Doing business in Andorra, especially for foreign investors, can be a highly attractive option due to its favorable tax environment and pro-business policies.
Here is a breakdown of the key steps and features for setting up a company in Andorra:
📝 Key Company Structures
The two most common legal forms for a company are:
- Societat Limitada (S.L.) – Limited Liability Company:
- Minimum Capital: €3,000.
- Founders: Minimum of one founder (Societat Limitada Unipersonal – S.L.U.) or two for an S.L.
- Liability: Limited to the amount of their shares. This is the most popular choice for small and medium-sized businesses.
- Societat Anònima (S.A.) – Public Limited Company:
- Minimum Capital: €60,000.
- Founders: Minimum of two founders.
- Liability: Limited to the value of their shares. Suitable for larger companies.
⚙️ Step-by-Step Company Formation Process
The process for a non-resident typically takes about 8 to 12 weeks and involves several key stages:
- Company Name Reservation:
- Submit a request to the Government of Andorra with up to three proposed names. This generally takes about 10 days for approval.
- Foreign Investment Authorization:
- If foreign ownership is over 10%, you must apply for and obtain this authorization from the Government.
- Required Documents typically include:
- Legalized and apostilled copy of your passport.
- Apostilled criminal record certificate (usually no older than three months).
- Proof of the legal origin of funds (Source of Funds – SOF).
- A detailed business plan.
- This step can take up to 1.5 months.
- Open a Corporate Bank Account and Deposit Capital:
- Open a bank account with a local Andorran bank to deposit the required minimum share capital (€3,000 for an S.L. or €60,000 for an S.A.).
- Due to stringent anti-money laundering and compliance checks (due diligence on the source of funds and business activity), this is often one of the slowest parts of the process, potentially taking several weeks.
- Notary and Registration:
- The Articles of Association are formally drafted and signed before an Andorran Notary (Public Deed).
- The company is then automatically registered in the Commercial Registry and receives its Tax Registration Number (NRT).
- Obtain a Commercial Operating License:
- Apply for the necessary commercial license from the local Comú (Town Hall) where the business is headquartered. This requires proof of a business address/office space.
- Social Security Registration (CASS):
- Register the company and its employees with the Andorran Social Security Fund.
💰 Tax Advantages in Andorra
Andorra is known for having one of the most competitive tax systems in Europe:
| Tax Type | General Rate | Notes |
| Corporate Income Tax (IS) | 10% | Can be reduced to 2% for certain types of income (e.g., from international trading or intellectual property). |
| General Indirect Tax (IGI – VAT) | 4.5% (Standard) | One of the lowest VAT rates in Europe. Reduced rates apply for certain sectors (e.g., 1% for health, education, and food). |
| Personal Income Tax (IRPF) | 10% (Maximum) | Income up to €24,000 is tax-exempt, and income between €24,001 and €40,000 is taxed at 5%. |
| Other Taxes | 0% | No wealth tax, no inheritance tax, and no gift tax. |
🔑 Key Takeaways for Foreign Investors
- 100% Foreign Ownership: The new foreign investment law allows for 100% foreign ownership of a company.
- Legal Assistance is Recommended: The process, while straightforward, involves specific documentation (e.g., apostilled criminal records, detailed business plan) and dealing with local banks and government bodies. Many foreign investors use a local law or consulting firm to navigate the process efficiently.
- Residency: You do not need to live in Andorra to own a company, but if you plan to be an active director and live there, you would need to apply for an Active Residence Permit, which has additional requirements, including a security deposit with the Andorran Financial Authority (AFA) and a minimum stay of 183 days per year.