From January 1st, 2021, the Principality of Andorra ceased to be part of the list of countries, territories and regions with clearly more favorable privileged taxation regimes, according to Ordinance No. 309 – A / 2020, published on December 31 in Diário da República, which thus changes Ordinance No. 150/2004, of February 13.
Under Article 63º-D of the General Tax Law, the countries, territories, or regions included in the list in question may request the member of the Government responsible for the area of finance to review their framework in the list, based, namely, on the non-fulfillment of the criteria established in the nº 2 of the referred article. This important mechanism ensures that the list of countries with a more favorable taxation regime is updated.
In this context, the Principality of Andorra has sent a formal request for the revision of its framework in the mentioned list, which has been object of a positive decision prepared by the Tax and Customs Authority, considering that the conditions to exclude the Principality of Andorra from the mentioned list have been fulfilled under the terms legally established.
What we may call the « blacklist » emerged as a defensive measure to fight tax evasion and international fraud, also helping to clarify uncertain terms such as « clearly more favorable tax regime », having been chosen, for reasons of legal security, the system of case-by-case enumeration.
In the Portuguese list, different jurisdictions remain, such as the Bahamas, United Arab Emirates, Hong Kong, Uruguay, Jersey, Cayman Islands, Virgin Islands, San Marino, Liechtenstein, Gibraltar, Panama, among others.
In the case of the Principality of Andorra, which has now had its “exit ticket”, it should be noted that since 2017 there is an existing convention between the Portuguese Republic and the Principality of Andorra to avoid double taxation and prevent tax evasion in matters of income taxes. For this reason, it seems to us that, incomprehensibly, this decision to remove the Principality from the list is a ‘late-decision’.
Nevertheless, this is a decision that makes us believe that maybe shortly more countries may see their removal from the list, either by a positive response to a formal and express request, or by changing the strict criteria presented in Article 63º-D of the General Tax Law.