This article has been revised and updated in accordance with the latest amendments to Andorran regulations. Updated August 2023.
Creating a holding company in Andorra is a way of optimising the taxation of the return on your investments. Holding companies in Andorra are subject to specific taxation that is different to normal companies, with more benefits and fiscal attractiveness. It should be noted that a holding company is considered as such when, in addition to holding shares in other companies, it is viewed as having proper economic substance. If the company does not meet this requirement, we would be dealing with joint ownership of property.How can you optimise the taxation of your investments?
One of the best ways to benefit from Andorran taxation is to acquire Andorran residence, which will allow you to create a company or holding company that becomes the owner of all its investments both inside and outside of the country. The holding company is responsible for receiving all the dividends from its foreign investments in Andorra. If these dividends come from countries where the corporate tax has already been paid, they will subsequently not be taxable in Andorra under the special regime for holding shares in other companies, also known as “Holding” companies. For example, a company based in Spain would only pay taxes of 5% instead of a minimum of 19% in the country of origin. Therefore, the ideal option for optimising your taxation is to reside in Andorra and create a holding company to receive dividends or capital gains from the sale of shares without additional taxes. When these dividends are allocated to your Andorran holding company, the non-taxable income may be distributed as a natural person, as Andorran residents do not have to pay taxes on capital gains from Andorran companies. Another very interesting option is reinvesting these dividends from your Andorran holding company in corporations in any country where you have an economic interest. Andorra has already signed fifteen double tax treaties (Spain, France, Portugal, Luxembourg, Liechtenstein, Cyprus, Malta and the United Arab Emirates, San Marino, Hungary, the Netherlands, Croatia, Czech Republic, Iceland and South Korea), and is negotiating with the major European countries to extend this network of treaties. This will facilitate investments and transactions with the most important countries in Europe and avoid double taxation.When are Andorran holding companies exempt from taxation?
Generally speaking, an Andorran holding company is exempt from taxation when:- Dividends or shares in profits from companies not resident in Andorra benefit from exemption in the Principality of Andorra, in the same way as income derived from the transfer of the corresponding holding.
- If a non-resident company located in a foreign country has a holding company in Andorra, it is subject to paying taxes similar to the Andorran income tax in its own country.
- When a resident in Andorra receives dividends from an Andorran holding company, these are not taxed by IRPF (personal income tax).