Andorra is a landlocked country in the Pyrenees mountain range between Spain and France. It is one of the smallest countries in Europe, occupying approximately 468 square kilometres and with a population in 2019 (est.) of 77,072. Ethnic groups (in 2018) included Andorran (40.2 per cent), Spanish (35.0 per cent), followed by Portuguese (18.2 per cent) and French (6.5 per cent). The official language is Catalan, with French, Spanish and Portuguese also spoken. Roman Catholicism is the predominant religion.
Australia established diplomatic relations with Andorra in 1998, with accreditation through the Australian Embassy in Madrid. As an indication of the growing bilateral relationship, a Tax Information Exchange Agreement was signed in 2011. Then-Parliamentary Secretary for Foreign Affairs, Richard Marles, visited Andorra in April 2012, the first such high-level visit from either side.
Australia's economic relations with Andorra are minimal. In 2017, Australian imports from Andorra were worth almost AUD135 000 and Australian exports to Andorra were worth almost AUD292 000 (World Bank figures).
The Principality of Andorra is one of the oldest countries in Europe. However, centuries of isolation meant that, until recently, it was relatively removed from the mainstream of European history and shared significant ties only with France and Spain. Expansion in tourism and telecommunications since the 1970s has gradually opened it up to the rest of Europe.
Andorra's official history began with a charter granted by Charlemagne in 805 as a reward for resistance against the Moors. The territory then belonged to the Diocese of Urgell in north-west Catalonia, which signed a defence agreement with the neighbouring French Count of Foix in 1095 in order to protect the territory from external aggression. In 1278, the Mediation of Aragon formalised the power-sharing arrangement between the Bishop of Urgell and Count of Foix (the two princes), giving Andorra the territorial and political form it holds today as a principality. In 1589, when the Count of Foix was enthroned as King of France, the role of co-prince of Andorra passed to the French monarchy. After the French Revolution, it passed to the French presidency. Andorra was an independent feudal protectorate from 1278 to 1993, when the country's first written constitution was ratified, creating a modern system of government and establishing the principality as a parliamentary democracy.
Andorra has moved to become an active member of the international community, including through membership of the United Nations, the Council of Europe and the Organization for Security and Cooperation in Europe. Although not a member of the European Union, Andorra uses the euro as its currency and enjoys a 'special relationship' with the EU, such as being treated as an EU member for trade in manufactured goods (no tariffs) and as a non-EU member for agricultural products.
Politics and Government
Andorra is a constitutional diarchy and parliamentary democracy. Its heads of state — co-princes — are the President of France, Emmanuel Macron (since May 2017), and the Bishop of Urgell (based in the neighbouring Spanish town Seu d'Urgell), HE Joan Enric Vives i Sicília (since May 2003). The role of the co-princes is largely ceremonial.
Parliamentary terms in the General Council (Andorran parliament) are four years, with half the counsellors elected in equal numbers from the seven administrative parishes, and the other half from a single national constituency. The head of government (Prime Minister-equivalent) is Antoni Martí Petit, whose broad centre-right coalition, Democrats for Andorra, came to power in April 2011 and again in March 2015.
The central challenges for the principality remain implementation of further fiscal reform, closer integration with the EU through finalising negotiations on an Association Agreement and ensuring continued economic growth.
The services sector is the most important in Andorra, accounting for 87.4 per cent of the country’s workforce. The services sector is heavily dependent on tourism, which constitutes the largest source of income for the country (Andorra received more than 8 million visitors in 2016). The retail and hotel industries are also very prominent, and so is the country’s large banking and financial sector, which accounts for almost 21 per cent of GDP.As only two per cent of Andorra's land is arable, it relies heavily on imports of food and other goods. Spain and France are its main trading partners. Spain buys nearly 60 per cent of Andorra's exports and provides 62 per cent of its imports; France takes 18 per cent of Andorra's exports and provides 16 per cent of its imports.
Previously a longstanding tax-free entity, Andorra has enacted policies committing to greater domestic and international tax compliance. In 2013, it introduced a value added tax (VAT)-like general indirect tax (called IGI, at a rate of 4.5 per cent), corporation tax and non-resident income tax. Personal income tax was introduced on 1 January 2015 at a flat rate of 10 per cent (5 per cent for incomes between 24,000 and 40,000 Euros). Andorra has signed tax information exchange agreements (TIEAs), including the OECD Declaration in 2014, and TIEAs with Spain and Italy in 2015. It has also signed double taxation treaties, including those with France and Portugal. Andorra has reformed and modernised its banking sector (which accounts for 21 per cent of GDP), and created new laws for enabling transparent direct foreign investment. Andorra is diversifying its economy in areas such as IT, education and medical services.