Historically, Andorra has had no income, capital gains, sales, gift or inheritance tax, and gaining residency was relatively simple. The Andorran government implemented a 4.5% value-added tax (VAT) and a set of relatively stringent residency requirements, primarily based on an investment of no less than 400,000 euros.
In 2013, Andorra announced plans to impose an income tax in response to pressure from the European Union. The tax was introduced in 2015, at a flat rate of 10%. Employees pay social security taxes at rates of 5-9% on their salaries; employers pay social security taxes of 13% on their employees’ salaries. In October 1991, a form of value-added tax was introduced at a general rate of 4% on most goods and at higher rates of 8% and 12%, respectively, for special goods and for deemed luxury goods. There are also taxes on the import of certain goods.
Source: http://www.investopedia.com/ask/answers/092815/why-andorra-considered-tax-haven.asp, https://en.wikipedia.org/wiki/Taxation_in_Andorra