The Principality has become a magnet for foreign businessmen wishing to set up in Andorra and take advantage of its many benefits.
These include its excellent taxation conditions, its high quality of life and its geographical location between France and Spain, with good communications. In 2021 alone, 916 applications for foreign investment were approved and formalised. This demonstrates the Principality’s great potential.
If you are thinking of opening a business in Andorra from abroad, this article is for you.
Table of contents:
- First steps to follow when creating your business
Types of companies that can be set up in Andorra
Opening a company as a partnership
Can I open a company in Andorra and not live in the Principality?
How much does it cost to open a company in Andorra?
What taxes do companies pay?
Double Taxation Conventions (DTC)
Labour costs and lower Social Security contributions
Andorra: part of the SEPA zone
What kind of companies can be established in Andorra?
Below is a step-by-step guide to successfully opening a company in Andorra.
- Application for a company name:
This is the first step you will have to take when setting up your company. You can choose up to three different company names. The procedure takes a maximum of 10 days.
- Application for investment authorisation:
Foreign investment pre-approval is a requirement to be satisfied by all non-resident partners of the company.
- The pre-opening of the company bank account:
In order to request the opening of a bank account in Andorra, you must explain the activity of the company and the origin of the funds, and you must submit the company’s profile with complete transparency. The account will be pre-authorised within one to four weeks.
In this article we tell you how to open a bank account in Andorra.
- Incorporation of the company:
This is formalised before an Andorran notary public, who will then register the company in the Trade Registry.
- Opening the business:
In order to open your company, you must provide your address, an electrical report for your office or premises, and valid paperwork for an extinguisher at the premises.
You also need to know what types of company you can set up in Andorra.
- The private limited company:
If you decide to open a small business, with at least €3,000 in capital, you can create a Limited Liability Company (S.L.). An S.L. with a sole shareholder is called a Sociedad Limitada Unipersonal (S.L.U.).
- The public limited company:
If the company you want to open has at least €60,000 in capital, you will want to set up a Sociedad Anónima (S.A.). You can set it up with other shareholders or, as an SLU, with a single shareholder as a Sociedad Anónima Unipersonal (S.A.U.).
Ten years ago, foreigners could only hold a maximum of 49% of an Andorran company. Since the approval of the law on foreign investment, one can create companies and open businesses in Andorra with 100% foreign capital. You can do this either as an individual or as a company or partnership. In the latter case, however, you will have to provide additional documentation.
As an individual, you will need to provide:
- A copy of your passport
- A criminal record certificate.
(Both with the Hague Apostille)
If you are a company, you will need to provide:
- Certificate of incorporation.
- Copy of the passport of the representative of the company.
- Power of attorney for the company representative.
- Criminal record certificates for all representatives.
- (These documents must include the Hague Apostille).
- An original copy of the certification of the board of directors’ consent to the requested foreign investment.
- Proof of identity of the beneficial owner.
- A certificate demonstrating that the company’s name has been entered into the company registry.
Yes, you can, and it is legal. You can open a company in the Principality and continue to live in Spain, France, Portugal, the United Kingdom or anywhere else. You will be taxed as an individual in your country of residence and your company will pay taxes in Andorra.
Another doubt that investors have concerns the initial set-up costs. These depend on the type of business, but the price is usually about €5,500, including professional, government and notary public fees.
There is also a required minimum of €3,000 as start-up capital for an S.L. and of €60,000 for an S.A., as well as an annual company maintenance fee of €850 for an S.L. and €950 for an S.A.
As already mentioned, investors who wish to come to the Principality highly appreciate the low tax burden for both individuals and companies. Andorra’s taxation system is very competitive, and setting up a company in Andorra is also relatively easy..
- Corporate taxation (IS)
The • Corporate taxation is only 10% and can be lower for certain activities.
- IGI (VAT in Andorra)
The General Indirect Tax on products and services is only 4.5%.
- Other taxes and charges
These are local taxes levied by the municipalities on commercial activities, cleaning and street lighting.
- Personal income tax
It should be noted that the maximum personal income tax rate is 10% from €40,000 upwards. Income below €24,000 is exempt, and on income of between €24,000 and €40,000 taxpayers only pay 5%.
With regard to taxation, it is also important to know that Andorra has agreements with many countries to avoid double taxation, known as DTC. Thanks to these agreements, you will only be taxed in the country where you carry out your activity. We tell you all about this in our blog article entitled Conventions to avoid double taxation.
Taxes included in the DTC:
– Corporation tax
– Personal income tax
– Non-resident income tax
– Capital gains tax on property transfers
Another benefit is that Andorra has a significant advantage over Spain and France in terms of labour costs. The Social Security contribution is 15.5%, whereas in Spain and France it is more than 30%. This encourages the employment of staff, and reduces the fixed costs for those setting up a new business in Andorra.
This aspect will be of interest to you if you are involved in international payments. Andorra’s entry into the SEPA (Single Euro Payment Area) facilitates payment procedures for international companies wishing to invest in the Principality.
The SEPA is a single area for payments in euros. It allows individuals and companies in all countries in the SEPA to make payments to others in the SEPA by credit transfer and direct debit, and under the same conditions regardless of their geographical location. Andorra’s membership of the SEPA zone is an advantage for companies wishing to invest in the Principality, due to the speed of the payment procedures.
The possibilities that Andorra offers, when one decides to set up a company there, are almost endless. As is well known, the predominant sector is tourism. The Principality has received about 8 million visitors this year, a figure that is similar to the levels of the years before the pandemic.
However, another sector into which the Principality is putting all its efforts is technology. In recent years, Andorra has passed legislation on digital assets and blockchain, e-sports and the digital economy, entrepreneurship and innovation. This legislation aims to promote a secure and reliable framework to attract new investors interested in setting up in these sectors.
If you want to open a business in Andorra as a foreign investor, those are the main aspects you need to be aware of.
Once you have analysed your business project, you will need to familiarise yourself with all the procedures and requirements for setting up a company in the Principality.
Advantia Assessors will be with you throughout the process and you will not be alone. We will advise and assist you by adapting to your situation and informing you of everything you need to know to carry out your project. Some of the areas in which we can guide you are those related to accounting, tax administration, employment rights and obligations, or the application for residence if you wish to settle in the Principality. This stage is critical for the success of your project.
It is therefore important that you receive correct information and guidance to avoid problems.