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Cryptocurrencies and bitcoin in Andorra

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Just like with the case of brokers and tradersAs all cryptocurrency and token related businesses and various blockchain applications are purely digital and do not require a physical location, they are a very frequent target client to go to live in Andorra.

This, of course, has also come as a consequence of the the country's efforts to open up internationally and attract the most innovative sectors and markets like Big Data or, in this case, blockchain. What Andorra is a jurisdiction that bets on cryptocurrencies and blockchainThis is demonstrated by the fact that a bill to regulate the sector is currently in the parliamentary process. 

In this article we will discuss the situation and the advantages of doing a business in this sector in the Principality. Of course, the main and most obvious advantage is the fiscal one, but it is not the only one.

Update and Bitcoin in 2022

With the price of Bitcoin at 50,000$ and with the first international institutional support already made, Bitcoin is slowly coming of age. Some continue to say that it is a bubble, but they are the same that they said when it was at 300$ and they are the same as when it fell from the peak of 20,000$ of 2017 to approximately 10,000$ they said "I told you so", even though 10,000$ it should also be a supposedly exorbitant amount for them.

The frequency of profiles of Bitcoin investors and hodlers and in general cryptocurrency traders who move their business to the Principality of Andorra has increased a lot in 2021, a year already marked by a strong boom and a maximum of new residents due to the pandemic, the economic crisis, the poor management of both by the governments of Spain, teleworking and trend set by El Rubius. The most innovative trend in this sense is that of games with NFTs, of which there are already numerous projects in Andorra and almost all of them have been established during 2021 and of which we have a lot of experience.

The importance of fund traceability

However, from Andorra Insiders we must insist that the source of funds must be clear when someone who owns these crypto assets wants to settle in any currency, especially if the objective is to operate with said funds again through the banking system and acquire goods and services with them.

Specifically speaking of the Principality, we already reflected in other articles how meticulous and strict Andorran banks are. This has always happened because the Andorran banks have investments of great wealth and businesses from all over the world, and their prestige is highly valued, image and brand for investors of all kinds as a serious, respectable and responsible bank.

Therefore the banks they are always cautious and put problems in all activities considered morally doubtful (for them): from online games, casinos and others related to gambling, to adult themes and pornography, through tarot and fortune telling businesses. In addition and as we also commented, after the BPA crisis that led to the transformation of the country, these controls have been intensified.

The case of cryptocurrencies is therefore not an exception, quite the opposite. Due to their properties and anonymity and how new they are, these assets are highly susceptible to money laundering and therefore for banks to accept the income and cash flows generated with them, it must always be proven that the ultimate origin of the funds resides in an entity of the banking system or that somehow the completely legal origin can be certified thereof.

Intermediate operations are taxed

The cryptocurrency exchange per se generates a taxable income that must be declared in personal income tax, regardless of whether whoever transmits the cryptocurrency obtains a legal tender currency (fiat), another cryptocurrency or another type of asset. That is to say: that when someone sells for example bitcoin, even if they obtain another cryptocurrency such as Ethereum, that operation per se is already subject to tax and constitutes a capital gain or loss that must be declared.

This fiscal impact, for many still unknown, has been clearly exposed by the tax authorities of practically all of Europe, including Andorra. In fact, in Spain, the verification of all operations, which includes the exchange of information with other jurisdictions such as Malta and Estonia, are part of the tax control plan for this year, and therefore, it is foreseeable that tax inspections will intensify in the sector.

The operation is therefore relatively simple and it works like this both in Andorra and in most countries of the world: each time a certain amount of cryptocurrencies, tokens or crypto assets is liquidated or sold, the holder of them obtains a capital gain / loss calculated as the value of the crypto in the sale operation minus the value in the purchase. At the end of the fiscal year, gains and losses from all operations are offset and the net income subject to tax is obtained.

We insist that this treatment is applicable regardless of the asset obtained And regardless of whether they are on a specific platform or exchange and the funds have not been withdrawn from the bank.

Record of operations with cryptocurrencies

In this sense, we recommend have a record of all operations carried out with bitcoin and other cryptocurrencies at hand in order to certify and justify, when the funds are to be settled and reintroduced into the financial system in current currencies, that the origin of the funds is lawful. It should be noted that you can have these cryptos in an external wallet, as long as it can be shown how that capital has gotten there.

Numerous clients and people around the world have a huge wealth in cryptocurrencies, especially in Bitcoin, but because they bought in the early days of this technology through low-traceable platforms and methods, they cannot liquidate and reintroduce the funds back into the financial system. Y Currently there is no use in owning Bitcoin if you cannot trade with it.

Taxes on cryptocurrencies in Andorra for trading

Cryptocurrencies in Andorra

For practical purposes, cryptocurrency trading is usually done in a personal capacity, except in cases in which a group of investors deposit a joint capital in a company, in which case it is the company that carries out the trading. 

Specifically, in the case of Andorra at the moment, and pending specific legislation, cryptocurrencies are considered as one more normal asset, and therefore obtained as individuals, they are taxed on the basis of personal income tax savings as capital gains, which is a 10% on net profit with € 3,000 exempt income. As a society the profits of the company are taxed to the 10% as well.

Thus, the gains obtained from trading cryptocurrencies in Spain are subject to personal income tax at a rate between 19% and 26% (due to the tax increase in 2022), while the maximum rate applicable in Andorra is 10%. Less than half, certainly a significant savings. You can read about Andorran taxes in greater depth here.

The main difference however is that In jurisdictions such as Spain, the cryptocurrency must be declared in the Wealth Tax, that is, it is taxed for the simple fact of owning cryptocurrencies in one's own patrimony. In Andorra there is no wealth tax, nor on inheritance and donations, with which the mere possession of these crypto assets is exempt from tax.

Crypto platforms used

The most famous exchange used in Andorra is Binance, although Coinbase is also very established. There are also the banks taking over Kraken. In general, we recommend that you verify that the platform on which you operate allows Andorra as the country of residence of the account and that it is a reliable, secure platform whose traceability of funds is clear. In general, it must be a platform with a reputation and that provides confidence to Andorran banks in such a way that they understand that there is no possibility of carrying out money laundering or other types of fraud with them.

The new legislation that is brewing

Due to the covid-19 crisis, Andorra has prepared a package of measures or plan for 2023 called "Horitzó 23" with which it intends to face the dire consequences that this pandemic has caused, especially as regards the economic ones. One of the 77 initiatives of the plan is the modification of the Law 35/2014, on electronic trust services to include in these all systems blockchain.

This law was passed in 2014 and seeks to regulate those electronic services that require trustnamely: electronic signatures and seals, certificates of authentication, and electronic delivery services and time stamps. Thus, the modification of the law would give all cryptocurrencies and other blockchain-based technologies the legal value of being reliable and usable.

Although the implications of the measure are quite unpredictable, for example, it would be a first step to be able to create cryptocurrency brokers in the country, to allow smart contracts, legal support and protection for crypto holders and traders, documentary validity in trials, etc.

That is, the implications of the law they go far beyond cryptocurrencies, since it implies admitting the value of distributed consensus that technology itself manages to make a reality. If we continue along these lines, we may be talking a few years from now about legally granting notarial and contractual validity, registration and exchange, etc. to all the tools that use blockchain and even to be able to issue cryptos. Not bad, although we will see what it really translates into.

Finally, it should be noted that the implementation of a license from the Andorran Financial Authority (AFA) that can be requested by companies that operate with cryptocurrencies in the same way that occurs with brokers, investment funds and financial advisers. This regulation would allow the growth of a very strong fintech sector in the Principality and the diversification of the banking system.

Mining, mentoring and blockchain business in Andorra

Other activities related to cryptocurrencies such as mining or mentoring related to blockchain has also reached Andorra. The type of residence that this type of profile usually takes advantage of is the self-employment, by means of the creation of a society to develop its activity.

The taxation of the company, as in the case of an individual, is the 10% on the profit obtained. This percentage applies regardless of the activity to be carried out with cryptocurrencies, You can also deduct all expenses related to the activity.

High-tech Internet connection

To attract capital and people from digital businesses from around the world, Andorra started a telecommunications modernization program in 2012 which today has culminated in a total coverage of fiber optic in the homes 100%, with 700 Mbps symmetric internet at home and up to 1 Gbps symmetric in the case of business. They also removed the facilities and the copper cable telephone network and also the ADSL when the total coverage was finished.

So that, you can trade quasi-instantaneous trades without having to worry about connection, despite being in a lost house in the Pyrenees. As if that were not enough, the mobile network of the country's telecommunications company, Andorra Telecom, has a reach in 98% of the territory, with which you can access and operate literally from anywhere in the Principality. We recommend seeing the rates in this regard.

Prevention and prudence

As a summary, although crypto assets are innovative and interesting, it is important to note that Andorra and its banking system have a restrictive positioning in money laundering prevention policy. In other words, in any case, the origin of the funds must be justified, as well as the traceability of the operations. For this, it is important have the most experienced and knowledgeable professionals in the sector, since passing the banking regulatory compliance procedure is an essential procedure to be a resident and be able to operate in Andorra.

At Andorra Insiders we have the best professionals in Andorran law and taxation, many of them also with a extensive experience in blockchain and cryptocurrencies. With our legal, tax and accounting services, the safest and most carefree establishment in the Principality of Andorra is completely guaranteed. Of course and as always, we offer you comprehensive support from the first to the last moment. May contact us and tell us your particular case here, and can read part of the services we offer here.

31 thoughts on “Criptomonedas y bitcoin en Andorra”

  1. Hello there
    I have lived in Andorra for 14 years, a few days ago I downloaded the Binance app, when it asks for the basic identification I put Andorra country, the address that appears on the Andorran driver's license and they verified it correctly.

    I am having the problem by increasing to the next level of identification and increasing the capital for operations, they only let you provide a passport, which being a resident I do not have it, and the vast majority of us who were not born there either.
    I change the country to my country of origin, Spain, but it won't let me provide the documentation. It denies me (DNI), I suppose because in the first identification I have put Andorra.
    Do you know how I can do to provide the documentation? And thus raise capital
    Thank you

    Reply
    • Hi Sonia, thanks for commenting.
      Being a resident does not exempt you from having a Spanish passport, you must also have it and it is requested and renewed at the Embassy of Spain in Andorra. Nor is it true that "the vast majority who were not born here" do not have it. You simply have to update your passport at the Embassy as a resident in Andorra and provide the passport to Binance.

      Reply
    • Hello, I am also a resident of Andorra but Spanish nationality and what I did in the second option was to upload the Spanish passport

      Reply
  2. Hello good

    Regarding personal income tax, both cryptocurrencies and any other asset, I understand that it only has to be declared as soon as the 3000 euros profit is exceeded after closing any operation during the current fiscal year, if said operation is not closed and If the asset continues to be maintained, it would not be necessary to make any kind of declaration, right?

    Thank you

    Reply
    • Hi Dani, thanks for commenting.

      The operation is as follows: you have to declare the personal income tax for a certain fiscal period (IRPF) when the net profit of all the operations carried out during it exceeds € 3,000 positive. Indeed, in terms of capital gains and losses until the sale is made, the operation is not considered closed and therefore said specific operation is not counted.

      Reply
  3. All this is very interesting, let's say that "Hypothetically" I want to get a value of € 100,000 of any currency (whatever), but of course "hypothetically" you do not have a record of your investment because when changing from a cold portfolio to an Exchanger As a base Coin x example, the registration or movements made are lost and part of the commission for the movement tmb is lost, in conclusion the question would be. Do I want to get 100 coins worth € 100,000, remembering that "Hypothetically everything cost me € 500 but you can't show it", what would be the operation and penalty to follow?

    Thank you for your time, and it seems to me to be a very internal post.

    Greetings

    Reply
    • Hi Jaime, thanks for commenting.

      In the first place and in terms of the origin of the funds, the change from an exchange to a cold wallet does not necessarily imply the loss of their traceability, as long as those coins were bought in their day in the exchange itself before extracting them and therefore there is a recorded transaction and evidence of where the coins came from. Similarly, if you buy from another site and it can be shown that those currencies you have were purchased at that other site at the time and have now appreciated, those funds are legal and fully usable.

      Both with respect to the origin of the funds and with respect to the tax treatment, the registration of all operations is obviously required and as well stated. It is up to you to prove everything and to corroborate both in front of a future tax inspection and in front of a banking entity so that you can accept the funds and introduce them into the banking system. In this regard, you can use exchange and wallet records, blockchain scanner tests, price charts, etc. There are many ways to prove the provenance of cryptos because their blockchains are usually very transparent.

      Finally, the penalties will depend on many things and on the specific case, we cannot specify that much. We insist that the operation to follow is to keep a record of all assets in possession, calculate well the capital gains / losses and therefore capital gains and declare everything. The commission or the extraction of the assets to a cold wallet is no excuse not to do it. All the best.

      Reply
  4. I bought Monero in 2017 and I want to sell it now, the problem is that I bought it in Bitgrail which is no longer operational so I cannot extract the purchase records. How should I proceed?

    Reply
    • Hi Victor, thank you very much for contacting us. Well, there is no way to proceed unfortunately. As you well know, and if you don't you should, Monero is a totally anonymous and opaque cryptoasset, and those are its defining characteristics. If you have lost any link to the banking system, there is no way to proceed.

      Reply
  5. Hello,
    Currently, there has been a great proliferation of NFT jocs that, when entering, buy a cryptocurrency, they allow to collect tokens that can be exchanged for euros in an exchange com binance. In what way is this activity declared? Moltes Gràcies.

    Reply
    • Hi Manel, some conscients and of fet estem, managing some related projects. The declaration depends on the other costs (if it is a professional economic activity or not, with a company or with a natural person, etc.). As always, the main problem of cryptocurrencies is to demonstrate to the bank that the origin of the funds is legal and traceable, something that is reported by compliance reports. If the seu objectiu is fer l'activitat mitjançant a company to Andorra hi has some forms of fer-ho, li recomanem contact-us at contact@andorrainsiders.com

      Reply
  6. Good Morning,

    I have a question regarding taxation. If I have bought the cryptocurrencies in Spain, and years later (hopefully) they revalue, could I change my tax residence to Andorra (obviously meeting all the necessary requirements) and declare those gains in Andorra? Or on the contrary, when being acquired in Spain, the profits must be declared in Spain?

    Thanks,

    Reply
    • Hello Nicolás, thank you very much for commenting.

      Indeed, I could do it without problem. At the level of income taxes (IRPF) and in this case with respect to capital gains, the income occurs once the operation in question is closed. That is to say: when it is sold.

      In this way, owning cryptocurrencies is not taxed for personal income tax, only for Wealth Tax (if applicable). If you have cryptocurrencies being a tax resident in Spain but do not close operations and then move to Andorra, become a tax resident here and once a resident sells those cryptocurrencies, the IRPF taxation would be made entirely in Andorra (10% with € 3,000 exempt income) .

      Reply
    • Hi Nicolas,

      As I have answered in the other comment, not necessarily. The operation that involves income subject to taxation is considered carried out once the purchased assets are settled, so you could come to Andorra and sell them here, in such a way that the income would be taxed here.

      Reply
  7. Hello, very good, I am Spanish and I have my tax residence in Spain. If it is the case that my only relevant assets is 1 million euros in crypto assets. Could I get tax residence in Andorra to sell them there? It is not necessary to leave a deposit of € 30,000 or € 40,000 in addition to other requirements to be a resident? But of course, if my capital is all in crypto assets, what would be the way to proceed?
    Thanks a hug.

    Reply
    • Hi Ivan, thank you very much for commenting.

      Well, then, it would be necessary to better analyze your case to see if you could apply some type of exit tax, but in principle if you have only bought cryptocurrencies and have not sold or exchanged between them, you can perfectly move to Andorra and once as a resident sell them here, applying therefore the Andorran personal income tax on the income obtained. As always, it would be necessary to clarify it and study it better and see how to do everything.

      Regarding obtaining residency, you would have to either establish a company here or become a passive or non-profit resident, but for this you would have to liquidate a part of your capital (€ 25,000 approx in the case of a company, € 450,000 approx. In passive resident case).

      Reply
  8. Buenas tardes. I am Spanish and I intend to reside in Andorra (passive residence) in the near future precisely motivated by the crypto issue. As I observe that in your comments there is a lot of knowledge on this subject, I would appreciate a lot if you could help me to solve some doubts.

    In Spain staking is declared as follows; All that you receive for staking should be included in “Income from movable capital”, that is, translated into Euros and at the price that that crypto was quoted at the time of receiving the tokens, as a consequence of this you will have to pay taxes from 19% to 26%. Later if you sell those tokens as the FIFO method is applied (sell first the ones that have been acquired first), therefore you do not sell the ones you have received, you sell the ones you bought at a much lower price and that is why you generate a " Capital gain ”that is also taxed from 19% to 26% in“ Capital gains and losses ”. All this, if they are large amounts, also makes you go up in the different sections of personal income tax, therefore the result of the income statement is something totally confiscatory so that you have practically no benefit left, even if you have to pay taxes. of equity, you are forced to sell part of the cryptocurrencies to meet your tax obligations, so that in a few years they completely decapitalize you.

    I know that in Andorra there is no wealth tax, but my question is: Would staking also be declared in that way in the personal income tax in Andorra; When you receive it, Capital returns. If you sell the tokens, Capital gains and losses (applying the FIFO method) or on the contrary, in Andorra, would NOT the capital returns be declared and only the gains and losses would be declared? .I understand that the sections in the personal income tax does not exist since the maximum is the 10% or there are also different sections depending on what is earned?

    Another question. Regarding the justification for the acquisition and possession of cryptocurrencies. With the bank receipts of the acquisition with Euros, as well as with the csv and screenshots of the operations in the exchanges in the crypto-crypto exchanges, will it be sufficient documentation to justify to the Andorran bank the total legality of cryptocurrencies owned? The current returns would already be justified with documents or with the traceability in the blockchain of the staking address.

    Thank you in advance for the help you can give me and I do not rule out asking you for any other information on any other issue related to the crypto issue, I note that you are on this matter and it is appreciated.

    A cordial greeting.

    Reply
    • Hi José, thank you very much for your complete comment.

      In Andorra, the taxation of cryptocurrencies is similar to Spain and also dictated under jurisprudence by the DGT. And indeed, returns from staking have to be declared as capital returns and gains and losses as capital gains or losses.

      Of course, the difference, as it very well indicates, is that the Andorran personal income tax for the savings base is a single rate of the 10% with € 3,000 of income exempt from taxation. And on the other hand, there is no Wealth Tax.

      Regarding your last question, it would be necessary to analyze it more deeply and it also depends on the operation followed and the bank in which the funds received are going to be deposited. In principle, that should be enough, also depending on many things (the exchanges used, the operation carried out, the amount to be withdrawn, etc.).

      For more information we would have to make a formal consultation in the office.

      Reply
  9. Hello, if I am a full-time investor and I want to move to Andorra to be able to sell part of my crypto, live as a passive resident, and invest there, what could I do? With an approximate portfolio of 5M dollars, the problem is that I have made a lot of changes between cryptocurrencies but I have most of the data on purchases / sales etc.

    Reply
  10. Hello Andorra Insiders,

    Sóc andorrà i porto 1 anys invertint in cryptocurrencies.
    You buy them that I have fetched the cryptocurrencies from the COINBASE and BINANCE exchanges, they have signed the bank's debit card.

    Ara mateix has some benefits and I would be happy to re-enter a part d'aquests to the meu compte banking.

    I have verified the KYC meu and the VISA card to COINBASE and BINANCE, but, the bank compte not the puc to verify because they have said the exchanges suports that do not have agreement with our country.

    I suppose because here the SEPA transfers have to pay commissions to the rest of the countries members the mateixa transfer not the cap comissió.

    The question is:
    How could a part of the benefits of cryptocurrencies re-enter the bank compte andorrà?

    Gràcies.

    Reply
    • Hi David, thank you for commenting.

      Donat that do not know in depth who is the seu cas, I can not tell what is missing. It is also true that some Andorran banking entities are more open to this type of operation and other menys.

      In qualsevol cas, it is possible if it is fully in order, that some of our clients fan constantment movements between the bank and the Binance and Coinbase compte. If the quantity is filled, it is possible to contact us and to propose a consultation to solve it.

      Reply
  11. Very interesting, thanks for sharing. I have a query, suppose I have hypothetically created an nft project and sold it all and now I have a large sum of Ethereum. In this hypothetical case, would it be legitimate to move my crypto to the Andorran banking system since the funds come from the purchase of an artistic collectible? Thanks!

    Reply
    • Hi Juan, thank you very much for commenting.

      Well obviously not. The banking entities would ask you for a lot of documentation about the operation carried out, the funds and the movements made. As you understand it is a very suspicious operation.

      Reply
  12. Hello, I have quite a few cryptocurrencies of different types with many changes between them among other DeFi protocols where it is practically to have complete traceability. Together they have a high dollar value, would there be a way to settle in a bank showing only the entries of my current bank to an exchange like Coinbase?
    Thank you

    Reply
    • Hi Ernesto, thanks for commenting.

      If the traceability of the funds is not clear, I am afraid that you will not be able to do anything with said cryptos. In fact, you should already be clear about it because according to Spanish legislation, as in Andorran law, each exchange between cryptocurrencies is considered an exchange and therefore an operation subject to capital gains tax. You have more information here: https://andorrainsiders.com/impuestos-criptomonedas-espana-europa/

      Therefore, even if we assume that it is possible to liquidate the funds, you have a tax problem with them.

      Reply
  13. Hello, I am starting in this market and I have some doubts. I am from Spain and tax resident in Andorra. I see that most people ask about the sale of crypto, in my case being a resident here already, it seems the most obvious thing to do, selling them here. However, my doubts come about the purchase. I have an account in Spain and every month I bring legal money, from my payroll, to that account and I have thought if, due to commissions, it would be better to buy from Spain. Does anyone know how much it costs to exchange money from Andorra and how much from Spain? Can you also use revolut-type platforms from Andorra?

    Thank you.

    Reply
    • Hi Gemma, thank you very much for your comment. As far as we know, in Binance and in general in most exchanges there are no commissions when a transfer payment is made, but in Andorra, given that banks apply commissions on international transfers, there are commissions from them. On the other hand, if it is purchased with a Visa card, a 3% commission applies. From Spain it will be cheaper but there are many banks that do not allow the purchase of cryptocurrencies with their funds. Finally, you can have Revolut in Andorra.

      Reply

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Andorra Insiders is a professional legal, tax and accounting services platform, specialized in creating companies and establishing people in the Principality. 

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