The Principality of Andorra is a tiny European country nestled in the Pyrenees Mountains between Spain and France. It has a long history and no less ancient borders, which were finally drawn in the 13th century.
Every year, the ski resorts, ancient castles and medieval churches of this hospitable principality welcome up to 9 million tourists from all over the world. Andorra is best known to the business world as an ideal place to start a new company. Imperial & Legal has prepared a brief overview of the main advantages of this jurisdiction for international business.
Andorra offers a truly unique combination of advantages for international entrepreneurs — from a low corporate tax rate and minimal government interference to a world-class banking system and access to European markets. Add to that a fast-track registration process, low operational costs, and the opportunity to obtain residency, and you get one of the most attractive jurisdictions for setting up a company in Europe today
The Principality has one of the lowest corporate income taxes in Europe at only 10 per cent. In some cases, the tax legislation allows the effective corporate tax rate to be even lower.
Double tax treaties help entrepreneurs optimise the taxes of international corporations registered in this jurisdiction.
The Principality of Andorra has an amazing political status. Since the early Middle Ages, these lands were first protected by Charlemagne and the Frankish Empire. Then they were under the protectorate of the Kingdom of Navarre. From the end of the 13th century Andorra became an associated jurisdiction with Spain and France.
It is somewhat of a stretch to say that the association has gone nowhere, since the Principality is landlocked and economically dependent on its immediate neighbours. At the same time, the Andorran authorities have shown marvellous diplomacy to make the most of their position.
For example, the Principality does not have its own currency and uses the euro for settlements. However, at the same time Andorra is not a member of either the Eurozone or the EU and thus faces almost no economic problems of these associations.
According to World Bank data for 2023, Andorra is among the top twenty countries in terms of GDP per capita (based on purchasing power parity). By this parameter, the Principality confidently overtakes its nearest neighbours – Spain and France, as well as such countries as Belgium, Sweden, the United Kingdom and Canada.
The high level of prosperity in the country has been made possible by the development of tourism, banking and duty-free trade. Another remarkable feature of Andorra is the minimal level of government interference in the affairs of private business.
Since the Principality does not have its own national bank, which fulfils the functions of a market regulator, Andorran financial institutions have developed independently according to the laws of free competition. As a result of these objective economic processes, the high standards of work of modern Andorran banks have been recognised.
In this country, banks offer entrepreneurs efficient financial instruments, low service fees combined with minimal corporate requirements and a high level of confidentiality.
The reliability of Andorran banking institutions is often compared to that of Swiss banks in their best years.
On the one hand, due to its modest size, the Principality’s domestic market is unlikely to satisfy the needs of an ambitious entrepreneur.
However, on the other hand, there are large European countries in relative proximity to this jurisdiction, whose vast markets can be successfully exploited with the help of an international company registered in Andorra.
You do not need to be a resident of the Principality or reside in Andorra to set up a company in Andorra. Andorran law allows 100% foreign ownership of corporations registered in the jurisdiction.
All a prospective company owner in the Principality of Andorra needs is a foreign investment permit, a verified and reserved company name and an open account in one of the local banks.
Your costs of running an Andorran firm will be significantly lower than similar costs in neighbouring jurisdictions. As a rule, businessmen in Andorra pay less for office rent, as well as for the services of a professional accountant, corporate secretary and nominees.
Andorra’s immigration legislation allows for obtaining a residence permit both for someone who will visit the jurisdiction occasionally on business and for someone who plans to permanently move to the Iberian Principality with their family. Passive and active residences are used for these purposes.
Registering a company in Andorra will be an additional argument in favour of the entrepreneur when applying for a long-term visa. A positive experience of living in the country (without offences or seeking help from the local social services) will help you obtain an Andorran residence permit for 10 years.
In our article, we will only look at the most common forms of doing business in Principality.
The Catalan name for this type of corporate structure is Societat Limitada. The abbreviation SL may also be used in the name.
The establishment of such a company in Andorra requires at least two founders, either local residents or foreigners. The Principality’s corporate laws allow a commercial or holding SL to be 100% owned by foreign entrepreneurs.
The founders of Societat Limitada must deposit €3,000 into a special account with an Andorran bank as payment for the minimum authorised capital.
The capital of the company is divided into shares of the participants. Andorran SLs may issue registered shares in accordance with the founders’ shares in the authorised capital.
Each founder contributes its share to the share capital, usually in cash, although transfers of tangible property and intellectual property rights as well as financial obligations are permitted. If SL goes bankrupt, the liability of the shareholders is limited to their share of the authorised capital.
A limited liability company in Andorra is managed by a director appointed by the founders. If there are many directors, they form a Board of Directors. One of the shareholders or a hired manager may serve as a director.
In Catalan, these commercial organisations are called Societat Limitada Unipersonal. The abbreviation SLU is also used.
In its basic parameters, this corporation is not much different from a regular SL, except for the structure. The SLU has only one founder, who often also acts as a director of the company.
The Catalan name of a public limited company is SocietatAnónima. In the statutory documents, the abbreviated SA may be placed at the end of the name of the corporation.
This legal form is generally recommended for the incorporation in Andorra of large companies that will list their shares on the stock market. SA has the ability to issue bearer shares. In order to register such a company, the founders must pay a minimum capital of €60,000.
A public limited company may be opened by 2 founders, including tax residents of other countries. The liability of the shareholders of an Andorran SA is limited to the current value of the shares held.
SocietatAnónima, registered in Andorra, is governed by a board of directors. Once a year, the company’s management conducts an audit and convenes a general meeting of shareholders.
The obvious advantages of a public company are the possibility to attract additional investments into the business by placing shares on the stock exchange and a high level of confidentiality for ordinary shareholders. However, maintaining an SA is more expensive for businessmen than maintaining an ordinary limited liability company.
The key advantages of Andorran partnerships (Catalan designations are SocietatColectiva and SC) are:
No requirement to pay a minimum founding capital;
tax neutrality – the income of such business structures is not taxed at the company level.
As there are no limited liability partnerships in Andorra, any partnership registered in Andorra is a general partnership, i.e. with unlimited liability of all its members.
A minimum of 2 partners will be required to form an SC. Private entrepreneurs and commercial entities, including those of foreign origin, may participate in an Andorran partnership.
The partners manage their own business and all their relations are governed by a partnership agreement, which is notarised in Andorra. The Principality‘s laws governing general partnerships do provide for the possibility of limiting the liability of certain partners by amending the partnership agreement accordingly.
10% is the standard rate of corporate tax in Andorra, which is levied on all profits (including foreign profits) of resident companies, as well as on portion of non-resident companies’ profits earned in the Principality.
There are a few exceptions to this rule:
A zero corporate tax rate applies to the profits of pension funds and private investment funds registered in Andorra.
Dividends are only subject to corporate tax at the company level if the recipient is an individual.
Capital gains are considered to be company profits and are also subject to corporate tax. However, if the capital gain is realised by an Andorran company as a result of the sale of a subsidiary abroad, no corporation tax is due.
The analogue of the value added tax in Andorra is called Impost General Indirecte or IGI for short. It is an indirect tax that is levied on the sale of goods and services rather than on the profit at the end of the accounting period.
The Principality prides itself on the low level of this tax. Its basic rate is only 4.5 per cent. Andorraalsoappliesincreased and reduced IGI rates:
The zero and reduced rates of Andorran VAT have resulted in some types of goods in the Principality being 25-40% cheaper than in neighbouring France and Spain.
You can get even more information about taxes in the Principality of Andorra and effective methods of tax optimisation by booking a consultation with Imperial & Legal.
At first glance, incorporating a new company in Andorra seems to be a fairly straightforward process. However, the first impression is deceptive – even with an experienced registration agent, incorporation of a company with foreign participation takes at least 8 weeks in the Principality.
With the qualified assistance of Imperial & Legal you will become the owner of an Andorran company within a reasonable time and without significant financial losses. The whole registration process can be divided into seven stages.
Before reserving a name, our corporate attorneys carry out a preliminary consultation with the client to find out what kind of business they need a company in Andorra for and to select the appropriate corporate form. According to statistics, SL – limited liability companies – are the most popular with investors.
You must come up with 3 variations of a name for your company. The Andorran company name does not have to be in Catalan, but it absolutely must be written in Latin letters. Our staff will check your suggestions against the names of existing companies in the jurisdiction and then send a formal application to the Andorran government to reserve one or all three names.
On the form, the names are arranged so that the most interesting name comes first. The document also contains a detailed description of your company’s future activities and its legal form (SL, SLU or SA). You will receive a reply to the application within about 10 days.
This step is often put in the first place, because all further actions will be meaningless if you are not allowed to make an investment in the Andorran economy – to pay the authorised capital of the company.
The procedure is mandatory for those foreign entrepreneurs whose share in the company’s authorised capital is greater than 10%. What do I need to submit to the Andorran authorities to obtain authorisation? The minimumpackageofdocuments includes:
Copy of passport;
Police certificate of no criminal convictions;
Documents confirming the legal origin of the funds to be used for payment of the authorised capital.
The procedure for obtaining a foreign investment authorisation can take up to 6 weeks. Our specialists will help you to collect and prepare all the necessary documents.
In parallel with obtaining a foreign investment permit, our lawyers are working on opening a bank account in Andorra to pay for the authorised capital.
Every financial institution in the Principality conducts thorough due diligence on all its potential corporate clients. The bank must understand the conceptual model of your business, so we add to the personal documents of the businessman, bank statements, personal and corporate tax returns (for the current and past financial years) a brief description of the future activities of the company to be opened in the Principality, or a business plan drawn up in accordance with all the rules.
The involvement of Imperial & Legal greatly increases your chances of obtaining a bank account in Andorra on the first application, but the application process itself can take several weeks. Once the bank has opened a current account for you, you must pay the authorised capital and obtain a confirmation certificate.
Your memorandum (memorandum of association) and articles of association show the structure and the allocation of rights and obligations between the members of the company – issues that the founders must agree between themselves.
The company documents indicate the legal address of the company, for non-resident business structures this is the virtual office in Andorra, which is provided by the registration agent, i.e. our company.
Imperial & Legal uses standardised forms of articles of association in Catalan. On request, we can customise the Articles of Association and Memorandum of Association and Memorandum of Association, taking into account the specificities and structure of the corporation to be incorporated.
Our lawyers then contact the notary in the Principality and agree on the place and time for the signing of the articles of association by the participants. If you do not plan to come to Andorra, your legal representative can sign the documents for you.
Once the founders and directors have signed the Articles of Association and Memorandum of Association in the presence of a local Notary Public, and the Notary Public has drawn up the official deed of incorporation and entered the necessary information in the Registrar of Companies, your company is deemed to be established. However, it still cannot carry out commercial operations without risking the assets of the founders.
To trade and pay taxes in Andorra, your company needs a Número de Registre Tributari or Tax Identification Number. We will send the appropriate request to the Andorran Tax Department.
In addition, a commercial licence should be obtained from the municipality nearest to your registered office in the Principality so that your company can start operating and begin billing customers.
Under current regulations, new entrepreneurs must provide the Andorran authorities with information on all shareholders and ultimate beneficiaries of their company. Our lawyers complete a declaration listing the owners and send it to the relevant department at the final stage of business registration.
Although, as a rule, co-operation with Imperial & Legal does not end there, as our clients entrust us with a lot of related tasks – from obtaining a long-term visa to Andorra to preparing annual accounts.
Only branches of foreign insurance companies may be registered in the Principality. The right to have branches of other foreign companies in Andorra may only be granted if it is officially recognised as being in the public interest.
Thus, if you are engaged in a normal operating business in your home country, it is highly likely that you will not be able to open a branch of your company in the Principality of Andorra. However, there is nothing to prevent you from registering a subsidiary in this jurisdiction by choosing one of the corporate forms discussed in our article.
Passive residence in Andorra is a residence permit that allows a foreign national to stay in the Principality for no more than 90 days per year.
This immigration category is suitable for those foreign businessmen who do not plan to run their company in Andorra directly at the place of incorporation, but who have to come to Andorra occasionally. For example, to make changes to the statutory documents in the presence of a notary.
The Principality’s corporate laws do not prohibit foreign businessmen from registering new companies from a distance. With the help of a competent registration agent and authorised person, you can indeed become the owner of an Andorran corporation from the comfort of your own home.
The only obstacle in your way may be the bank in Andorra. Sometimes representatives of a financial institution insist on a face-to-face meeting with a businessman and will not agree to an online interview. In this case, you will either have to apply for an account at another Andorran bank or come to the negotiations in person.
The tasks of our lawyers include minimising the personal interaction of the client with representatives of banking structures to the necessary minimum.
This is an annual registration fee paid by private and public companies in Andorra. The amountofthispayment is:
around €850 for SL and SLU;
about €950 forSA.
Probably not. If any time is saved, it will be spent checking the status of the company being acquired and looking for its outstanding debts.
Judgeforyourself:
Even when buying a ready-made business in Andorra, you are still a foreigner making an investment and therefore you will need to be vetted and authorised by the authorities.
The re-registration of the company in your name involves a notarised procedure for amending the statutory documents, which you should attend in person or send a representative.
Finally, the transfer of the corporate bank account and assets of the old company comes with a number of onerous checks on the new owner.
It turns out that setting up a new company will take you about the same amount of time as buying an already registered company. Such a transaction makes sense if you want to acquire not just a legal entity, but an operating business with valuable assets, such as unique equipment or technology.
Partnerships operating in the Principality are subject to a single tier taxation scheme whereby the partnership is not tax resident and does not pay corporation tax.
The profits received by SC are distributed to the partners in accordance with the partnership agreement, and they, in turn, declare the dividends received and pay income tax in the country of their tax residence.
The amount of time it takes to set up an Andorran corporation depends on several variables:
the legal form of the company;
participation of foreign citizens and companies;
response times of government agencies and banks to requests;
the professionalism and attentiveness of your registration agents.
We at Imperial & Legal do our best to ensure that the authorities and bank managers do not have any additional questions about your application and documents. In this case, the time we will spend with you on company registration in Andorra will be:
about 8-10 weeks – for a limited liability company;
up to 12 weeks for a publicly traded company.
How to start a business in Andorra? Which type of company to choose? What opportunities this jurisdiction offers? What taxes a company will have to pay?
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