Create a company in Andorra
The benefits of creating a company in Andorra
Andorra has gone through many changes with regards to the formation of companies and their ownership. Foreign ownership of companies used to be limited to 49% of the company’s capital. New reforms and the opening to international business have brought fundamental changes to the old legislation within the past five years. The country has now transformed to be 100% open for foreign investment and ownership in / of local companies.
Entity models 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 / provider location or ownership are treated as resident companies as there is no other model. Companies are expected to prepare quarterly and annual reports as well as filing the tax declarations associated. Legal and fiscal requirements for the company formation are very similar to the Spanish model.
The reasons to create a company in Andorra
However the advantages of forming your Andorran company make it one of the most attractive locations in Europe if not worldwide :
I. 10% maximum corporate tax on profits
II. 2% corporate tax on profits for companies involved in activities such as:
– international management of intangibles
These 2% reduced corporate tax models are subject to some minimum requirements.
III. Tax-exempted status for certain holding companies with minimum participation % in foreign companies
IV. Andorra has Europe’s lowest value added tax (VAT / sales tax) at 4.5%
V. Annual municipal, registry of commerce, government fees to maintain your company are typically around 800 EUR for ordinary company types
VI. Social security contributions for companies are around 15.5%
We will then introduce you to the Andorran tax jurisdiction and how your business or personal tax planning might fit. Andorra has gone through tremendous changes in the past five years 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 jurisdiction 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.
Steps to create a company in Andorra
1. Application for the name of the company:
You can choose three different denominations in order of preference. The government confirms the name within 10 days.
2. Request for foreign investment authorization:
Each shareholder / non-resident partner must request prior authorization of the foreign investment in an Andorran company. This process takes approximately 4 weeks.
3. Pre-opening of the bank account for the company:
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 4 weeks to have your account opening pre-authorized.
4. Constitution and registration of the company in the commercial register:
The statutes / articles of incorporation are formalized before an Andorran notary and the company is registered in the Andorran commercial trade registry.
5. Opening of the company’s commerce:
The opening of the trade is requested. At this time you must have the address of your company, an electric bulletin / certificate of your office or premises and a valid contract of an extinguisher at the address of your company
The purchase of an already existing shelf company in Andorra may be an alternative to a new creation but it is not always the best option as we explain here in detail. It must analyze its priorities and especially the risks of a purchase of a company that has been constituted for many years.
Other benefits of incorporating in Andorra
Besides the numerous tax benefits offered when you create a company in Andorra, the Principality is also very attractive for its low business and infrastructure costs.
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.
Wages in Andorra
Andorra has also very competitive wages. The average Andorran wage is about €2050 per month, and the monthly minimum wage is €1017. 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 12% higher than the Andorran one once the social charges are included in the statistics. As far as France is concerned, the average wage has maintained at €2,500 per month. Once the 30% social charges are added, it even goes up to €3,250 per month, while it is about €2,367 every month in Andorra – the difference between the two countries reaches 30%.
The advantages for French companies are obvious: from a tax point of view, they can save more than 23% on their benefits, and more than 30% on labour costs.
Infrastructures in Andorra
Besides the numerous tax advantages in Andorra, there are a lot of other attractive criteria for foreign companies.
Leasing costs for buildings 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, local taxes represent an annual cost of less than €500, which won’t be too heavy on the benefits of Andorran resident companies.
The health care system is also very efficient in Andorra thanks to its high-quality equipments and a coverage even when you are abroad thanks to international agreements. Besides, Andorran education system is composed of three different high quality and free models, in addition to a lot of possibilities to be enrolled in private or specialized schools.
Therefore, Andorran infrastructures are more than attractive for foreign residents and companies. Communication routes are being improved currently, and the country offers a 100% fibre optic coverage on all its territory, while the coverage rate in the European Union is only about 21%. It may become a really interesting location for distance selling and e-commerce companies from Andorra