Investing in Andorra

Andorra is one of the most competitive European countries in terms of taxation. Andorran taxation conforms to all OECD standards, and Andorra has been removed from the list of tax havens. Corporation tax, personal income tax and non-resident income tax rates are at only 10%. IGI, the general indirect tax (equivalent to VAT), is at 4.5%. Moreover, Andorra has treaties which avoid double taxation.

The country also offers other advantages that are highly valued by investors, such as security, legislation, political stability and a high quality of life.

Thanks to the approval of Law 10/2012 of 21st June, on Foreign Investment in the Principality of Andorra, companies with 100% foreign capital may now be created. To set up a foreign-capital company in Andorra, the first step is to apply for reservation of the corporate name and authorisation for the desired type of investment. Four or five weeks later, you will receive an answer from the ministry concerned. After receiving authorisation to proceed with the foreign investment, and prior to the company’s incorporation before a public notary and registration at the Andorran Companies Registry, a company bank account must be opened. The last step is to request the commencement of trading by the company.

Non-resident foreigners can also invest in Andorra by purchasing property in the country (a foreign property investment permit is required).

Thanks to the approval of Law 10/2012 of 21st June, on Foreign Investment in the Principality of Andorra, companies with 100% foreign capital may now be created, and there are significant fiscal benefits. Residents also enjoy other advantages such as 0% taxation on company dividends and exemption from taxation on gifts or inheritances.

In the case of foreign investors (without residence in the country), the company or partnership will pay its taxes in Andorra, and the entrepreneur would be subject to the taxation of the country in which he/she is resident for tax purposes.

The main taxes in Andorra are:

• Personal Income Tax (IRPF): a maximum of 10% on €40,000 and above. On income of between €24,000 and €40,000, taxation is at 5%, and the first €24,000 is exempt from taxation. Savings income up to €3,000 is also exempt from taxation, and the sale of cryptocurrencies is taxed at a maximum of 10%.
• Corporation Tax (IS): a maximum of 10% is applied to net income, which, depending on the activity of the company, can be reduced to 2% or even 0%.
• IGI (General Indirect Tax, equivalent to VAT): only 4.5%, the lowest in Europe.

There are no wealth, inheritance or gift taxes. Furthermore, Andorra does not make it compulsory to declare assets abroad, nor does it apply any exit tax (the taxation of latent capital gains when a taxpayer changes their tax residence to another country).

To set up a company in Andorra, the following five steps must be followed:

1. Apply for company name: up to three names can be submitted, in order of preference. The government will provide confirmation within 10 days.
2. Application for investment authorisation: each non-resident shareholder or partner must request prior authorisation for foreign investment in an Andorran company. This process takes approximately 10 to 15 days.
3. Pre-opening of the company bank account, with the documents required by the chosen bank. The activity of the company, as well as the origin of the funds, and your profile, must be outlined with complete transparency. Pre-authorisation can take between one week and four weeks.
4. Incorporation and registration of the company at the Companies Registry: the statutes are formalised before an Andorran notary, and the company is registered at the Andorran Companies Registry.
5. Commencement of trading by the company: at this point you must have a confirmed address for your company, an electrical report for your offices or premises and a current contract for a fire extinguisher at your company’s address.

The steps to invest in Andorra are somewhat different for residents from those for foreigners. For foreign investment, after applying for the company name, an application for authorisation of the investment must be made on behalf of each non-resident partner or shareholder. If the investor is already a resident, he/she only needs to submit the application for the company name.

The following steps are identical for foreigners and residents: opening a bank account in an Andorran bank and depositing the share capital, incorporation and registration of the company at the Andorran Companies Registry, and opening of the company’s business (a physical premises/address and at least one employee are required).

To pay taxes in Andorra, the effective tax residence must be changed. A person can live in different countries, but can only have fiscal residence in one of them (the one where he/she will be taxed).
In order to establish fiscal residence in Andorra, the following requirements must be satisfied:

• Living de facto in the Principality for more than 183 days per year (either renting a home or owning it).
• The nuclear household (partner and children) must also have its residence in Andorra.
• The economic centre should be in Andorra.

The cost of setting up a company in Andorra will depend on the type of business, but in general terms, it can be as much as €5,500, which includes professional fees, governmental and notary’s fees. 

To this should be added the minimum share capital of the company (€3,000 in the case of an S.L. or €60,000 in the case of an S.A.) and the annual maintenance cost of the registry (about €850 for an S.L. and about €950 for an S.A.).