Investing with cryptocurrency in Andorra
The benefits of trading or mining cryptocurrencies in Andorra
Andorra clearly has many advantages for crypto and blockchain technology related projects with entrepreneurs and traders coming to reside in Andorra. Setting up a technology company is attractive for multiple reasons. Safety, environment, culture but also taxation make Andorra very attractive as a location for your crypto activity. You may read further on tax advantages that speak for Andorra discussed here. However investing in cryptocurrencies in Andorra is a topic that we need to discuss separately from traditional factors that make a jurisdiction competitive.
Crypto professionals residing in Andorra
If you are a trader investing into digital coins you may of course trade being a resident in Andorra. Residency in Andorra is an attractive option for various profiles and lifestyles.
Professionals that work as developers, IT specialist consultants and in R&D related to blockchain technology and crypto assets are increasingly considering Andorra. Working for start ups with a vesting strategy for tokens and flexible contracts to choose your location are driving crypto specialists to Andorra.
Please review here the different options available for active business people as well as passive retirees or traders.
Being a resident in Andorra you are fully subject to income taxation on your worldwide income. However there is income that may qualify for tax exemptions that includes capital gains from publicly traded stocks under certain conditions. We recommend an initial analysis of your trading activities, investment types and vehicles to properly evaluate your potential taxation implications in Andorra. Trading cryptocurrencies has a different treatment as these assets do not fall under the same category as collective investment vehicles such as equity.
Ultimately your residency has to be properly maintained under the rules of international tax treaties and the definition of a tax residency in Andorra with respect to the neighboring countries is quite clear.
The regulatory framework for activities related to cryptocurrencies in Andorra
The legislation and regulatory framework for cryptocurrencies is still unchartered territory throughout much of the world. As currencies such as the bitcoin have multiplied their value over the past year banking authorities and governments are paying close attention and are working on a regulatory framework. Compliance in banks have been very careful as specifically the bitcoin had been used in transactions that are doubtful or directly for money-laundering purposes. Andorra in that sense is very sensitive to this topic with its increased vulnerability as small country and tiny financial system independent of the ECB. Its increased compliance and constant state of alert to prevent any incident also has an impact on the general attitude towards any business or trading activity with cryptocurrencies.
The financial regulatory and supervising body in Andorra called AFA is closely monitoring the developments, but has not yet formally pronounced itself with regards to the rules to establish companies with activity related to cryptocurrencies. The local business association has taken a proactive approach to urge the Andorran authorities to establish a legal framework and reduce uncertainty for those companies specialized in ICOs, blockchain technology and mining that wish to establish themselves in Andorra.
A new regulatory framework is expected by 2023 with incentives to attract and facilitate investment, ICOs and projects linked to blockchain technology. The Andorran parliament should legislate during 2022 on the new law to go into effect thereafter.
Cryptocurrency-mining in Andorra
Besides the lifestyle and tax benefits Andorra may also provide with the proper infrastructure for this future activity that is increasingly gaining in importance. According to Eurostat official numbers Andorra has some of the lowest electricity prices in Europe. The small principality has a price 0.134 EUR for the kilowatt per hour (kWh) , while the average in Europe is something above 0.20 euros for a kWh.
Apart from this the electrical infrastructure in Andorra is extremely stable and blackouts or down times are rather uncommon when comparing to Spain for example.
Industrial property is available for rent and server and IT infrastructure may be installed in suitable conditions.
Provided that you have access to a piece of equipment like this mini doge home miner, mining for and then trading any cryptocurrency that you find can help to put you in a steady financial position going forward. If you’re part of it, you will know just how much of a difference it can make to your finances.
Finally Andorra offers as one of the few countries in the world a coverage with 100% fiber optics.
These and other factors related to your lifestyle may make Andorra a suitable destination for your cryptocurrency / digital coin project.
How are cryptocurrencies taxed in Andorra?
Capital gains from trading cryptocurrencies are taxed at the maximum personal income tax rate of 10% in Andorra. Gains are calculated as follows. When buying or selling a cryptocurrency the holder obtains a capital gain/loss calculated as the value of the cryptocurrency in the sale transaction minus the value of the purchase. In the tax return, gains and losses from all transactions can be offset and the net income/taxable income subject to taxation of 10% is obtained. There is the option to include transaction costs.
How can I become a resident in Andorra as a cryptocurrency investor and trader?
There are several types of residency. Depending on your profile, we can recommend passive or non-profit residency as a more wealthy profile or active residency in Andorra for a profile that has a commercial activity.
What is the Andorran bank system position related to crypto and blockchain?
Andorra’s banks are still hesitant about too much exposure to crypto-assets. With its small financial system being vulnerable to any potential risk such as money-laundering-related issues, it is fiercely implementing AML policies sometimes rejecting genuine projects and fortunes. This is similar to the National Australia Bank’s decision to close all bitcoin trade due to the associated risks. You can read NAB cryptocurrency to learn more about it.
What is the future of crypto and blockchain related projects in Andorra?
Andorra’s government wants to position the country as a progressive jurisdiction to promote blockchain technology. It is very likely that with the advance of legislation and AML standards among the financial regulated sector there will be an increasingly crypto-friendly environment in what is today already one of the most competitive tax environments in Western Europe.