Andorra is to introduce a tax on personal income for the first time as it faces pressure from the its European neighbours to tackle tax evasion.
Antoni Marti, the head of the Andorran government, told French President Francois Hollande that he will introduce a bill before 30 June.
The principality will "gradually meet international tax standards", according to the office of the French president.
There is currently no income tax applied to individuals or corporations.
EU finance ministers have agreed to start talks with Andorra - along with Switzerland, Liechtenstein, Monaco, and San Marino - on swapping bank account information.
Recently, the European Commission told the European Parliament it wants EU-wide exchange of all types of income data as part of the fight against tax evasion.
EU tax authorities already automatically exchanged information for income such as employment, pensions and insurance but not for income such as dividends and capital gains.
Tax evasion costs EU states 1tn euros ($1.3tn; £850bn) a year, more than was spent on healthcare in 2008, the Commission has said, and some MEPs are calling for a Europe-wide blacklist of tax havens.
Mr Hollande was meeting with Mr Marti in Paris in his role as one of the two co-monarchs of Andorra, which is situated in the Pyrenees mountains between France and Spain.
More recently, France's Socialist government was hit by a scandal, as former minister Jerome Cahuzac was forced to resign over tax fraud allegations. He later admitted that he had hidden about 600,000 euros in a Swiss bank account.