Company registration in Andorra

Registration of a company in Andorra is currently one of the prevalent inquiries among foreign entrepreneurs, given the Principality's proposition of financial and fiscal advantages conducive to investors seeking fresh avenues for business expansion. The government has been engaged in the formulation of legal reforms over the past few years aimed at crafting a more progressive regulatory framework for investment activities in Andorra.

Laws governing business and business immigration have recently undergone significant liberalization and modernization to stimulate investment in the national economy. While the country is not a member state of the EU, it has adopted the euro as its official currency. Furthermore, for any trading enterprise, location is paramount. Easy access to other major European markets and unique infrastructure in terms of telecommunications, office space make Andorra one of the sought-after destinations for launching investment projects in Europe. We invite you to familiarize yourself with the registration process and available types of companies for foreigners.

Foreign investment in Andorra: which corporate form to choose?

When establishing a company in Andorra, one can opt for various organizational and legal forms. It is crucial to select the one that best suits the needs of your business. The government permits the following types of company registrations in Andorra for non-residents:

1. Societat Limitada (SL). This form is primarily chosen by small enterprises. The SL must have a capital of no less than 3,000 EUR. For such a structure, the appointment of 1 director and 2 founders of any nationality is required. Registering an SL in Andorra typically becomes the preferred choice for global entrepreneurs, as now non-residents can own 100% of voting rights in both trading and holding companies. It is also possible to register a company in Andorra with only one founder (SLU).
2. Societat Anonima (SA). The preferred legal form for larger organizations is the SA. To register an SA in Andorra, a minimum capital of 60,000 EUR is required. A minimum of 2 shareholders of any residency must be appointed.

You can also enter the local market through a branch or representative office.

Company registration process in Andorra

To create a company in Andorra, you need to follow a number of steps:

1. Apply for title reservation.
2. Draw up a Charter (which will indicate the company's activities, who the founder is and how it can be managed) and a package of other corporate documents.
3. Register a legal address in the Principality.
4. Open a bank account and deposit the initial authorized capital, it is essential to select a financial institution willing to engage with your business model. Additionally, confirmation in the form of a bank certificate demonstrating that a specified amount has been transferred to the company's bank account will be required. However, one of the most intricate procedures entails passing the bank's compliance requirements, necessitating the provision of information regarding the source of funds and the scope of business activities.
5. Obtain the Andorran Tax Identification Number (Número de Registre Tributari) through the Department of Taxes and Duties.
6. If necessary, obtain licenses, permits, and approvals for lawful business operations in Andorra.

Registration of a company in Andorra requires the preparation of an extensive list of documents. The average documentation package includes:

• A copy of the applicant's passport.
• Documents explaining the company profile and business model (for example, a business plan).
• Documents confirming the legal origin of funds.
• A certificate of no criminal record is usually valid for 3 months from the date of issue.

Key benefits for registering a business in Andorra

1. Strategic position: direct lines of communication with Spain and France.
2. Modern infrastructure.
3. The five national banks are among the most solvent in Europe.
4. Double taxation agreements with 7 countries. In addition to numerous tax agreements, Andorra is in the process of concluding an association agreement with the EU.
5. Favorable tax regime.

Tax advantages of Andorra

If you are looking for a country to launch a startup with a low tax burden, then Andorra offers much lower taxes than many neighboring countries.

Goods and services tax. This tax is only 4.5% of the total VAT (referred to as IGI). In certain sectors such as healthcare or education, the tax is reduced to 3.5%. This renders Andorra as the European state with the lowest VAT.

Corporate tax. The standard rate is 10%, making Andorra one of the jurisdictions with the lowest corporate income taxes in Europe. The rate can be reduced to 2% depending on the type of business.

Non-Resident Income Tax (NRIT) Rates. Individuals or entities whose commercial or professional endeavors are conducted within the Andorran territory but whose tax domicile is located outside the country are subject to non-resident income taxation, typically levied at a rate of 10%. The tax base for NRIT is determined based on the net profit derived from business activities, employment income, real estate revenues, royalties, and capital gains.

Capital gains taxation. The capital gains tax structure is another attractive inducement for investors if you are thinking about starting a business in Andorra. Capital gains are usually taxed at a rate of 10%. On the other hand, capital gain is not subject to taxes if it results from the transfer of an equivalent or qualifying participation in a holding company. You may sell your shares without incurring taxes if you own 25% or less of the voting rights or shares in the business. Holding assets for more than ten years is exempt from capital gains taxes.

Property tax. There exists a capital gains tax related to real estate, which diminishes from 15% to 1% and is applied to profits derived from real estate transactions, sales of real estate, depending on the duration the proprietor held the real estate prior to sale.

Types of residences in Andorra

Andorra provides different types of residences. Below you will find basic information about the most popular types of residences in the Principality.

Digital nomad visa. Very recently, in January 2023, the government endorsed a novel residency status in Andorra, aiming to catalyze digital and technological innovations within the nation. Precise legislation and further details remain undefined, yet these are the salient points extracted from official sources.

• New visa for Andorra exempts deposit requirement.
• Applicants must establish a business in Andorra.
• Qualification based on contributions to the digital economy, business, or innovation.
• No income threshold of 3 times local base salary.
• Visa issued within 3–6 weeks post acceptance.
• Mandates minimum 90-day residence in Andorra annually.

Passive residence with a minimum of 85% international activity. With this option, the applicant can open a business in Andorra; however, for the government to confirm the feasibility of the enterprise, a three-year business plan should be produced.

• Refundable deposit: 47,500 EUR to AFA.
• Company must pay taxes per Andorran system.
• Entity must conduct 85% of business outside Andorra.
• Visa issued in 3–6 weeks.
• Non-refundable fee: 2,500 EUR.
• Requires 90 days of residence annually.

To secure an active residency permit for self-employed, several essential criteria must be met:

• Residing in Andorra for at least 183 days per annum and paying 10% of income per year following the tax regulations of Andorra as a resident for tax purposes.
• Deposit of 50,000 EUR in AFA for each founder having 20% company's shares.
• Apostilled papers, comprising a declaration of absence of criminal history, issued within three months from the application date.

Conclusion

Andorra offers a plethora of benefits when it comes to foreign company registration. There are several company formation options, each appropriate for a different kind of business endeavor. But choosing to open a business in Andorra necessitates getting expert guidance to handle the legal requirements of the procedure. Our group can provide extensive assistance with business registration in Andorra in addition to a variety of consultancy services.