Andorra Company Registration: Everything You Need to Know in 2024

In 2024, Andorra remains a sought-after jurisdiction for entrepreneurs and companies, particularly for those looking for tax efficiency, stable political conditions, and access to European markets. This small nation nestled between France and Spain offers a favorable tax environment, with a corporate tax rate capped at 10%, significantly lower than in neighboring countries. 

The country's streamlined registration process, designed to attract international investors, ensures that new businesses can be operational within one to three months. The Andorran government’s push to diversify the economy, especially in technology, real estate, and finance sectors, has led to a 5% increase in the number of foreign business registrations in the past year, underscoring its growing appeal to international companies.

Andorra’s stable financial infrastructure and business-friendly regulations continue to attract a wide array of entrepreneurs and investors. According to the Ministry of Economy, foreign investment in Andorra increased by over 8% in the last year, with small-to-medium enterprises (SMEs) representing 60% of all new businesses registered. 

The process for company registration includes obtaining residency for at least one shareholder, submitting the required investment of €50,000, and undergoing compliance checks, which are relatively straightforward compared to many other jurisdictions.

Benefits of Andorra Company Registration

Establishing a company in Andorra offers multiple benefits for entrepreneurs and investors, primarily due to its attractive fiscal policies but also for several other strategic advantages.

Double Taxation Treaties

Andorra has implemented double taxation treaties with various European Union nations, including Spain, to prevent businesses from facing redundant taxes on the same income. This treaty network eases international business operations and facilitates management from abroad by addressing non-resident tax obligations at personal, banking, and professional levels.

Competitive Tax Rates

One of Andorra's most appealing features is its low tax regime. Corporate income tax rates are highly competitive, ranging between 2% and 10%, while personal income tax is capped between 0% and 10%. Furthermore, Andorra’s VAT stands at only 4.5%, significantly lower than the 21% rate seen in neighboring Spain.

Ease of Business Setup

While Andorra requires specific documentation for company registration, its streamlined and relatively straightforward business setup process makes it more accessible than other countries. Andorra’s stable political and economic environment further supports smooth company formation.

Modern Infrastructure and Strategic Location

Located in the heart of Europe, Andorra combines modern infrastructure with high connectivity, creating a stable, secure, and legally sound business environment. It also offers access to a skilled labor force, which can be a valuable asset for new and established businesses.

Corporate Flexibility

Andorra’s corporate structure policies are designed to be adaptive, enabling businesses to stay agile and responsive to market changes. This flexibility is particularly advantageous for modern businesses in emerging sectors such as blockchain technology.

Favorable Business Regulations

Andorra's regulatory environment is among the least restrictive, allowing non-residents to invest through the Foreign Investment Law. The principality’s business laws align closely with Spain’s accounting standards and do not mandate audits for companies exceeding certain revenue thresholds, reducing both administrative and financial overhead.

Andorra Company Types

When establishing a business in Andorra, selecting the correct company structure is crucial, as it will influence aspects like ownership, liability, and capital requirements. Andorra offers several business entity types that cater to different business needs, ranging from small single-owner companies to large enterprises with multiple shareholders. The appropriate choice depends on the scale of the business, the level of personal liability the owner is comfortable with, and the desired privacy for shareholders. Here are the types of company structures available in Andorra:

Societat Limitada (SL)

The Societat Limitada (SL), equivalent to a limited liability company, is the most popular structure for small to medium-sized businesses in Spain. It provides limited liability protection, meaning that owners are not personally liable beyond their initial investment. Typically, an SL is recommended for smaller businesses that seek the advantages of liability protection without needing substantial capital investment. For this company type, two or more shareholders are required, and a minimum capital of €3,000 must be invested.

An SL offers advantages in terms of liability protection and straightforward management, with relatively few formal requirements compared to a Societat Anónima (SA). However, it has limitations when it comes to raising capital, as it may not attract as much interest from outside investors. SLs are subject to corporate income tax, and dividend distributions to shareholders might incur additional tax obligations.

This structure is ideal for small and medium-sized enterprises that need liability protection and do not plan on going public or seeking extensive outside investment.

Societat Limitada Unipersonal (SLU)

The Societat Limitada Unipersonal (SLU) is essentially a single-owner version of the SL, tailored for individual entrepreneurs who desire limited liability protection without involving additional partners. This structure is optimal for solo entrepreneurs looking to establish small to medium-sized businesses independently. Only one shareholder is required, and the capital requirement remains at €3,000, similar to the SL.

With an SLU, the single owner benefits from limited liability while maintaining full control over the business. Although it offers simplicity in management, the lack of additional shareholders limits growth potential and access to external funding. Taxation-wise, the SLU is subject to corporate income tax, providing potentially more favorable tax treatment than a sole proprietorship.

The SLU is best suited for individuals who intend to manage and operate a business independently and want the protection of limited liability.

Societat Anónima (SA)

The Societat Anónima (SA) is equivalent to a public limited company and is ideal for large companies with multiple shareholders. This structure is particularly suitable for businesses with significant capital needs or those planning to attract many investors. An SA offers shareholders increased privacy, as their information is not as easily accessible in public records. Multiple shareholders are required, and a substantial minimum capital of €60,000 is necessary to form an SA.

The SA structure is advantageous for companies requiring substantial investments, with the flexibility to issue shares publicly. Shareholders benefit from privacy protections, and the structure supports a more complex capital arrangement. However, the SA has higher administrative and compliance demands, and the minimum capital requirement is considerably higher than that of an SL.

SAs are subject to corporate income tax, and tax regulations can be more complex, particularly for publicly traded companies. This company type is ideally suited for large enterprises or those planning to go public and engage multiple investors.

Sole Proprietorship

A Sole Proprietorship is the simplest form of business structure, directly owned and controlled by an individual. There is no limit on the owner’s liability, making it easy to establish but leaving the owner fully accountable for all business debts and obligations. Only one shareholder is required, and there is no minimum capital requirement. However, the owner assumes full financial risk.

Sole proprietorships are straightforward to set up with minimal regulatory requirements, allowing the owner to retain complete control. However, unlimited liability exposes the owner to personal risk, and this structure may lack credibility when seeking financing from lenders or investors. Tax-wise, income is taxed as the owner’s personal income, which may simplify filing but could result in higher rates.

This structure is best suited for low-risk or small-scale businesses, such as freelancers or individual service providers.

General Partnership (Societat col·lectiva)

In a General Partnership (Societat col·lectiva), two or more individuals share ownership and responsibility for the business. Similar to a sole proprietorship, partners have unlimited personal liability for business obligations, which includes a shared accountability for any debts or claims. This structure requires at least two shareholders, and there is no minimum capital requirement.

The general partnership allows partners to share resources, responsibilities, and decision-making equally. This structure provides flexibility and is ideal for businesses where all partners wish to play an active role in management. However, unlimited liability means each partner’s personal assets are at risk, and the potential for partner disputes can add complexity. Each partner’s income is taxed as personal income, which may lead to higher tax rates.

The table below provides a summary of various business structures available, comparing key attributes such as required shareholders and capital requirements for each type.

Furthermore, you should keep in mind such key considerations before starting a company in Andorra as: 

1. Size and Ownership: For smaller or single-owner businesses, an SL or SLU offers limited liability with relatively low capital requirements. For larger companies with many shareholders or those looking for increased privacy, the SA structure may be more appropriate.
2. Liability: Choosing between limited and unlimited liability is a critical decision. Limited liability options like the SL, SLU, and SA protect personal assets by limiting liability to the amount invested, while sole proprietorships and general partnerships expose owners to full liability for debts and obligations.
3. Capital Requirements: The minimum capital required varies significantly by entity type, ranging from €3,000 for SL and SLU to €60,000 for an SA. Capital requirements can influence the choice based on the business's financing needs, budget and the intention to apply for residency by investment. 

Andorra Tax System Explained

Andorra’s tax system is designed to be attractive while aligning with international standards. Below is a breakdown of key taxes:

Personal Income Tax

Andorra’s personal income tax system is progressive yet simple, making it attractive for residents. Income up to €24,000 is tax-free, offering relief to lower-income residents. Income between €24,000 and €40,000 is taxed at a moderate 5%, with the top rate of 10% applied only to income above €40,000. Non-residents earning income from Andorra, such as rentals, royalties, or dividends, are subject to a withholding tax, although the rates may vary based on tax treaties. Additionally, the tax on savings income follows the same progressive structure, with an exemption on the first €3,000 of investment income and a 10% rate applied to amounts beyond this threshold.

Corporate Tax

Andorra's corporate tax rate stands at a flat 10%, appealing to businesses looking to establish themselves in a low-tax environment. New companies, particularly start-ups or small enterprises with income below €100,000, can benefit from reduced rates: 5% on the first €50,000 of taxable income and 10% on income exceeding this. These incentives are available during the first three years of activity, making Andorra particularly attractive for new ventures in sectors such as intellectual property and research. Additional exemptions and deductions may apply to businesses in innovative sectors, further reducing the effective tax burden.

Capital Gains Tax on Real Estate

Capital gains tax in Andorra mainly applies to property transactions, with rates designed to encourage long-term property ownership. A sliding scale tax rate applies, starting at 15% if the property is sold within the first year of ownership, gradually reducing each year until becoming fully exempt after 12 years. The rate decreases by 1% annually after the third year, reaching zero at year twelve. Additionally, sellers may avoid capital gains tax if they reinvest the sale proceeds in another Andorran property within six months.

Value-Added Tax (IGI)

Andorra’s General Indirect Tax (IGI) functions similarly to VAT, with a general rate of 4.5%, among the lowest in Europe. Essential items like food, books, and certain healthcare services benefit from reduced rates. Specifically, human consumption goods are taxed at 1%, while certain cultural and artistic services are taxed at 2.5%. Banking and financial services face an increased rate of 9.5%. Additionally, certain services, such as healthcare and education, enjoy a super-reduced 0% rate, providing essential support for residents and aligning with Andorra’s focus on social well-being.

The following table provides a clear summary of Andorra’s tax structure, making it easy to compare rates and understand the tax implications for various types of income and activities in the country.

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Andorra Company Formation Requirements

Setting up a company in Andorra involves fulfilling a series of regulatory requirements and providing specific documentation to meet Andorra's international compliance standards. This process, especially aligned with transparency and anti-money laundering regulations, ensures that all business activities adhere to high standards of legality and credibility.

To begin, the primary applicant must prepare and submit several essential documents. Please see below. 

1. Administrative Identification Number (NIA):

The NIA is a unique identification number for the main applicant, necessary to initiate the business setup in Andorra. Applying for this number is one of the first steps in the formation process.

2. Background and Due Diligence Documents

This involves a series of records to demonstrate the applicant's reliability and financial standing:

• Apostilled Criminal Record. A recent criminal record, apostilled for validity must be provided. Note that this document should be no older than three months from the date of submission.
• Legalized Passport Copy. A legalized (certified) copy of the applicant’s passport is essential to verify identity.
• Proof of Professional Background and Business Model. Demonstrating professional qualifications and business intentions is crucial. This proof may include:some text
  • A comprehensive CV showcasing relevant experience.
  • A detailed business plan that outlines the company’s purpose, objectives, and growth strategy.
• Tax Compliance Evidence and Financial Records:some text
  • Proof of recent tax compliance, such as tax returns from the applicant's home country, is necessary to confirm a transparent tax history.
  • Additionally, documents evidencing the origin of the funds intended for the business (such as account statements or financial records) must be submitted. This assures authorities of the lawful nature of the business’s financial resources.

How to Register a Company in Andorra? Step By Step Process

To incorporate a company in Andorra, you need to follow a series of structured steps, typically requiring between two and four months to complete. Below is a simplified breakdown of the process:

Step 1. Company Name Reservation

To reserve your company name, submit a request to the Government of Andorra, including up to three name options. Specify the business activity and legal structure (e.g., S.L., S.A.). This process typically takes about 10 days.

Step 2. Foreign Investment Authorization

Non-residents owning over 10% of shares must apply for authorization, including:

• The reserved company name certificate.
• Apostilled identity documents.
• Professional experience evidence.
• Apostilled criminal record certificate.
• A comprehensive business plan detailing the company’s nature and services.

Approval for this application generally takes up to 1.5 months.

Step 3. Draft Articles of Association and Register the Company

Prepare and formalize your company’s articles of association with a notary in Andorra. Once completed, register the company with the Andorran commercial register to legally establish your business.

Step 4. Tax Registration Number (NRT)

Register for a Tax Identification Number with the Andorran Tax Administration to enable financial and commercial transactions.

Step 5. Open a Bank Account

Set up a local bank account to deposit your company’s share capital. This step involves stringent compliance checks, particularly regarding the source of funds (SOF) and intended business activity. Opening an account can be time-intensive, especially for cryptocurrency-related ventures.

Step 6. Obtain a Commercial Operating License

Request a commercial license from the local Comú, and complete the Trade Register requirements, including proof of a business address, relevant inspections, and safety equipment contracts.

Step 7. Apply for Social Security

Finally, you need to register your company and its employees with the Andorran Social Security Fund (CASS) to complete the process, after which your business can begin operations.

Golden Harbors specializes in guiding individuals and businesses through the Andorran registration process, helping clients navigate the complexities of tax compliance, residency, and corporate setup. Our team ensures a smooth experience by handling documentation, coordinating with local authorities, and tailoring strategies to maximize tax efficiency under Andorra's favorable system. However, challenges can arise, such as delays in document processing, unexpected tax obligations due to evolving regulations, and potential issues meeting residency or investment requirements. Golden Harbors proactively addresses these risks, providing expert support to eliminate roadblocks and ensure your transition to Andorra is secure and compliant. 

FAQ

Who Can Open a Company in Andorra?

In Andorra, both residents and non-residents are permitted to establish companies. The Foreign Investment Law allows non-residents to own up to 100% of an Andorran company's capital, eliminating the previous restriction that limited foreign ownership to 49%.

Is It Possible to Create a Company in Andorra Without Living in Andorra?

Yes, it is possible to establish a company in Andorra without residing there. Non-residents can own up to 100% of an Andorran company's capital, provided they obtain the necessary foreign investment authorization from the Andorran government. However, it is important to note that while non-residents can establish and own companies in Andorra, at least one person (administrator or employee) must reside in the country.

How Much Does it Cost to Register a Company in Andorra?

In total, the cost to set up a company in Andorra typically ranges between €6,000 and €11,000, excluding the required share capital.

How Long Does it Take to Set Up a Company in Andorra?

Establishing a company in Andorra typically takes between 2 to 3 months. 

How Much Is Company Tax in Andorra?

In Andorra, the standard corporate income tax rate is 10%, which is notably lower than the European average of approximately 25%. In addition, Andorra provides special tax regimes for certain types of companies. For instance, companies engaged in the exploitation of intangible assets, such as intellectual property, may benefit from an effective tax rate of 2%, provided they meet specific criteria.

Is Andorra Still a Tax Haven?

Andorra has undergone significant reforms to shed its former status as a tax haven. Historically, the country was considered a tax haven due to its lack of income taxes and strict banking secrecy. However, in recent years, Andorra has implemented comprehensive tax legislation, including personal income tax and corporate tax, both capped at 10%. Andorra was removed from the OECD's list of tax havens in 2018.

Is Andorra Income Tax-Free?

Andorra is not income tax-free; it implemented personal income tax (IRPF) in 2015. The tax structure is progressive:

• Up to €24,000: 0% tax rate
• €24,001 to €40,000: 5% tax rate
• Above €40,000: 10% tax rate

For married couples, the 0% tax rate applies to combined income up to €40,000.

Can I Become a Resident of Andorra by Company Formation?

Yes, establishing a company in Andorra can serve as a pathway to obtaining active residency. To qualify, you must be a majority shareholder, hold a position that allows you to manage the company's operations, and the bank deposit must be at least €50,000. This active residency status permits you to live and work in Andorra. Active residents are generally required to spend a minimum of 183 days per year within Andorra to maintain their residency status. 

What are Other Popular Countries for Company Registration?

For companies seeking a strategic base beyond Andorra, countries like Singapore, the UAE, Hong Kong, Estonia, Cyprus, and Malta are attractive alternatives due to their favorable tax regimes, streamlined registration processes, and business-friendly environments. Singapore and Hong Kong offer low taxes and robust infrastructures for international trade, while the UAE's free zones enable 0% tax and full foreign ownership. Estonia’s e-Residency allows remote setup, ideal for digital businesses, and Cyprus and Malta provide access to the EU with appealing tax structures. Each jurisdiction has unique advantages, and Golden Harbors can guide you in selecting the best fit based on your business goals and market focus.