YouTubers in Andorra and the likely repetition of the same old tax mistakes

04.2021

In recent weeks, the media has given extensive coverage to the relocation of several Spanish YouTubers to Andorra, with the explicit purpose of reducing their tax burden on the income generated through their YouTube activity. This phenomenon has sparked a debate that could easily lead to misleading conclusions. From a tax law perspective, it is necessary to clarify what the change of residence of these Spanish YouTubers—previously resident in Spain—actually entails in fiscal terms.

The YouTuber as an Entrepreneur

A YouTuber, like any other professional running a business, is an entrepreneur. Although the nature of their activity may vary (for instance, singing, giving fashion advice, or discussing technology), their fundamental objective remains the same: generating income through the YouTube platform. This fact places them in a position comparable to other entrepreneurs, such as restaurant owners, lawyers, football players, or writers. In all these cases, the purpose of the business activity is to obtain profit, regardless of the geographical location of the clients.

Global Taxation and Business Seat

Businesses are subject to taxation on the totality of their income, not only on that obtained in the country where they are based. This principle, known as “worldwide income taxation”, establishes that if an individual professional or a company is domiciled in Spain, all income—regardless of where it is generated—must be taxed in Spain according to its national tax law.
For example, if a YouTuber earns income through YouTube from markets such as Canada, those profits must also be declared and taxed in Spain.
Every business activity must have a seat or place from which it is carried out. This seat determines the fiscal residence of the business. Therefore, if the business is operated from Spain, its income—regardless of geographical source—must be subject to Spanish tax legislation.

The tax reality

A fundamental principle of tax law is that what matters is not the formal documentation (such as the articles of incorporation of a company), but the substantive economic reality of the activity. This is the well-established principle of “substance over form.”
Hence, setting up intermediary companies in low-tax jurisdictions and claiming that they are the ones generating income is of no avail when, in fact, the business is effectively conducted from Spain.
Landmark cases involving figures such as Leo Messi, Imanol Arias, or Ildefonso Falcones illustrate how Spanish tax law disregards such artificial structures created solely to avoid taxation. These entities lack genuine economic activity and, therefore, any economic substance.

A similar situation would arise if a Spanish entrepreneur sold products, such as clothing, from Spain but issued invoices through an Andorran company, so that the profits would appear to accrue to the Andorran entity. From the standpoint of Spanish tax law, such a company would be deemed fraudulent, since in Andorra there would be no real business activity—only the façade of one. In other words, the economic activity would be artificially distorted, shifting the tax base from one country (Spain) to another (Andorra).

The YouTuber and their business activity

The business of a YouTuber, like that of a lawyer, engineer, or insurance broker, is characterized by a crucial feature: the YouTuber is the business. Wherever the individual is physically located, that is where the business exists.
Unlike an entrepreneur who owns a company with numerous employees and assets distributed across several locations, a YouTuber cannot separate their economic activity from their person. Although a YouTuber may incorporate a company, ultimately, they personally represent their business. Therefore, if a YouTuber wishes to reduce their tax burden, the only genuine option is to personally relocate to a jurisdiction with a more favorable tax regime—and to do so as an effective, genuine resident. Such a decision is entirely legitimate, provided it is not disguised or concealed. It is their full legal right to do so.

The transfer of tax residence to Andorra

Tax burdens across European countries are relatively comparable, with no substantial differences. Consequently, to achieve a significant reduction in overall taxation, the only viable option is to leave the circle of neighboring European jurisdictions and move to a country with very particular features—one that, for many years, has offered its residents or locally established businesses exceptionally low tax rates and, in some cases, has not applied the principle of worldwide income taxation to individuals or companies.
In this respect, Andorra is one of those jurisdictions that have historically maintained a very low-tax regime. This fiscal policy is the result of Andorra’s unique circumstances. While it is not possible to elaborate here in full on the country’s fiscal model, it is worth noting that Andorra lacks a social welfare state comparable to that of other European nations, nor has it ever aspired to one. With a population of just over 80,000, its residents often rely on hospitals in Spain—in cities such as Lleida or Barcelona—for emergency care. Similarly, those seeking higher education typically move to Spain, as Andorra has only recently begun to establish its own universities. Not long ago, Andorra appeared on the blacklist of tax havens, alongside countries such as Panama or Gibraltar.

For years, certain Spanish tax advisers encouraged some clients to transfer their tax residence to jurisdictions like Andorra, often without considering the evolution of tax law. While such practices were tolerated by the authorities for a time, they began to be challenged in the 1990s, and especially during the 2000s, when tax administrations introduced stricter control mechanisms and criminal tax law began to apply forcefully.

Notable cases from that period include those of Ana Torroja (lead singer of Mecano) and Arantxa Sánchez Vicario (tennis player), who claimed to live in Andorra but, in reality, maintained their personal and professional interests in Spain. They did not genuinely reside in Andorra; their move was purely motivated by tax reduction through the manipulation of reality.
A similar issue has arisen in the case of Shakira, who claims to have spent very little time in Spain and therefore argues she should not be subject to Spanish worldwide taxation, alleging tax residence in the Bahamas. However, the facts suggest otherwise: her husband and children lived in Barcelona, her private lessons (Zumba and French) were held in her Barcelona home, and her hairstylist visited her there twice a week.

Conclusion

In light of the above, it can be concluded that the relocation of Spanish YouTubers to Andorra is a legitimate, albeit rare, option, but that it is highly likely—just as in previous well-known cases—that such moves may have serious consequences in the future, especially in light of the evolution and maturity of Spanish tax law regarding such matters.
When an individual transfers their tax residence to one of these jurisdictions—until recently regarded as tax havens—the unavoidable consequence is that this young entrepreneur must sever all personal and professional ties with their country of origin in a definitive and verifiable manner, in order to prevent the Spanish tax authorities from concluding that the relocation is, in reality, nothing more than a fiction.

++ Article originally published in German in the magazine “Economía” (1/2021), issued by the German Chamber of Commerce in Spain.++