Andorra has become one of the countries with the most attractive direct taxation in the whole Euro zone and it is for this reason that many investors are thinking of opening their next company there.
However, before embarking on it, it is necessary to be clear about the main ideas that motivate making a viable investment in this country.
In this article we will delve into each of the questions that our clients usually ask themselves in this situation.
How to set up a company in Andorra?
Setting up a company in Andorra seems to be a simple procedure, but you must keep in mind that it implies a great workload that can take between two and four months of your time.
This is due to the fact that Andorra has a special procedure that requires the completion of certain steps prior to applying for the creation of the company.
Necessary documentation and other requirements
Contrary to what some might think, the creation of a company in Andorra is subject to strict international transparency standards, with an exhaustive review process that ensures the prevention of illicit activities such as money laundering. This involves gathering and presenting certain essential documentation:
- Criminal records legalized with a Hague Apostille, generally valid for three months from the date of issuance.
- Copy of the passport, also legalized with a Hague Apostille.
- Documentation describing the entrepreneur’s professional profile and business model (e.g., resume, business plan, etc.).
- Proof of tax compliance, such as previous tax returns, as well as documents proving the origin of funds (accounting, annual accounts, etc.).
Step-by-step process of creation
There are certain steps to consider before opening the company. From the application for the name to the registration with the Andorran social security, this is the process to follow step by step.
- Requesting the company name: you can propose to the Andorran government up to three names in order of preference. The response can take up to 10 days.
- Application for foreign investment: this procedure must be carried out in the case of non-residents wishing to acquire more than 10% of the company. It requires the submission of a complete dossier and the process can take up to a month and a half.
- Opening a bank account and having share capital: this is the most difficult step to overcome, as you must pass a bank’s compliance for the company. You must explain the SOF (source of funds) and its activity.
- Registration in the register of companies: the company is constituted and registered before an Andorran notary, to create the company officially and to be registered in the Andorran commercial register.
- Deposits with the Andorran Financial Authority (AFA): these deposits are a form of guarantee or reserve that institutions must maintain with the AFA (Andorran Financial Authority) to ensure that they comply with the country’s financial regulations.
- NRT and Registry of Commerce and Industry: the NRT (Tax Registration Number) is a unique tax identifier assigned by the Andorran Tax Administration to individuals, the equivalent of the TIN and is necessary to operate legally in Andorra. Once you have an NRT, you must register the company or commercial activity in the Register of Commerce and Industry, the body that grants legal personality to companies so that they can operate legally in the country.
- Registration with the Andorran Social Security Fund (CASS): Registration with CASS is mandatory for all companies that hire employees, as well as for self-employed workers. Both employers and workers must contribute to this system through monthly contributions.
How much does it cost to set up a company in Andorra?
Setting up a company in Andorra is a relatively simple process, but it involves a series of initial costs and recurring expenses that are important to consider before embarking on the project. These costs vary depending on the type of company to be incorporated, the economic activity to be developed and other factors.
| Share Capital | From 3.000 EUR (SL) or 60.000 EUR (SA) |
| Notary and Legal Fees | Between 300 EUR and 2.500 EUR |
| Registry of Commerce and Industry | Between 200 EUR and 400 EUR |
| Opening a Bank Account | Between 0 EUR and 200 EUR (plus, annual maintenance) |
| Business License | Between 100 EUR and 1.000 EUR, depending on the type of business |
| Tax and Accounting Consultancy | Between 300 EUR and 1.000 EUR per month |
| Registration with CASS | Monthly contributions of 22% of the gross salary |
What types of company can you create in Andorra?
Before creating a company in Andorra, the first step is to determine the type of company you want to create. The most common legal forms in Andorra are the Limited Company, the Public Limited Company, the General Partnership or the Sole Proprietorship.
For example, if you choose to incorporate a limited company, you need a minimum capital of 3,000 euros and to obtain the foreign investment dossier. The whole incorporation process must be carried out before an Andorran notary. Subsequently, you only need to obtain the company’s Tax Identification Number (NRT).
Limited Liability Company
The most popular form of incorporation for small and medium-sized enterprises (SMEs). Requires a minimum capital of EUR 3,000.
Public Limited Company
This is more suitable for larger companies with a larger number of partners. The minimum capital to incorporate a corporation is EUR 60,000.
General Partnership
This is a very common structure for small and medium-sized businesses. The general partnership is not subject to a minimum amount of capital for its incorporation.
Sole Proprietorships
In Andorra, as in many other countries, sole proprietorships can be incorporated under various legal forms, although the most common is the Sociedad Limitada Unipersonal (SLU).
- If you opt for a Sociedad Limitada Unipersonal (SLU), the minimum incorporation capital is EUR 3,000.
- On the other hand, if you decide to operate as a self-employed person, there is no minimum capital requirement.
Why choose Andorra to create your company?
Creating a company in Andorra is a strategic decision that combines attractive tax benefits, great political and economic stability and a high quality of life. Andorra creates an ideal environment for business growth and success.
Andorra offers a very competitive tax system compared to other European countries. Personal Income Tax (IRPF) is remarkably low, with rates ranging from 0% to 10%, and the General Indirect Tax (IGI), equivalent to VAT, is only 4.5%. In addition, corporate taxes are low, allowing for increased profits and reinvestment in business growth.
On the other hand, Andorra has a strong political system, based on a parliamentary co-principality, which ensures stable governance and a clear legal framework. The country has an excellent relationship with its neighbors, France and Spain, and is a member of several international organizations, providing an environment of political and legal security.
Economically, Andorra has demonstrated steady and sustained growth, with a diversified economy that goes beyond tourism to include emerging sectors such as technology and financial services. In addition, the adoption of the euro and a robust banking system ensure economic stability.
If you not only want to set up a business in Andorra, but are considering moving there, you will find that Andorra is an ideal place to live, as it has excellent air quality, spectacular natural scenery and a low population density. This makes Andorra a safe and healthy environment.
The quality of the Principality’s public services, such as education and health, as well as the general standard of living, are high, so you don’t have to worry about your family’s quality of life there. In addition, the lifestyle in Andorra is more relaxed, so you will be able to find a balance between setting up a successful business in Andorra and enjoying life there.
In addition, the foreign investment process in Andorra is quite accessible and agile. Non-residents can start businesses in the country, either by incorporating new companies or by acquiring companies that are already operating. The Andorran government encourages foreign investment and implements various measures to facilitate the arrival of businessmen and entrepreneurs, creating the perfect environment for business growth.
How to manage operations between Andorra and other countries?
Managing operations between Andorra and your own country requires a strategic approach that takes into account the tax, legal and operational differences between the two countries. GIven that Andorra does not belong to the EU, its legal and fiscal aspects are different than in other European countries.
To avoid problems when setting up your company in Andorra, you should have a good understanding of the tax, labour and operational differences between the two countries.
Double taxation agreement
The Double Taxation Avoidance Agreement between Andorra and several other countries is a bilateral agreement that seeks to prevent taxpayers in both countries from paying equivalent taxes on the same income in both territories. This type of agreement is crucial to facilitate economic and commercial relations between countries and, in this case, provides a framework that allows taxpayers to avoid double taxation and optimize their tax burden in both countries. So far, Andorra has signed the double taxation agreement with France, Spain, Portugal, Luxembourg, Liechtenstein, Malta, Cyprus, and the United Arab Emirates.
Mobility of workers and companies
The mobility of workers and companies to Andorra is fluid to and from Spain and France, thanks to the geographical proximity and cooperation of both countries. Although Andorra is not part of the European Union, there are mechanisms that allow individuals and companies to operate and move between the two countries relatively smoothly, with certain requirements and legal considerations to be taken into account.
Workers moving to Andorra to work must apply for a work and residence permit, while companies must incorporate a company in the country.
Can I create a company in Andorra and live in my country?
Yes, it is completely possible to create a company in Andorra and operate it from your country without residing in Andorra. No law prevents it.
However, concepts such as effective address or economic substance (i.e. where the offices, workers and key activities of the company are located) are fundamental to determine the tax residence of the company.
Even if the company you open is established in Andorra, it is important to keep in mind that the tax administration of the country of origin could consider the company to be resident there as well, if it can prove that the effective management is carried out in that country.
How does Andorra support the creation of SMEs and startups?
Andorra has become an attractive destination for the creation of SMEs and startups thanks to its favourable tax and business environment.
Over the last few years, the Andorran government has implemented a series of government incentives, facilitating access to financing and creating support networks for entrepreneurs, thus fostering a dynamic ecosystem conducive to innovation and entrepreneurship.
Government incentives include tax exemptions and subsidies, giving technology startups additional benefits, support for technology innovation and digital transformation companies through the National Innovation Plan or the Andorra Business Center, and simplification of business creation processes.
In addition, with public and private financing they mainly help technology, research and development sectors, facilitate access to credit and favorable loans for the development and expansion of new companies in Andorra, as well as grants and aid given to startups that are committed to R&D, helping them to create patents and prototypes.
Apart from tax and financial incentives, Andorra has a number of support networks and entrepreneurial communities that facilitate the exchange of ideas, collaboration between companies and access to knowledge and mentoring such as Andorra Business, coworking spaces and innovation centers, communities of local and international entrepreneurs such as Andorra Entrepreneurship Forum or access to training programs and professional training, ranging from business management courses to workshops on new technologies.
Andorra is increasingly positioning itself as a hub for entrepreneurship in the international arena, thanks to its tax advantages, its secure and stable environment, and the governmental support it provides to emerging companies.
Over the past few years, the government has worked to create an environment in which SMEs and startups can not only survive, but also innovate and scale globally, supported by technology, investment and access to a strong network of experts and entrepreneurs.
