Passive residences are one of the types of residence offered in Andorra. Basically it is for people who do not carry out a professional activity in the principality and in principle it is very simple. However, in practice you have some risks that have to be considered if you want to have a residence process as safe as possible.
For a residence to be fiscal, besides spending more than 183 days in the country, it is necessary that the center of economic and family interest be in the country of residence. In the case of a retired person, it is not extraordinarily complex, but in the case of people who have professional activities, it can be really complicated to obtain the fiscal residence with a passive, if not impossible. It will be achieved, but we will be in an investigation of the Treasure of the disaster.
Another thing that is done a lot is the passive as a means of having assets in Andorra or other associated countries without sharing information of those assets with the country of tax residence. This is perfectly possible, but care must be taken with the ages and the assets of the people. What for a retired person or with very sporadic activity can be ideal, for a person with constant activity can be a problem. Each case must be analyzed with care and taking into account that this type of residences work better for people over 50 years of age than for other age groups.
In short, passive residences are a way of getting either the fiscal residence or an extra layer of privacy (or even both), but they are not valid for all people nor are they a magical solution to be used lightly. Many times it is better to review the general patrimonial scheme and an active residence than a passive residence when exposing ourselves to it will entail additional risks.