Andorra and San Marino signed association agreements with the EU in Brussels on October 19, giving both microstates access to the bloc’s single market without EU or Schengen membership.
Monaco, which negotiated alongside them from 2015, suspended talks in 2023 over the free-movement terms.
The deals leave both countries’ low-tax regimes and non-EU residence routes untouched. The change affects EU nationals, who gain residence rights but face tight annual quotas. Andorran and Sammarinese citizens, meanwhile, gain the right to live and work across the EU.
Enis Sljivo of Ancova Capital calls the deal “a positive strategic development for both countries,” though its real impact “will depend on implementation and the balance between the benefits of integration and the additional regulatory obligations.”
Two Tax Systems, Left Untouched
Andorra taxes personal income at no more than 10%, exempting the first €24,000, and levies no wealth or inheritance tax. Corporate profits are also taxed at 10%, while the general indirect tax, Andorra’s equivalent of VAT, stands at 4.5%.
San Marino’s standard income tax is steeper, rising from 9% to 35%, alongside a 17% corporate rate. Its pull for wealthy foreigners lies in residence-linked regimes: a 7% substitute tax on foreign income for atypical residents, with an annual floor of €10,000 (approximately $11,200), and a 6% rate on pensions for qualifying retirees.
None of this changes. Andorra states in a declaration annexed to the agreement that “taxation does not fall within the scope of this Agreement,” and San Marino’s regimes for new residents likewise stay under national control.
Both microstates do commit to “good governance in tax matters,” including standards on transparency and information exchange. Within four years, they must also agree on mutual assistance in recovering tax claims, which would let EU tax authorities seek help collecting debts from people who have moved there.
Non-EU Investors: Same Routes, No EU Mobility
Residence for non-EU nationals stays under national law, as the agreement explicitly excludes immigration policy. Andorra’s passive residency keeps the rules in force since February, which require that applicants invest €1 million (approximately $1.12 million) in Andorran assets and pay a non-refundable €50,000 to the state.
San Marino’s elective residence, which requires a €500,000 property purchase or €600,000 in government bonds, is equally unaffected.
For non-EU clients, Sljivo sees Andorra potentially becoming “more attractive as a European base if closer integration delivers greater economic connectivity and regulatory predictability.”
He warns, however, that “access to the EU single market should not be confused with the right to live and work across the EU.”
Free movement applies to Andorran and Sammarinese nationals, not to foreign residents. Turning residence into an EU-mobile passport means naturalizing, which takes 20 years of residence in both countries, and Andorra does not allow dual nationality.
EU Nationals Gain Rights, but Few Places
EU nationals could now move to both countries under EU free-movement rules rather than discretionary national permits, but only within annual quotas. Andorra will run three, for economically active residents, passive residents, and seasonal workers, starting two years after the agreement enters into force.
The government says the quotas will be “very conservative, below the number of permits granted in recent years.”
For passive residents, Prime Minister Xavier Espot projected “some 20 or 30” a year in 2024, adding that EU applicants would no longer pay the deposit then required; how today’s €1 million investment rule will apply to them has yet to be clarified.
San Marino will issue enough permits for its population of working EU nationals to grow by 3% a year, or approximately 100 permits, with a far smaller allocation for those who do not work.
Both countries also retain the option to restrict property purchases by non-residents.
Sljivo expects EU clients to weigh Andorra differently anyway. Since they “already benefit from extensive mobility rights within the EU,” its appeal “is more likely to depend on its tax framework, lifestyle, business environment and individual circumstances.”
What Andorrans and Sammarinese Gain
Citizens of both countries gain the right to live, work, study, retire, and set up businesses anywhere in the EU on the same terms as EU nationals. Until now, Andorrans have relied on bilateral arrangements with Spain, France, and Portugal, needing national permits elsewhere like any other non-EU citizen.
San Marino’s Foreign Affairs Secretary Luca Beccari has said the change will help most those without a second citizenship.
Neither population gains EU citizenship or voting rights, and neither country joins Schengen.
Not Monaco or Liechtenstein
The Commission says the quotas are inspired by Liechtenstein’s arrangement under the European Economic Area (EEA) Agreement. Sljivo nonetheless cautions against putting Andorra in the same league as Monaco and Liechtenstein, since each “has a distinct relationship with Europe, its own tax framework and a different proposition for internationally mobile individuals.”
For clients, he argues, the real question “is how they compare in practice across taxation, residency rights, lifestyle, business opportunities and asset protection.”
What Happens Next
Neither agreement is yet in force. Both need the European Parliament’s consent and ratification by EU member states, and Andorra must also secure its co-princes’ consent and hold a consultative referendum, potentially in January.
San Marino’s path could still be complicated by Bulgaria, which held up Council approval this year amid a dispute over €15 million belonging to Bulgarian firm Starcom. San Marino froze the funds after refusing Starcom’s bid for Banca di San Marino and opening a criminal investigation, later widened to money laundering, into its owner, who is now seeking at least €150 million in treaty arbitration.
Until then, today’s residency rules apply in full to applicants of every nationality, EU citizens included.
