Introduction
The Llei 5/2025, del 6 de març, per al creixement sostenible i dret a l’habitatge (Llei Òmnibus 5/2025), has transformed the landscape of real estate investment in Andorra, particularly for foreign investors. While the new restrictions and levies aim to promote housing access and market sustainability, they have also increased the complexity of structuring investment vehicles such as real estate SICAVs.
A properly structured SICAV can be a viable option to channel investment into real estate assets, provided it complies with current regulations. This article analyzes how to structure a real estate SICAV within the framework of the Llei Òmnibus, highlighting the keys to leveraging its fiscal and operational advantages while minimizing risks and meeting legal requirements.
What is a Real Estate SICAV?
A SICAV is a collective investment company that allows for the management and diversification of real estate assets within a regulated framework. SICAVs are highly useful for:
- Family offices and high-net-worth individuals seeking professionalized management.
- Business groups looking to diversify treasury surpluses.
- Real estate investors focused on rental and asset turnover.
- Wealth managers needing a regulated vehicle to structure portfolios.
Tax Advantages of a Real Estate SICAV
Real estate SICAVs offer significant tax benefits:
- 0% Corporate Income Tax (CIT): SICAVs are exempt from corporate income tax.
- Exemption for non-resident investors: Dividends and capital gains from the sale of shares are exempt from the Non-Resident Income Tax (IRNR).
- Exemption for resident investors: Dividends and capital gains from the sale of shares are exempt from Personal Income Tax (IRPF) and CIT, provided minimum participation and holding requirements are met.
The Impact of the Llei Òmnibus (and Llei 3/2024) on Real Estate SICAVs
The Llei Òmnibus (and Llei 3/2024) has tightened conditions for foreign real estate investment, directly affecting SICAVs with foreign participation.
The main changes include:
1. Mandatory Prior Authorization
The obligation to obtain prior administrative authorization for all foreign real estate investments already existed before the Llei Òmnibus came into effect. However, its essential nature is worth emphasizing, as without this authorization, the notary cannot formalize the transaction. Although not a novelty, it remains a key step in the process.
2. Quantitative Limits
A foreign investor, including SICAVs with foreign participation, can only acquire:
- One plot for a single-family home.
- Two apartments, flats, or studios (with limited annexes).
- Six parking spaces not linked to a residence.
- Properties intended for affordable rental for at least 10 years are not counted within these limits but must meet certain requirements.
3. Usage Prohibitions
- Real estate development for sale: Prohibited unless 100% of the project is allocated to residential rental, with at least 50% at affordable prices and a commitment to rent for ≥10 years.
- Tourist accommodation: Prohibited to allocate properties to vacation or tourist rentals (e.g., HUTs).
- Evasive schemes: Prohibited are rent-to-own agreements, transactions between related parties, or any operation constituting legal fraud.
4. Deadlines and Monitoring
Once granted, foreign investment authorization has a limited validity. The investment (property acquisition) must be completed within the indicated period in the authorization or, failing that, within six months. If the operation is not materialized within this period, the authorization expires unless expressly extended once. Additionally, the imposed conditions are subject to biannual monitoring or as required by the competent ministry, as determined by regulations.
5. Tax on Foreign Real Estate Investment (IIEI)
The tax on foreign real estate investment applies progressive rates of 3%, 5%, and 10%, depending on the number of properties acquired. Once the maximum rate of 10% is reached, all subsequent investments are taxed at this rate, significantly increasing costs. A 90% rebate is available when the property is allocated to affordable rental as a habitual and permanent residence for ≥10 years, with registration and reimbursement obligations in case of non-compliance.
Is a Real Estate SICAV Still Viable Post-Llei Òmnibus?
Yes, as long as it is correctly structured.
Key points to consider:
- Operational Restrictions: The limitations on the number of properties and permitted uses reduce the flexibility of SICAVs to diversify and efficiently manage real estate assets.
- Tax Burden on Property Acquisition: While the general taxation of SICAVs is undoubtedly attractive (0% CIT, exemptions in IRPF and IRNR), the progressive IIEI levy on foreign investment increases costs at the time of property acquisition, especially in projects involving multiple acquisitions.
- Regulatory Complexity: The need to comply with prior authorizations, tax rebates (if applicable), and biannual monitoring requirements adds an administrative burden.
Despite the above, SICAVs remain fiscally attractive in terms of taxation on income and capital gains, making them an interesting option for specific real estate projects, such as long-term residential rentals. However, it is essential to carefully plan acquisitions to minimize impact and ensure regulatory compliance.
Conclusion
The Llei Òmnibus 5/2025 has radically changed the landscape for real estate SICAVs in Andorra, imposing restrictions that limit their flexibility and increase operational costs. While this investment vehicle offers tax advantages, its viability depends on proper strategic planning and regulatory compliance. In this context, it is crucial to thoroughly evaluate whether, in each specific case, it is the right choice for each investment project, considering both the new limitations and the investor’s objectives.
Need Advice?
If you are considering structuring a real estate SICAV or evaluating investment alternatives in Andorra, our legal team can help you navigate this complex regulatory environment. Contact us to analyze your case and design a strategy tailored to your needs.
