The Andorran banking sector, which accounts for about 20% of GDP, has undergone radical changes over the past few years.
Historically, Andorran banks offered numbered accounts without common names. Numbered bank accounts were especially popular among foreign residents as they made Andorra an attractive place to park and earn income away from the eyes of their home government.
In light of a changing world, and after briefly being included on the OECD’s list of non-cooperative tax havens, Andorra is moving towards a model of global economic transparency while striving to maintain privacy for its residents.
Automatic exchange of information and uniform reporting standard
Andorra signed the Declaration on the Automatic Exchange of Information on Tax Matters in 2014, along with 100 other jurisdictions. The purpose of this declaration is to sign up jurisdictions to combat tax evasion and facilitate tax compliance by implementing a “Common Reporting Standard.”
The Common Reporting Standard, or CRS, requires jurisdictions to collect relevant financial information from their banks and other financial institutions and automatically share this information with other jurisdictions.
How are residents exposed to AEOI?
Andorran banking confidentiality is maintained for resident bank accounts. Financial institutions are not required to share information about residents’ accounts with Andorran authorities.
Since the automatic exchange of information is a reciprocal agreement, Andorra will receive information from other jurisdictions. Therefore, residents should assume that the Andorran authorities will be aware of their accounts abroad.
This is positive news for Andorrans who properly declare their income to the government, as it means that their financial information within the Principality must remain confidential.
What information is being transmitted?
Information is disseminated on bank accounts of non-resident individuals and legal entities, consisting of:
- Account number,
- taxpayer identification number,
- Name,
- address,
- date of birth,
- income (interest, dividends, insurance income, etc.),
- proceeds from sales,
- account balances and
- for company accounts, the ultimate beneficiaries (known as “UBO”).
When did reporting start?
Andorran institutions began collecting information in 2017 and reporting in 2018.
Andorra currently reports using a so-called “narrow approach”.
This means that its banks will only collect and share information with tax residents of jurisdictions specified in the Competent Authority Agreement.
Combined catalyst
In 2015, Banca Privada d’Andorra, a bank known locally as “BPA”, was indicted by the US Treasury Department for money laundering.
Local opinion differs somewhat from that expressed in the major press of the world.
Whatever the truth, this scandal, combined with the CRS, has placed significant pressure on the Andorran banking system, with due diligence and KYC often becoming difficult for individuals and companies.
Fortunately, the worst is over and the Andorran banking system is open for business again.
Banking confidentiality of Andorra: following the path of peace
Despite a financial secrecy score of 66/100 (only 10 points lower than Switzerland), Andorra ranks 105th in the Financial Secrecy Index. This is due to the small size of countries and their influence on the global economy.
The Andorran government and financial sector are moving towards a model of transparency, but not greed. Taxation in Andorra remains low and fair, but non-resident and resident individuals and legal entities must comply with it both domestically and abroad.