain is 21%. So, the income of many people in Spain is taxed at over 50% if you include the VAT (consumption) and capital gains tax (savings). I consider this level of taxation to be theft.

In contrast, income in Andorra is taxed at 0% (<24.000 €), 5% (between 24,000 and 40,000 euros) and to 10% for anything more than 40,000 euros. And capital gains tax is 0%.

Furthermore, VAT in Andorra is 4.5% and corporate tax is a flat 10%.

There is no inheritance tax in Andorra.

The nontax factors that affected my decision were the following:

· Increase insecurity in Spain: Corruption, lack of respect for private property and violence have been on the rise in Spain.

· Air pollution: In Madrid 2.4 cigarettes' worth of pollution particles is inhaled daily. Spain is the third largest country in Europe (not including Russia), so there are plenty of areas with little or no pollution. But these areas have little infrastructure, and taxes are the same than in Madrid or Barcelona, if not more.

Freedom

Freedom is an exceedingly difficult parameter to measure. But the most common measurements are the following:

1. HFI Score (0–10): Measures personal and economic freedom (e.g., rule of law, property rights, expression) across 86 indicators; higher scores indicate greater freedom.

2. Freedom House Score (0–100): Assesses political rights (e.g., elections) and civil liberties (e.g., speech, justice); higher scores reflect stronger democratic freedoms.

Freedom scores.

Andorra is not included in most freedom rankings due to its small size. So, to create the table of the Top Free Countries (Including Microstates), I compiled data from the Human Freedom Index (HFI) 2024 and Freedom in the World 2024. Countries like Switzerland (HFI: 9.01, Freedom House: 96), New Zealand, and Denmark are at the top based on personal, civil, and economic freedoms.

For microstates like Luxembourg, Liechtenstein, and Andorra, I used HFI scores (e.g., Luxembourg: 8.71) and Freedom House scores (e.g., Liechtenstein: 90), while San Marino and Monaco were ranked lower (9th, 10th) using Freedom House scores (96, 85) and qualitative data from U.S. State Department reports due to their absence from HFI.

Main downsides of living in Andorra versus Madrid

· Less public transport: The public bus system is good in Andorra, but there are no trains.

· Less availability of cab drivers: No Uber available here and fewer taxis than in Madrid.

· Less availability of home delivery: No Amazon Prime delivery and less restaurants delivering food to your home.

· Fewer homes available: Andorra has much more demand for homes than the existing capability to build them. They need more supply.

· Everything is in Catalan: All contracts, street signs or labels are in Catalan, not Spanish. I do not mind it, and I am learning Catalan, but some people might not like this. However, everyone knows how to speak Spanish.

· No airport.

· Andorra is about 20% more expensive than Madrid. Although the low VAT in Andorra helps.

· Andorra Telecom has a monopoly on internet services and telecom. Plus, there is roaming in Andorra since it is not part of the EU.

Main upsides of living in Andorra versus Madrid

· Better air quality: There is almost no air pollution in most of the country.

· Lower taxes.

· Safer: Andora is among the safest countries in the world.

· Long history of neutrality: Andorra has not been actively involved in any war since its creation in the year 1278.

· Counterpower: Andorra is a parliamentary co-principality. On the one hand there is a democratically elected government. On the other hand, the co-princes of Andorra, the Bishop of Urgell, and the President of France, hold largely ceremonial powers under the 1993 Constitution. However, they can sanction laws, call elections, approve treaties, and appoint officials.

This ensures no given person holds too much power in Andorra.

· Higher quality of life: Supermarkets offer higher quality products and there are better gyms, social clubs, and such.

· Better infrastructure: In Andorra there are very high-quality roads even to the most remote village. My wife and I live in a village and the roads are just as good as in the capital city.

· Water is almost free in your apartment.

· Electricity and gas are much cheaper than in Madrid.

· Private property is respected in Andorra, unlike in Spain where there are squatters.

Deeper insights into why I prefer Andorra

In this segment I will write my thoughts on (often random) ideas that have crossed my mind while thinking about which country I want to move at.

First, bear in mind that I have examined every possible country before deciding on Andorra. I checked out Panama, Paraguay, Dominican Republic, Romania, Hungary, Estonia, Bulgaria, Georgia, Singapore, Hong Kong, New Zealand, Thailand, and many others before making a final decision with my wife.

Andorra made the most sense since almost everyone speaks Spanish here, although the official language is Catalan. The food here is wonderful, you can find both Spanish and French food. The weather is great, at least in my opinion. The winters are cold but skiing here is great. And the summers are mild, so no need for air conditioning. Hiking is amazing since the country in built on the Pyrenees mountains.

I argue that moving to another county is a highly personal decision, regardless of taxes. My wife and I live a calm life. For example, we like going to the gym, hiking, reading, going out to eat, spending time with each other and going to the sauna. So, Andorra is an ideal place for us, it is quiet, clean, and very calm. If you like partying, drinking a lot or doing a wide variety of social activities, Andorra may not be the place for you.

Andorra has been mostly empty throughout its history. Feudal records show that in the year 1300 (when it was founded), Andorra had a population of 2,000 people. However, during the 20^th and 21^st centuries this changed.

The country almost increased tenfold its population from 1960 till today. It went from 8,000 people to around 80,000 today. This was largely driven by massive immigration from Spain. In 1955 only 20% of the population were immigrants. By 1990 this number had exploded to over 70%. Today half the population of Andorra was born here, and the other half are immigrants.

In that sense I argue that the Andorra you can witness today was built on immigrants, just like the US. This is extremely positive for the country as immigrants tend to be the most adventurous and energetic of the population. After all, it takes a lot of courage and energy to move to another country.

That is why migration is so bad for the country from which people are running away. People without an adventurous or entrepreneurial spirit stay, while others leave. That is why countries with more freedom are prosperous: They allow individuals to exploit their inner potential as they seem fit.

This is proven in the numbers: The GDP per capita of Andorra has increased tenfold since 1970.

Another key factor I considered is the geographical location. I believe that demographics and climate change will play a significant role going forward. I do not believe climate change is human-caused, I argue it is just the natural order of things: The weather changes over time. However, I believe that being surround by fertile land in which to grow food is important, and there is plenty of that in Andorra. There is also a massive amount of clean water available in Andorra, which I think will become more important as years pass on.

Regarding demographics, almost all the “western world” has collapsing demographics. This means that fertility rate is well below replacement rate of 2.1. The only exception being Israel. In this sense Andorra is no different from other European countries. But they are smart about it and are very selective with immigration. In most cases, only the most productive can come to Andorra. They even do a health check on immigrants, like the one I went through.

Most people think of demographics in terms of how it will affect our economy going forward. But I prefer to think of it in terms of comparison across regions. Europe, US, and Asia are suffering from very low fertility rates. While Africa is mostly in the green: Population is growing fast. Even South and Central America are going into low fertility rates.

The conclusion I extract from this is that Africans will at some point or another will want to emigrate elsewhere. However, America and Asia have barriers to entry. American has the Atlantic Ocean in between. And Asia has the Middle East, where most countries have extremely strict immigration policies and strong military to contain any unusual migration flows. Therefore, I argue that Europe is the most likely destination for most African migrants, as the Mediterranean Sea has proved that it cannot stop them.

Therefore, I believe that during the next decades, Europe will have some sort of invasion or massive immigration from Africans. Due to two main reasons arising from high population growth: 1. There are not enough opportunities for all the young people in Africa, therefore they must migrate. 2. Quality of life is much better in Europe, so it is only natural that they want to move here.

However, Andorra is somewhat protected from this trend due to several reasons. 1. The country is very high in the mountains, making migration and/or invasion difficult. 2. Andorra is very strict with the immigration policy. 3. It is not part of the European Union; therefore, they can decide on foreign policy. The EU has been extremely soft on this subject, allowing millions to come legally and even more to come illegally.

In Andorra, the taxpayer does not fully subsidize the health system. The user has to pay for a portion of the services. That is important to bear in mind, especially if you come from a country (like Spain) where healthcare is 100% subsidized, often confused with “free”. There is nothing free about it as the taxpayer is handed the bill.

How to move to Andorra

There are three ways to move legally to Andorra. The first one is to find a job, which is particularly easy for those of you with computer science degrees or great programming skills. The second way to move to Andorra is to open a business here. The business must have a real activity with cash flow, and this is the path I have chosen. I have created a consulting company here. However, you must also deposit 50,000 euros to the AFA (Andorran Financial Authority), the equivalent to the SEC in the US. The third and final way to move here is to buy a real estate asset worth at least 600,000 euros.

Bear in mind these ways will get you the Andorran residence permit, but not the nationality.

In some countries you might also face exit taxes. In Spain fortunately I did not have to because I do not have that much money.

If you do not have to pay an exit tax, you do not have to sell your assets before coming here if you do not want to. However, the real estate income (from RE sales or rent) that you own outside Andorra is taxed in the country where that RE is located, not here.

I highly recommend hiring a company to organize your migration process if you decide to make the move. However, do some due diligence as some companies will charge you outrageous rates. For example, one company wanted to charge me 15,000 euros to organize my permits to move here, while another company told me they could do it for 7,000 euros. So be careful who you hire to do this.

To pay taxes here you need to live at least 6 months in Andorra. And if you want to move with your girlfriend or boyfriend here, they must also go through one of the “three ways to move legally to Andorra” or be married to you.

When is the right time to move to Andorra

The main takeaway I want you to take from this report is that there is no perfect time to do something difficult, and moving is hard. Just like there is no perfect time to start a new company or going to the gym, migrating is no different. So, if you want to do it, I encourage you to jump into it.

Many people tell me that they do not have enough money to move here, or that the low taxes do not mean that much to them. This may be true, but if you move to another country just to make more money or to pay less taxes, you are going to have a tough time. As I have explained throughout this report, moving to Andorra is about a lot more than money or taxes for me. It is about freedom, a better future, health, safety, and a better life altogether.

There is no range of income from which you should move here. For example, some people say that once they have 1M euros net worth or make 100k euros per year they will move to Andorra. That is nonsense, those are just excuses people tell themselves so they can remain in their comfort zones. The main thing you need to move here is the will to do it, nothing more. If you want to move here just for the taxes, do not do it.

Personally, I have not felt socially isolated, something many people fear when moving to another country. I did not know anyone when I arrived, but within the first month I had already met people to meet with for a drink or to chat. Half the people here are from outside Andorra, so many people are seeking to make new friends.

I have been hesitant about sending this report as an email, as this blog is investment related. But since so many of you have reached out asking about Andorra, I have sent the report as an email anyway. I hope you do not mind. If you like this kind of reports too, please let me know.

I hope the report has not been boring or too vague. I explore every single factor when making such a big decision. But once it is clear, I make the decision and do not look back.

Any feedback is more than welcome in the comments, or you can send me a message on Substack, or through my Twitter (X) account @AAGresearch.

As always, I want to thank my wife Yeimy, who has helped me a lot while I was writing this by myself. This report and this blog would not be possible without her. Thank you.

I hope this finds you well,

Alberto Álvarez González.

Disclaimer: I assume no liability for any and all of your actions, whether derived out of or in connection with this information or elsewhere, and you hereby warrant and represent that any and all actions that you take or that you may take at a later date in connection with this information shall remain your sole responsibility and, in case, I shall not be held liable for any such actions.