Despite being one of the most competitive tax jurisdictions in the world Andorra does not have an offshore company system as such. The most common definition of an offshore company is a corporation or other type of legal entity which is incorporated in an offshore country with substantial tax advantages or in a so-called “tax haven”. Other terms used are a shell corporation or international business company (IBC). Many would however refer to an offshore company as an entity not subject to taxation in their home jurisdiction, very flexible in terms of corporate regulations and typically an entity with no substance at all meaning not much more than a mailbox or entity registered at a law firm or accountant office. Many offshore companies in so-called tax havens operate with nominee director, issue bearer shares and have no accounting requirements whatsoever.
Andorran entities then certainly do not fit the description of the typical offshore company regime. Corporate taxes in Andorra are very low, but you must have a registered office and meet minimum substance requirements. Further you may not use a nominee director as such and shares must be registered to each shareholder. Finally, the accounting laws in Andorra require you to a bookkeeping standard with maintenance of annual accounts and tax declarations.
A company formation in Andorra is a process that requires absolute transparency from the shareholders in terms of providing a notarized identification and a certificate of criminal / police records for each shareholder with more than 10%. Further the official formation of the company is done in a public notary office in Andorra and requires the shareholders to be present in the moment of the formation.
Shares are registered under the name of the shareholder and the director carries a certain degree of legal responsibility for his actions which makes it difficult or nearly impossible to designate nominee directors.
It becomes very clear that an offshore company in Andorra as such are not existing, however this is only to the benefit and legal security of Andorra as a country and its fiscal framework. Andorra has signed double tax treaties (DTA) with several European jurisdictions and is positioning itself as a low-tax jurisdiction following substance requirements as per BEPS and OECD standards.
If your project involves an actively trading business with clients and providers in high tax jurisdictions such as the European Union, then an offshore entity in some remote tax haven will most likely not meet the substance requirements of the OECD. Further with regards to the automatic information exchange being implemented between 2016 and 2018 we strongly advise against such practices. Ultimately you wish to incorporate in a country that meets international requirements in terms of transparency, BEPS and of course with sufficient legal security to protect your investment.
Andorra may offer you those advantages and substance requirements such as office space and even qualified human resources are accessible and extremely competitive when comparing to other jurisdictions.
For more information on substance requirements please, click here.
To discover the tax advantages that Andorra offers, please, click here.