Setting up a company in Andorra while maintaining your life in France does not automatically convert your income into Andorran income or change your tax residency. The matter depends on several factors, including where you live, where you work, and where the actual decision-making takes place.
An Andorran limited liability company may be valid, but its structure must correspond to a genuine economic activity. If the company is used solely to invoice for services that a person residing in France personally provides from Andorra, the French authorities could question the transaction and claim taxes, interest, or penalties, depending on the circumstances.
Key data
- The tax agreement between Andorra and France was signed in 2013.
- Article 155 A of the French General Tax Code may affect services provided personally through a foreign entity.
- The analysis can be divided into three levels: company formation, company tax residence, and tax residence of the partner or administrator.
Is it legal to start a business in Andorra while living in France?
Yes, setting up a company in Andorra while continuing to live in France can be legal. However, incorporation alone does not eliminate French tax obligations. Taxation depends on factors such as the company's business activity, management, residency, and cash flows.
Three concepts need to be distinguished. The first is the place where the company is incorporated. The second is its tax residence, which may depend on where its effective address is located. The third is the personal tax residence of the partner or director. An individual can be a tax resident in France and hold shares in an Andorran company, but they will have to declare their income correctly and analyze how the two jurisdictions relate.
The structure should be based on real activity, consistent management, and documentation prepared from the outset. Contracts, business decisions, invoices, expenses, material resources, and each person's role must be aligned. A formal address in Andorra alone does not prove that the company is managed there.
This analysis helps identify common risks, but it does not replace an individual review. Personal residence, type of business, clients, shareholding in the company, and payment method can all affect the outcome. Complex projects require coordinated tax and legal advice in France and Andorra.
What does the 2013 tax treaty between Andorra and France say?
The 2013 tax treaty between Andorra and France addresses double taxation and distributes taxing powers between the two states. It also contains rules for resolving certain residency disputes and determining which country can tax a particular type of income.
The agreement does not automatically make Andorra the applicable jurisdiction simply because a company is incorporated there. First, the domestic laws of each country must be analyzed, and then the rules of the agreement applied to the actual circumstances. Formal residence and actual residence may not coincide.
Tax residence of an individual
To analyze personal residence, factors such as the primary residence, the center of vital interests, the length of stays, and economic and family ties can be considered. Maintaining one's residence, family, professional activity, and most of daily life in France may be relevant, even if one has a company in Andorra.
Tax residence of a company
In a company, one of the criteria that can be decisive is the effective management headquarters in Andorra Or, conversely, in France. The practical question is simple: where are the strategic and commercial decisions actually made? The registered office address is only one piece of the puzzle.
The effective management headquarters: the main risk for an Andorran SL
The effective management headquarters is the place where the company is actually run. That's where all relevant decisions about contracts, customers, financing, personnel, strategy, and operations should be made. It doesn't necessarily have to be the same as the registered office address, the tax domicile, or the mailroom.
The French authorities could scrutinize the administrator's home address, the location where contracts are signed, meetings are held, banking transactions, accounting, invoicing, and daily interactions with clients. No single piece of evidence is usually conclusive, but several elements in alignment could create a problem.
Indicators of effective leadership in France
- I usually work from a home located in France.
- Use that house as the company's actual office.
- Managing employees or suppliers from France.
- Concentrate meetings, contract signings, and business contacts there.
- Manage bank accounts, accounting and invoicing from France.
Having an address in Andorra or contracting local administrative services may not be enough if day-to-day management continues to be carried out from France. Substance is demonstrated through traceable resources, decisions, and activity.
How to demonstrate real management in Andorra
Relevant factors could include suitable premises, equipment, team presence, meeting minutes, contracts, operating expenses, and clear traceability of decisions. It can also be helpful to retain business correspondence, travel receipts, and documentation explaining who makes decisions, who implements them, and from where.
The company should be able to explain its operations without contradictions. A company with clients, employees, suppliers, and activity in Andorra would present a different profile than one that only receives invoices from a single professional residing in France, although the final assessment would depend on the facts.
Article 155 A: Can France tax the income of an Andorran company?
The Article 155 A of the French General Tax Code This rule can come into play when a person residing in France personally provides services but channels remuneration through a foreign entity. According to the cited analysis, this regulation addresses situations in which an intermediary company could artificially shift income linked to the professional's personal activity.
The risk could arise, for example, when the administrator performs all the work from France, maintains direct contact with clients, and the Andorran company merely issues invoices and receives payments. The application of this law will depend on the specific circumstances, the nature of the services, the relationship between the individual and the entity, and any exceptions provided for by the regulations.
The difference lies between genuine business activity and a structure used solely as an intermediary. A company with its own resources, staff, autonomy, independent clients, and real functions could have a more defensible position than a company with no activity other than invoicing for its partner's personal work.
What tests can reduce the risk?
Before you begin, review the contracts, invoices, the administrator's responsibilities, the dividend policy, payroll, and financial statements. It should also be clear what services the company provides, what services the partner personally provides, and how their compensation is determined.
Having your own resources, staff, independent clients, and consistent remuneration could be relevant. Documentation should be prepared during the activity, not after an inspection has already begun. Reconstructing traceability afterward is often more difficult.
Exit tax when moving from France to Andorra: when it may arise
The exit tax from France to Andorra This is a tax regime that can affect certain unrealized capital gains when an individual transfers their tax residence outside of France. Its analysis may focus particularly on shareholdings, the value of the securities, the percentage of ownership, the length of residence, and reporting obligations.
Establishing a company in Andorra does not automatically activate this tax regime if the individual remains a French tax resident. The problem arises when combining two distinct operations: company formation and transfer of personal residence. Each has its own consequences and must be examined separately.
Difference between creating a company and changing tax residence
Being a partner or director of an Andorran company does not, in itself, prove that you have ceased to be a tax resident of France. A genuine relocation requires an analysis of your residence, family life, business activities, days spent there, and center of economic interests.
What documentation should be prepared?
The file could include the valuation of shares, tax returns, relocation dates, proof of residence, and documentation regarding transfers, guarantees, or subsequent transactions. Keeping this information from the beginning allows for a more accurate reconstruction of the asset situation.
What can a taxpayer do in the face of a French tax correction?
A French tax assessment should be taken seriously from the first notification. The response must respect the stated deadlines and focus on the facts, the legal basis, and the available documentation.
Review the proposed correction
Review which facts the tax authorities accept or dispute, which years are affected, which regulations they use, and how they calculate the tax, interest, and potential penalties. An error in the description of the activity or in identifying the person who provided the service could be relevant.
Gather evidence of the reality of the activity
Prepare contracts, attendance records, accounting documents, bank statements, minutes, business correspondence, media evidence, and decision-making documents. The answer gains strength when each claim can be supported by a dated document.
Submit observations and protect taxpayer rights
Observations should be technical, organized, and documented. It's also necessary to review whether the procedure was followed and whether the tax authorities adequately explained their reasoning. The strategy will depend on the tax, the type of audit, and the notification received.
Subsequent avenues of appeal
After that, there could be an administrative appeal, intervention by an applicable commission or advisory body, and legal recourse. The appeals process and their deadlines vary depending on the tax and the procedure, so it's essential to act quickly while deciding on a strategy.
Common mistakes when setting up a limited liability company (SL) in Andorra while living in France
- Thinking that the registered office alone determines tax residence.
- Formally transferring the company without transferring the management or the actual activity.
- Confusing the roles of partner, administrator, employee, and supplier.
- Billing from Andorra for services performed personally from France without analyzing article 155 A.
- Ignoring declarations, withholdings, VAT, social security contributions and personal taxes.
- Not preserving contemporary evidence of the activity and decisions.
- Confusing legitimate tax optimization with a structure lacking economic substance.
Checklist before setting up a company in Andorra if you still live in France
- Determine your current tax residence and the one you intend to have.
- Define who will manage the company and from where.
- Analyze customers, employees, assets, activity, and necessary resources.
- Review the 2013 tax agreement along with the internal regulations.
- Evaluate Article 155 A, the exit tax and other anti-abuse rules.
- Design a coherent policy for remuneration, dividends, expenses, and billing.
- Prepare a dossier on economic substance and traceability.
- Arrange a review with specialized advisors in France and Andorra.
Conclusion: an Andorran society requires substance, coherence, and planning
Setting up a company in Andorra can be viable even if you continue living in France, but the company does not replace the need to analyze your tax residency or its effective address. The risk increases when business activity, decision-making, and personal services remain in France while invoicing occurs in Andorra.
Planning before incorporation, documenting the financial reality, and reviewing the structure over time is safer than trying to justify it after an inspection. Andorra Insiders You can analyze the project, residency, business substance, and tax coordination between both countries before making decisions.
Frequent questions
Can I set up a company in Andorra if I continue to live in France?
Yes, in principle it's possible, but incorporation doesn't automatically change tax residency. It's necessary to analyze the actual address, the actual business activity, personal residence, and obligations in France.
Does a limited liability company (SL) incorporated in Andorra always pay taxes in Andorra?
Not necessarily. If the company is effectively managed from France, the French tax authorities could question its tax residency or subject certain income to French taxation.
What is the headquarters of effective management?
It is the place where strategic decisions are actually made and the company is run. It does not necessarily have to be the same as the registered office or address.
What is the relationship between Article 155 A and an Andorran company?
This may be relevant when a French resident personally provides services and receives payment through a foreign entity. Its application depends on the specific circumstances and applicable legal exceptions.
Does setting up a company in Andorra automatically trigger the exit tax?
No. The exit tax is primarily related to the transfer of tax residence and certain unrealized capital gains or equity interests. Each individual's specific financial situation needs to be reviewed.
How can I respond to a tax correction in France?
The proposal must be reviewed, deadlines monitored, evidence of the activity gathered, and substantiated observations submitted. The strategy depends on the tax, the facts, and the procedure applied.
Sources
- Original Analysis by Kohen Avocats
- French General Tax Code: Article 155 A
- Official French source on international tax treaties
Last update: October 2026. The information in this article is verified with official sources from the Government of Andorra.
