The EU and Andorra have signed a new tax transparency agreement that will make it harder for EU citizens to stash undeclared income in financial institutions in Andorra.

Under the deal, Andorra and EU Member States will automatically exchange information on the financial accounts of one another’s residents from 2018.

The pact will also allow member states to receive the names, addresses, tax identification numbers, and dates of birth of their residents with accounts in Andorra, as well as other financial and account balance information.

This agreement is in line with EU’s effort to boost tax transparency and tackle tax avoidance and evasion as well as complies with the new OECD/G20 global standard for the automatic exchange of information.

The EU has already signed similar agreements in 2015 with Switzerland, Liechtenstein and San Marino, while talks are also being finalised with Monaco.

European commissioner for economic and financial affairs, taxation and customs Pierre Moscovici said: "Today’s agreement will throw a powerful spotlight on those who try to escape taxation by hiding their money abroad.

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"It also introduces a new level of openness and cooperation between Andorra and the EU in taxation."