Andorra and Gibraltar occupy an unusual position on the edge of the European Union: attractive to internationally mobile individuals for their tax regimes, yet outside the Union’s internal mechanisms in ways that matter when their residents hold assets inside the single market. A resident of either who owns European real estate or business interests faces the same question as any non-Union holder: how to own those assets efficiently from outside the club.
The position outside the Union
A resident of Andorra or Gibraltar holding European assets directly, or through a local entity, does not have access to the internal mechanisms of the single market that a Union-resident structure enjoys. Withholding taxes, directive exclusions and treaty limitations can all bite. A Dutch holding inside the Union, owned from Andorra or Gibraltar, can capture the benefits of membership for the European assets, while the individual remains resident where they choose. We describe the holding mechanics in our note on the participation exemption.
Real estate is the common case
The most frequent situation is an individual holding European real estate, often in Spain, France or Portugal, from a base in Andorra or Gibraltar. The ownership structure determines the treatment of rental income, financing and eventual sale, and a Dutch holding above the property companies can provide a cleaner and more treaty-efficient structure than holding directly. The financing dimension connects to our note on private debt secured on Spanish real estate, since these owners frequently finance as well as hold.
Living outside the Union is a choice about where you are taxed personally. It does not have to mean owning your European assets from outside the Union’s mechanisms, and usually it should not.
Substance is decisive from outside
For a holder outside the Union, the substance of the Dutch structure is not a formality but the very thing that determines whether the structure works, as set out in our note on Dutch substance requirements. A structure owned from Andorra or Gibraltar with no genuine substance in the Netherlands is precisely the arrangement that modern anti-abuse rules are designed to defeat, and the individual relying on it is exposed. Genuine substance is what separates a legitimate European holding from a conduit.
Coordination across small jurisdictions
Both Andorra and Gibraltar have their own rules, their own treaties, and their own evolving relationships with the Union and with Spain and the United Kingdom respectively. A structure for a resident of either has to be coordinated across the home jurisdiction, the Netherlands, and the country where the assets sit, by advisers who understand all three. The individuals who do best treat this as a single coordinated exercise rather than assembling pieces that were designed in isolation.
Montclare runs a dedicated Iberia desk, structuring the corporate, tax and holding architecture for groups and families entering Europe through the Netherlands. Our services are set out on our services page.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.