In this guide
Two European Options, Different Trade-Offs
Andorra and Portugal are two of the most popular European destinations for entrepreneurs relocating from high-tax countries. Both offer lower taxes than France, Spain, or Germany — but with very different lifestyles and requirements.
Portugal's Non-Habitual Resident (NHR) regime made it a tax haven darling for years. But with the NHR being replaced by a more restrictive regime in 2024, the comparison has shifted. This guide reflects the current (2026) situation.
Tax Comparison (2026)
The tax picture has changed significantly since Portugal modified its regime.
Andorra
Corporate tax: 10% flat Personal income tax: 0–10% (first EUR 24,000 tax-free) Capital gains: Included in personal income (10% max) Wealth tax: None Inheritance tax: 0% for direct family Indirect tax: 4.5% IGI
Andorra's system is simple and predictable. The 10% rate applies to everyone — no special regimes, no expiration dates, no qualifying conditions beyond residency.
Portugal
Corporate tax: 21% (+ municipal surcharge up to 1.5%) Personal income tax: Up to 48% (+ 5% solidarity surcharge on high incomes) New "scientific research and innovation" regime: 20% flat rate on qualifying income for 10 years Capital gains: 28% (or included in progressive rates) Wealth tax: AIMI on high-value real estate (0.4–1.5%) VAT: 23%
Portugal's new regime is more restrictive than the old NHR. Only certain qualifying activities (scientific research, technology, innovation) are eligible for the 20% flat rate. Not all freelance or consulting activities qualify. And even at 20%, it's double Andorra's rate.
Residency Requirements
Andorra: 183 days minimum presence per year (strictly enforced). EUR 50,000 refundable deposit. Active business required. Not an EU member.
Portugal: 183 days minimum presence per year (or a habitual abode). No deposit required. EU member with full freedom of movement. The Golden Visa program (investment-based residency) still exists but no longer includes real estate investment — qualifying investments include fund subscriptions (EUR 500,000+) or cultural heritage donations.
Portugal's EU membership is a significant advantage for entrepreneurs who need EU market access, want to hire across the EU, or value freedom of movement within the Schengen area.
Lifestyle Comparison
This is where the two countries couldn't be more different.
Andorra
Population: ~80,000. Mountain microstate between France and Spain. One main road. Exceptional outdoor lifestyle (skiing, hiking, mountain biking). Very safe, very quiet. Limited nightlife and cultural scene. Community of entrepreneurs is small but growing. Languages: Catalan (official), Spanish, French, Portuguese widely spoken.
Portugal
Population: ~10.3 million. Atlantic coast with beautiful beaches and mild climate. Vibrant cities (Lisbon, Porto) with rich cultural life, excellent food, and active startup scenes. International airport hubs. Growing tech community (Web Summit, startup accelerators). Languages: Portuguese (English widely spoken in business and tourism).
For lifestyle, Portugal wins decisively. Lisbon and Porto offer a quality of life that few European cities match at their price point. Andorra's lifestyle is specialized — it appeals to a specific type of person who values mountains, quiet, and outdoor activities above all else.
Cost Comparison
Andorra setup: EUR 12,000–16,000 + EUR 50,000 refundable deposit Portugal setup: EUR 5,000–10,000 (company formation + residency)
Andorra ongoing: EUR 10,000–15,000/year (office, accounting, social security) Portugal ongoing: EUR 8,000–15,000/year (accounting, social security, compliance)
Andorra cost of living: EUR 2,500–4,000/month Portugal cost of living: EUR 2,000–4,000/month (Lisbon); EUR 1,500–2,500/month (smaller cities)
The costs are roughly comparable, with Andorra having higher setup costs (due to the AFA deposit) but lower ongoing tax burden.
Which Should You Choose?
Choose Andorra if: tax minimization is your primary goal (10% vs 20%+), you enjoy mountain lifestyle, you don't need EU membership for your business, you value privacy and a small community, and you want a simple, permanent tax regime (no 10-year expiration).
Choose Portugal if: you want EU membership and Schengen access, you prefer city life, beaches, and a vibrant cultural scene, the 20% flat rate is acceptable for your income level, you want access to a larger talent pool, or you plan to eventually obtain EU citizenship (Portuguese citizenship available after 5 years).
Vector operates in Andorra. For Portugal setups, we can refer you to trusted local partners. If you're deciding between the two, our Relocation Readiness Audit can help you compare both options based on your specific situation.
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