How to Start a Business in Andorra

Andorra is one of the most favourable jurisdictions for registering a business in Europe. The corporate tax rate is only 10% here. Plus, minimal administrative costs make the country attractive to international companies. You can register a limited liability company or a joint stock company in Andorra as there is no requirement to be a resident of the country. Registration is available to foreigners. In addition, local banks offer high standards of service and confidentiality.

In this article we will look at the process of company registration, tax rates and the advantages of doing business in Andorra.

Why incorporate a company in Andorra

Andorra is a small independent principality located in the Pyrenees Mountains between Spain and France. This country attracts entrepreneurs from all over the world due to its economic stability, low taxes and flexible legislation for doing business.

Andorra is not a member of the European Union, which allows it to keep its bureaucratic procedures simpler than the EU. At the same time, it uses the euro as its official currency. The country’s economy is mainly based on tourism, banking and duty-free trade, which has resulted in a high level of wealth. Finally, one of the most attractive tax systems in Europe makes it an ideal jurisdiction for international business.

7 reasons to incorporating a company in Andorra

1. Low tax rates. Andorra offers one of the lowest corporate tax rates in Europe, at just 10%. In some cases, the effective rate can be reduced even further thanks to double tax treaties.
2. No limitations to foreign ownership. Local residency is not required to register a company in Andorra – foreign investors can own 100% of the company.
3. Economic stability. Andorra is among the countries with the highest GDP per capita. In 2024, according to IMF calculations, Andorra’s GDP per capita will be USD 44,900, putting the country on a par with France (USD 47,359). This confirms Andorra’s sustainability and economic well-being. The state interferes minimally in private business affairs.
4. High confidentiality of the banking system. Andorra is known for its high level of banking confidentiality and reliability of financial institutions. Local banks offer competitive rates and minimal requirements for corporate clients.
5. No bureaucracy. The process of registering a company in Andorra is simple and transparent. To start a business, it is enough to obtain a foreign investment permit and open an account in one of the Andorran banks.
6. Low operating costs. Compared to neighbouring countries, Andorra has lower operating costs – office rent, accountants and administrative costs are cheaper.
7. Possibility of obtaining residency. Registration of a company in Andorra can be the basis for obtaining a residence permit. The country offers several residency programmes that may be suitable for both permanent residence and occasional business trips.

Types of companies in Andorra

In Andorra there are several types of legal entities that can be registered by foreign entrepreneurs. The choice of company form depends on the nature of the business, the amount of capital and the entrepreneur’s objectives. Here are the main forms:

1. Societat Limitada (SL) – Limited Liability Company

This is the most popular form of doing business in Andorra. It is suitable for small and medium-sized businesses.

• Minimum authorised capital: €3,000. Funds must be deposited in the company’s bank account before incorporation.
• Number of founders: Minimum of two founders, who can be both residents or foreigners.
• Liability of the founders: Limited to the amount of their shares in the authorised capital. The founders are not personally liable for the company’s obligations.
• Issue of shares: No shares are issued, instead the authorised capital is divided into shares of the founders.
• Management: The founders appoint a director, who can be either one of the founders or a hired manager. If there are several directors, they form the Board of Directors.

SL is ideal for companies involved in trade, services or small-scale production.

2. Societat Limitada Unipersonal (SLU) – Sole Proprietorship with Limited Liability

This form is similar to SL. The main difference is that the founder and owner can be one person.

• Minimum authorised capital: Same as SL – €3,000.
• Number of founders: One founder, who may also be a director.
• Founder’s liability: Limited to its contribution to the authorised capital.

SLU is suitable for those who want to run a business on their own, without partners, while protecting their personal assets.

3. Societat Anónima (SA) – Public Joint Stock Company

SA is a larger corporate form designed for companies that plan to raise capital through issuing shares and operating in international markets.

• Minimum authorised capital: €60,000, which must be paid into the company’s account prior to incorporation.
• Number of founders: Minimum two founders, residents or foreigners.
• Shareholders’ liability: Limited to the value of their shares.
• Issue of shares: SA can issue both registered shares and bearer shares.
• Governance: The company is managed by the Board of Directors, which is appointed by the shareholders. An annual shareholders’ meeting is held and the company is audited.

This form is suitable for large enterprises that can attract additional investment through the sale of shares. However, SA is more expensive to maintain than SL or SLU due to audit and management requirements.

4. Societat Colectiva (SC) – Full partnership

This is a classic form of partnership where all partners are fully liable for the company’s obligations. There are no limited liability partnerships in Andorra, so all partners are liable for the company’s debts with their personal assets.

• Minimum authorised capital: Not required.
• Number of partners: Minimum of two participants, which can be either individuals or other companies.
• Liability: Unlimited. Partners are fully liable for the debts and obligations of the company.
• Management: The partners manage the company jointly, unless otherwise stated in the partnership agreement.

SC is usually chosen for businesses where trust between the partners is high, as they are all responsible for the company’s debts. This type of legal entity is tax neutral, avoiding double taxation.

5. Branches of foreign companies

Branches are only permitted for foreign insurance companies or companies whose activities are recognised as important to the Andorran economy.

• Authorised capital: Authorised capital is not required for branches.
• Responsibility: Full responsibility is borne by the parent company.

Branches are rarely used as it is recommended to register subsidiaries for normal business.

Corporate Taxation in Andorra

Andorra offers one of the most favourable tax systems in Europe. Tax rates are lower than in most other countries and accounting is as simple as possible.

Main tax rates

1. Corporation Tax:
   The standard rate is 10%, but for some companies, especially holding companies, the tax can be reduced to 2% due to incentives and international double tax treaties.
2. Value Added Tax (IGI):
   The IGI base rate is 4.5%, one of the lowest in Europe. Reduced rates apply to certain goods and services:
   • 2.5% for tourism and medicine,
   • 9.5% for banking and construction services,
   • 1 per cent on food, books and other goods.
3. Capital Gains Tax:
   Capital gains are taxed at 10%, but if the gain is realised from the sale of subsidiaries abroad, it is not taxed.
4. Dividend Tax:
   Dividends are taxed at the company level, but personal taxation does not apply to them, making them a favourable tool for business owners.
5. Partnerships (SC):
   Partnerships in Andorra are exempt from corporate tax – profits are taxed at the level of partners in their country of residence.

Company registration for non-residents

Foreign entrepreneurs can easily incorporate a company in Andorra without being resident in the country. The incorporation process is transparent but requires following certain steps and collecting documents.

Registration process

1. Obtaining authorisation for foreign investment
   Foreign investors need to obtain authorisation to contribute capital to the Andorran economy. This is a mandatory step, especially if the foreign ownership of the company exceeds 10%. The authorisation requires the submission of documents including a passport, a criminal record certificate and proof of the legal origin of the funds.
2. Company name reservation
   You need to select several options of names for the company, which must be checked for uniqueness. Approval of the name takes approximately 10 days.
3. Opening a bank account
   In order to deposit the authorised capital of a company, a bank account must be opened with a local bank. Opening an account can take several weeks as the bank checks all documents and the business plan.
4. Preparation of incorporation documents
   Lawyers draft the articles of association and memorandum of association of the company, reflecting the structure and rules of business. The documents must be notarised in Andorra.
5. Registration in the commercial register and obtaining a tax number
   After signing all the documents, the company is registered in the registry and also receives a tax identification number (NRT). At the same time, a commercial licence must be issued.

Cost of registration

• The cost of incorporating a company in Andorra varies depending on the form of legal entity. For Societat Limitada (SL) or SLU, the registration costs range from €3,000 to €12,000, including legal and notary services.
• There is also an annual registration fee, which is around €850 for SL and SLU type companies, and €950 for an SA (public company).

Timeline

The company incorporation process usually takes 8-10 weeks. This time includes obtaining permits, checking the name, opening a bank account and completing all the paperwork. For larger companies, such as SA, this can extend to 12 weeks.

Imperial & Legal provides a full range of services for company registration in Andorra, as well as assistance in obtaining a residence permit, opening bank accounts and supporting all stages of business immigration.

Relocation to Andorra by business

Registering a company in Andorra can be the basis for obtaining a residence permit, which offers advantages for both business and living.

Residence options

Active residence

Suitable for those who plan to run a company locally. Requirements:

• Living in Andorra for at least 183 days per year.
• Actively running a business.

The residence permit is issued for 2 years with the possibility of renewal.

Passive residence

For entrepreneurs who are not planning a permanent residence. Conditions:

• Investment in the economy (company, property or deposits).
• Residence in Andorra for a minimum of 90 days per year.

It is also issued for 2 years with extensions.

Advantages of an Andorra residence permit

• Low taxes and no inheritance tax.
• Opportunity to include family members in the residence.
• Safety and a high standard of living.

An application for residency can be submitted after company registration. The processing time is from 1 to 3 months.