Temporary Suspension of Foreign Investment Authorisations for Real Estate

Authors: Berta Bonet, Laura Lobón and Laura Palomera

On 7 September, the Bill on the Temporary Suspension of Foreign Investment in Real Estate in the Principality of Andorra was submitted for parliamentary consideration. The legislation, which is expected to be debated and voted on by the General Council on the same day, will enter into force on the date of its publication in the Official Gazette of the Principality of Andorra (BOPA).

This measure represents a significant change for the Andorran real estate market, as it temporarily suspends the granting of new foreign investment authorisations for real estate until the entry into force of the future law that will impose a tax on this type of investment.

Who is affected by the suspension?

The suspension will apply to:

• Non-resident foreign individuals.

• Foreign legal entities.

• Andorran companies with foreign shareholding, regardless of the percentage of foreign participation.

It is particularly important to note that the measure also affects Andorran companies with any percentage of foreign ownership in their share capital, thereby limiting their ability to carry out new real estate investments subject to the foreign investment regime.

Transitional regime for ongoing transactions

In order to preserve legal certainty and avoid adversely affecting transactions that were already underway, the Bill includes a transitional regime.

On the one hand, applications for foreign investment authorisations in real estate submitted before the entry into force of the Law may continue to be processed in accordance with the regulations in force at the time of their submission.

On the other hand, investors may also benefit from the previous legal framework if they can demonstrate that, prior to 5 September 2023, there was an agreement between the parties for the purchase of a property accompanied by a financial transaction effectively completed before that date.

In such cases, both the agreement and the corresponding financial transaction must be evidenced and documented to the satisfaction of the Administration.

What will happen to new applications?

Applications for foreign investment in real estate submitted while the suspension remains in force, and which do not fall within any of the transitional situations described above, will be automatically rejected and deemed not to have been filed.

A measure with a significant impact on the real estate market

The temporary suspension of foreign investment authorisations is one of the most significant measures recently adopted in the Andorran real estate sector. Its purpose is to establish a regulatory pause until the future tax framework applicable to this type of investment is approved.

For this reason, both foreign investors and Andorran companies with foreign participation should carefully assess any planned real estate transaction and determine whether they qualify for any of the transitional provisions established by the new legislation.