The Foreign Investment Law allowed the year 2012 that foreign capital participated in investments that aimed at the acquisition of properties and other real rights that would imply a proprietary use in Real Estate, located in the territory of the Principality of Andorra.

In this way, in a moment of change of paradigm with regard to foreign investment, a limitation included in article 14 of the aforementioned Foreign Investment Law was incorporated that made it impossible for Real Estate acquisition to foreign legal entities that is devoted to the acquisition or construction of real estate in order to market them, including leasing.

However, the Law left the door open to be able to materialize this type of operations through the creation of Andorran investment vehicles, in order to be able to carry out the investment. Therefore, the door was closed to that international Real Estate investment vehicles acquired real estate directly in the Principality.

The United States Real Estate Investment Trust (REIT), vehicles created at the end of 1800, Spanish Publicly-traded Real Estate Investment Company (SOCIMI) or other investment vehicles. International Real Estate with similar characteristics, have as its main activity The acquisition, promotion and rehabilitation of real estate assets for their leasing or exploitation and are currently attracted by the Andorran market due to their high profitability prospects. In Andorra, we find the real estate agencies of the OIC created by the Law regulating the collective investment agencies of Andorran law that have been a figure that has not been exploited in the country and that they could have taken more care. For all, it is clear that the hotel and commercial real estate market has become an attractive market for the investor in recent years. An example has been the case of Atom Hoteles Socimi S.A., for example.

We must recognize that these Real Estate investment vehicles, in order to enjoy special tax regimes in their countries of origin, must guarantee certain and very strict requirements in order to guarantee the protection of the investor, what it does At present, it is difficult to directly acquire Andorran properties.

Consequently, the current foreign investment regulations can be improved in some aspects in order to favor this investment and ultimately increase the rehabilitation of the hotel and commercial real Estate park of the country, which is indispensable for the economic growth of Andorra.

It is a shared objective of the effort carried out for the continuous improvement of tourist and commercial demand figures, not only from a quantitative but, above all, qualitative point of view. In this way it becomes key to encourage investment in the hotel and commercial sector. Lately we are confirming that there is a strong interest on the part of international investors to finance hotel properties due to the strong impetus of the sector, both from the point of view of the acquisition and of the reform and construction of new facilities.

But we have to keep in mind that the purchase and sale of these Real Estate assets becomes an operation of relative complexity. The heavy investment involved implies that planning in different phases is usual. From the letter of intent that the future buyer sends to the potential seller, where we will most likely venture into a due diligence or technical and legal audit of the real estate asset that if all goes well will materialize in a first contract that will end with the public deed of formalization of the purchase and sale. However, often issues that would need to be regulated more closely by our rules often appear. A small example we find when signing preparatory agreements before obtaining the foreign investment authorization, and therefore before, before the Andorran company that will carry out the acquisition of the asset. There would be a better interpretation of the taxation of these preparatory agreements.

Certainly the option to increase the investment rate would be to enable the direct investment of foreign companies, evidently with all the necessary internal controls, without the need to create ad hoc Andorran societies. This could increase the attraction of Socimis or Reits for example to Andorran assets.

Despite the improvement options pointed out, certainly the growing interest of foreign investors for Andorran Real Estate assets is good news and shows that things are doing well. Often the fruits of a new policy, in this case the opening to foreign investment, are not fast. Investors need to know the market, see their stability, analyze opportunities and, above all, do not change the conditions in a long period of time. In short, legal and economic security of your investment. Andorra is doing things well in this direction and now it is beginning to prove.