This question could apply to the UK, Spain, Portugal, Italy, or any other European country where the level of corporate and personal tax is much higher than that of our Principality. Without a doubt, this is one of the questions most frequently posed by businesspeople and entrepreneurs who are intrigued by Andorra’s attractive tax policy but who want to remain in their customary place of residence.
Creating a company in Andorra and living abroad is perfectly legal
That answers that :). But you probably have other questions. Just read on….
As we mentioned, creating your company in Andorra (or anywhere else in the world) and continuing to live in your country of residence is perfectly legal. You would continue to pay taxes as an individual in your country of residence, and your company would pay taxes in the country where it is based (in this case, in Andorra).
You only need consider that:
- Whether or not you are a resident of Andorra, you must apply for a foreign investment authorisation.
- You will need to open a bank account in one of the country’s financial institutions.
- Your company or corporation must have a physical address in Andorra and hire at least one employee registered with the Andorran Social Security system in case the director of the company is not a resident.
Should I move to Andorra?
This is an excellent question. If you also want to pay less personal tax, the answer is undoubtedly YES.
In Andorra, persons with net income below 24,000 euros have no personal tax liability. For net incomes from 24,001 to 40,000 euros, the rate of personal income tax is only 5%. And for net incomes above 40,000 euros, the tax rate is 10% (much lower than in your country of residence).
Regarding income from savings, the applicable tax rate is 10% with an exemption for the first 3,000 euros of such gains.
Moreover, given that any dividends paid to you by your Andorran corporation have a 0% tax liability, and that there is no wealth tax and no inheritance tax, Andorra is undoubtedly a good option to reduce the tax burden on any individual.
Andorra residency requirements
All persons interested in applying for Residency and self-employment authorisation in Andorra must:
- Live in Andorra on a permanent basis.
- Provide proof of foreign investment authorisation to form a company in the country (in which the person applying for residency has an ownership share of greater than 20%).
- Hold a position in the governing body of said company.
- Deposit 15,000 euros with the Andorran Financial Authority (AFA). Should the person later decide to end their residency in Andorra, this deposit will be returned to them in full (so long as there are no outstanding debts).
This type of active residency authorises you to live and work as a self-employed individual or businessperson. But there are other types of residency in Andorra that might be of interest to you.
A country where the living is good
Make no mistake about it: Living in Andorra doesn’t just make sense in terms of tax. As a matter of fact, our little Principality enjoys one of the highest levels of quality of life of any country in the world.
- Strategically located in the Pyrenees, it is less than 3 hours from the airports of Barcelona and Toulouse, and only 2 hours from the AVE train station in Lleida.
- There are just a few of us, that’s true. Andorra has roughly 75,000 inhabitants, half of which are foreigners, made up from over 100 different nationalities.
- Only 5% of our territory is urbanised. Furthermore, 36% of our 468 km2 (181 sq. miles) are protected natural areas.
- We enjoy clean air, low levels of noise pollution and pure rivers and lakes.
- Our public health system is world-class. In fact, statistics show us to be the fourth healthiest country in the world.
- Life hums here year-round. With more than 2,000 hours of sunshine each year and an economy focused on services and tourism, life in Andorra goes on throughout the year.
- Quality public education: You can choose from three public systems (Andorran, Spanish or French) in addition to private schools in English.
- We live in absolute serenity, as the crime rate is practically zero.
Is this why so many elite sportsmen and women move to Andorra with their families?
74 applications for foreign investment were submitted in 2017, of which 760 were granted, representing a total investment volume of more than 82 million euros (figures provided by the Servei d’Estudis, Departament d’estadística del M.I. Govern d’Andorra)
If you think that Andorra might be a good option for reducing your tax burden, do not hesitate to contact us without any commitment.