Set up a company in Andorra
Andorra’s taxation is undoubtedly very attractive. For many investors and entrepreneurs it is the main reason for considering the formation of a company in Andorra. However, Andorra has other important advantages for companies and people who operate and live in the Principality, such as its digital infrastructure, its strategic location and, above all, its quality of life. These other advantages are key to consider Andorra not only for its competitive taxation but also for the benefits of establishing the place of effective management of your company. Adding real value from Andorra by establishing the effective residence of a member of the company’s board of directors, be it a director, partner or appointed director can make the difference between legal tax planning and a potential tax irregularity.
The benefits of setting up a company in Andorra
Andorra has gone through many changes with regards to the company formation and their ownership. Foreign ownership of companies in Andorra used to be limited to 49% of the company’s capital. New reforms and the opening to foreign investment have brought fundamental changes to the old legislation. The country has transformed to be 100% open for foreign investment and ownership of local companies.
Reasons why to set up a company in Andorra
The advantages of forming your Andorran company make it one of the most attractive locations in Europe if not worldwide :
- 10% maximum corporate tax on profits
- 2% corporate tax on profits for companies involved in activities such as: – international management of intellectual property. This 2% reduced corporate tax model is subject to some minimum requirements.
- Tax-exempted status for certain holding companies with minimum participation % in foreign companies
- Andorra has Europe’s lowest value added tax (VAT / sales tax) at 4.5%
- Annual municipal, registry of commerce, government fees to maintain your company are typically around 800 EUR for ordinary company types
- Social security contributions for companies are 15.5%
We will introduce you to the Andorran tax system and explain you how your corporate or personal tax planning may fit. Andorra has gone through tremendous changes in the past decade to move away from a “tax haven” status to a transparent, modern and low tax jurisdiction. Those changes are continuing and will position Andorra among other jurisdictions such as Switzerland, Luxembourg or Cyprus. Contact us and we will be happy to get you to speak with one of our tax planning professionals in Andorra.
Entity models for company creation in Andorra
The following entity models exist for company formation in Andorra:
The SL “Societat Limitada”
a limited liability company with a minimum capital requirement of 3000 EUR.
The SA “Societat Anonima”
a corporation company model with a minimum capital requirement of 60.000 EUR.
The company must have a registered office and director (Administrador). There is no offshore entity model such as in other traditional “offshore jurisdictions”. Essentially all companies independently of their trading activities, client or supplier location are treated as resident companies as there is no other model. Companies are expected to prepare annual reports as well as filing the tax declarations for VAT and corporate tax. Legal requirements in terms of documentation and process for the company formation are very similar to the Spanish system.
Steps to form an entity in Andorra
You can choose three different denominations in order of preference. The government confirms the name within 10 days.
Each shareholder / non-resident partner with more than 10% participation must request prior authorization of the foreign investment in an Andorran company. This process takes approximately 4 weeks.
A request to open a bank account with the documents required by the bank is presented. You must explain your activity, the origin of funds and present your profile with total transparency. You must estimate between a week and up to 2 weeks to have your account opening pre-authorized.
The statutes / articles of incorporation are formalized at an Andorran notary and the company is registered in the Andorran commercial trade registry.
The commercial authorization for an actively trading company must be requested. At this time you must have the address / domicile of your company, an electrical certificate of your office or premises (home office) and a valid contract of a fire extinguisher at the address of your company. The Coworking solution is a popular option.
The company will have its tax code activated and registered with the social security.
The purchase of an already existing shelf company in Andorra may be an alternative to a new set up but it is not always the best option as we explain here in detail how to buy a company in Andorra. You should analyze your priorities and especially the risks of a purchase of a company that has been constituted for many years.
Other benefits of incorporating in Andorra
Labour costs in Andorra
Labour costs are lower in Andorra than in France or in Spain for example. Social security charges for companies are 15.5% in Andorra, while the same charges represent more than 32% in France and Spain. Thus, it is easier for companies to hire in Andorra than in other countries, especially considering that the fix cost is reduced for any entrepreneur who would decide to incorporate in Andorra.
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Wages in Andorra
Andorra has also very competitive wages. The average Andorran wage is about €2100 per month, and the monthly minimum wage in 2023 is set at €1,286.13. According to the last figures from the Instituto Nacional de Estadísticas (Spanish National Statistics Institute), the average Spanish wage is close to the Andorran one, although it becomes 16% higher than the Andorran one once the social charges are included in the statistics. As far as France is concerned, the average wage is around €3,300 per month. Once the 32% social charges are added, it even goes up to €4,500 per month, while it is about €2,425 in Andorra – the difference between the two countries reaches more than 50%.
In this example the advantages for French companies are obvious: from a tax point of view, they can save more than 23% on their profits, and more than 50% on labour costs.
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Infrastructure in Andorra
Besides the numerous tax advantages in Andorra, there are many other selling points for foreign companies.
Leasing costs for commercial space that can be used as small offices are lower than in France or Spain: for only €400 you can settle your company’s headquarters in Andorra and enjoy all the benefits offered by the Principality. Moreover, municipal fees and duties apart from taxes represent an annual cost of less than €800.
The health care system is also very efficient in Andorra thanks to its high-quality equipments and a coverage abroad given international social security agreements. The Andorran education system is composed of three different high quality and free tuition models, in addition to a lot of possibilities to be enrolled in private or specialized schools.
Andorra’s infrastructure is more than attractive for foreign residents and companies. Access routes are being improved currently with the opening of a heliport / airport, and the country offers a 100% fibre optic coverage on all its territory, while the coverage rate in the European Union is only about 44%. That is why many internet entrepreneurs are setting up distance selling and e-commerce companies from Andorra.
Full video guide - How to form a company in Andorra
FAQS
The total cost to set up a company in Andorra is between 5000 EUR and 6500 EUR. Costs are divided into fees for professional services and governmental / notary fees. We charge between 3000 EUR – 4000 EUR in professional fees for a typical company depending on various factors such as a company with or without commercial activity, number of shareholders, type of activity, etc. The government charges and notary charges add up to between 2000 to 2500 EUR depending on the capital and type of company.
You need to calculate between 7 to 12 weeks depending on the type of company, profile of the shareholders and time of the year. For example a holding for a Spanish shareholder future resident in Andorra may take 7 weeks while a non-European shareholder not planning to become a resident with a commercial activity requiring special authorization may take up to 15 weeks.
Technically you can be a non-resident shareholder and director of an Andorran entity. However banks and local government do require economical substance in terms of physical office space and human resources. This means that if you do not reside or plan to reside in Andorra in the short term you may need to consider a part-time or full-time employee to take run daily operations of the company. We strongly suggest to consider residency in Andorra for the director and / or shareholder of the company. From 2023, with a participation of more than 34% you may apply for residency. After all tax advantages for you as a shareholder or managing director are maximized with being a tax resident in Andorra.
You can buy an already existing company in Andorra, however time and money saved is not substantial. Any non-resident wishing to create a new or buy an existing company will need to go through the process of foreign investment authorisation. Change of shareholders and name need to be processed through a notary similar when you set up a new company. Finally bank accounts need to be opened again and the commercial authorization has to be done again when domicile and activity code changes. Additionally the current owner may ask you for a price to sell the company and due dilligence for outstanding debt is highly recommended. We recommend a new set up.
Government and banks in Andorra are subject to strict anti-money-laundering regulations and conduct a due dilligence. They will check your credentials and background.
– Criminal records legalized with the apostille of Den Hague. They are normally valid for a maximum of 3 months from the date of issue.
– Copy of your passport – legalized in Andorra or with the apostille
– Documents explaining your economical profile / income / qualifications for the company formation (CV, income statement etc.)
How we can help you
Analyze your current business
We analyze your current business model to explore the tax planning alternatives you have by forming an Andorran entity.
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