Spain's 100th Tax Hike: Why Entrepreneurs Are Moving to Andorra in 2026

In January 2026, Spain’s government passed its 100th tax increase since Pedro Sánchez took office in 2018. It wasn’t a headline reform. Like most of the previous 99, it was a quiet adjustment: the Intergenerational Equity Mechanism (MEI) rising to 0.9%, a tougher solidarity surcharge on high earners, and yet another refusal to index income tax brackets to inflation.

While most European countries reduced their tax burden after the pandemic — nearly one percentage point of GDP across the EU-27 — Spain moved in the opposite direction. Its tax burden rose by almost two points. And in 2026, the trend continues.

For entrepreneurs, freelancers, and business owners already paying more than ever, the question is no longer whether taxes will keep rising. It’s whether it makes sense to keep paying them in Spain when a country with a radically different tax system sits three hours away by car.

What Changed in Spain in 2026

The 2026 tax changes aren’t a dramatic overhaul. They’re an accumulation of adjustments that, taken together, significantly increase the cost of working and running a business in Spain.

MEI up to 0.9%. The Intergenerational Equity Mechanism, created to fund baby-boom pensions, rises from 0.8% to 0.9% on the contribution base. For the self-employed, this cost falls entirely on them.

Tougher solidarity surcharge. Salaries above the maximum contribution base (now €5,101/month, up from €4,909) face progressive surcharges of 1.15% to 1.46%. This is an additional tax on qualified workers and the businesses that employ them.

Fiscal drag on income tax. For the sixth consecutive year, the government refuses to adjust income tax brackets for inflation. Inflation pushes taxpayers into higher brackets without any real increase in purchasing power. State brackets range from 9.5% to 24.5%, with regional surcharges on top.

New 30% savings tax band. Investment income above €300,000 is now taxed at 30%, after progressive increases in recent years. This hits investors, business owners taking dividends, and anyone with significant capital gains.

Enhanced electronic payment surveillance. Financial institutions must now report monthly to the tax authority on all electronic payments received by businesses and professionals, including those linked to Bizum. The previous €3,000 minimum reporting threshold has been eliminated.

Mandatory waste collection tax. Municipalities must now charge a fee covering 100% of waste collection costs. In Madrid, this means approximately €140 per citizen per year in additional charges.

Agricultural deductions eliminated. The 35% deduction on agricultural diesel and 15% on fertilisers disappear from 2026, increasing costs for the primary sector.

Municipal capital gains tightened. New coefficients penalise short-term property sales more heavily, with higher multipliers for transactions within the first years of ownership.

The Comparison Spain Doesn’t Want You to Make

200 kilometres from Barcelona, the Principality of Andorra applies a tax system that makes Spanish numbers hard to justify.

Concept	Spain 2026	Andorra 2026
Maximum income tax	47% (up to 54% by region)	10%
Income tax exemption	~€5,550 (personal allowance)	€24,000
Corporate tax	25% (24% SMEs)	10% (5% if profit ≤ €50,000)
Dividends (resident individual)	19-30%	0% (Andorran source)
VAT	21%	4.5%
Social security (total)	~36-38%	~22% (CASS)
Wealth tax	0.2-3.5% (varies by region)	0%
Inheritance tax	7.65-34% (varies by region)	0%

A concrete example: business owner with €150,000 profit

In Spain: The company pays 25% corporate tax (€37,500). If the owner takes the remaining profit as a dividend, they pay an additional 19-23% in savings income tax. Estimated total tax cost: €55,000-65,000.

In Andorra: The company pays 10% corporate tax (€15,000). Dividends distributed to a resident Andorran shareholder are taxed at 0%. Total tax cost: €15,000.

Difference: over €40,000 per year.

Another example: freelancer earning €80,000 net

In Spain: Effective income tax of approximately 25-30%, plus social contributions that can exceed €400/month. Estimated total tax burden: €28,000-32,000.

In Andorra: Income tax of 10% on income above €24,000, plus CASS of approximately 22% on a base salary. Estimated total tax burden: €12,000-15,000.

Difference: €15,000-17,000 per year.

Why Now?

Spain has been accumulating tax increases for eight years. What makes 2026 different?

The trend has accelerated. Tax increases are no longer exceptional — they’re the default mechanism for funding growing public spending. Public debt now equals three full years of tax revenue.

Enforcement has tightened. Bizum surveillance, monthly Form 170 declarations, and the upcoming Verifactu system (mandatory from 2027) mean the room for tax planning within Spain shrinks every year.

Technology makes it possible. For freelancers, consultants, content creators, traders, and digital business owners, physical location no longer determines income. If your business works from Barcelona, it works from Andorra la Vella — two hours away.

Andorra hasn’t raised taxes. While Spain accumulated 100+ increases, Andorra has maintained its rates: 10% maximum income tax, 10% corporate tax, 4.5% IGI. The January 2026 Omnibus 2 Law changed passive residency requirements (minimum investment now €1,000,000) but didn’t touch tax rates.

From What Income Does It Make Sense?

The tax savings become significant from around €60,000-80,000 in annual net income. For a business owner with a company generating over €150,000 in profit, the annual saving can exceed €40,000.

But the calculation isn’t purely fiscal. Andorra offers genuine safety (one of the lowest crime rates in the world), a top-ranked public healthcare system, free education in three public systems (Catalan, French, Spanish), proximity to Barcelona (2 hours) and Toulouse (3 hours), and zero wealth and inheritance tax for long-term estate planning.

What You Need to Know Before Making the Move

Relocating to Andorra isn’t just a change of tax address. It requires effective residency (183+ days per year), establishing a genuine economic activity for active residency, a €50,000 deposit with the Andorran Financial Authority (refundable), and professional guidance for the Spanish exit — including managing exit tax on unrealised gains and formal obligations with the Spanish tax authority. Our complete guide to moving from Spain to Andorra covers every step of the process.

Calculate exactly how much you’d pay in Andorra versus Spain with our free calculator.

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This article is for informational purposes only and does not constitute tax or financial advice. Tax obligations vary by individual circumstances. Always consult a qualified tax professional.

Sources: Juan de Mariana Institute (Impuestómetro 2025), BOE (Royal Decree-Law 16/2025), Spanish Tax Agency, Government of Andorra, Omnibus 2 Law (January 2026), CASS, Euro Weekly News, The Local Spain.