Create a company in Andorra: advantages and requirements
Why open a business in Andorra?
Tax advantages of doing business in Andorra
- 10% of Impost de Societats (Corporate tax), with the possibility of having a bonus of 80% (rate of 2%)
- Some holdings exempt from paying corporation tax (see services)
- Social contributions for employees of 15.5%
- VAT, called IGI, 4.5% only
- Annual fees and costs to maintain the company less than €1,000 for ordinary companies
Types of companies in Andorra
Although when we talk about types we can talk about many classifications, among others: Andorran family business, heritage company, sole proprietorship, etc. Here we address the types at a legal level and their differences:
Process to incorporate a company
1. Application for company name
Applying for the companies corporate name is similar to any other European country. The Government of Andorra provides a form to validate the company name and thus obtain a successful first request. Then we can use it:
2. Foreign Investment File
This step is not necessary if you are a resident. As normally before creating the company the client is not a resident, we must request the Government to allow us to invest as foreigners. For this, a certificate of criminal record is required, for the prevention of money laundering.
3. Bank account and share capital
The following of the basic requirements as in any other country, is create a bank account of a company in constitution and make the effective deposit of capital. For this we will have to go to any of the five banks in the country, also complying with the requirements of banking compliance of each entity. Of course, they have the help of our professionals, already experienced in this kind of documentation.
It is worth mentioning that the compliance process depends exclusively on the bank in question, and will vary depending on the type of company and its activity, as well as the current condition of the partner or partners.
4. Public deed and signature before a notary
Prior to the incorporation before a notary, the drafting of the public deed and statutes of the company, which will vary according to the characteristics of the same. Once the deed has been drawn up and with the company name and the certificate of deposit of the capital stock, you can proceed to the previous step to have the company open: go to the notary.
5. Registration in the Companies Registry
Once signed, the notary registers the public deed and incorporates it into the Companies Registry within a maximum period of 20 days, thus empowering the company. However, this does not imply the authorization of the same, since the commercial authorization is still required (process of approximately one month).
6. Deposit in the AFA
While all the procedures of the company are carried out and to advance with the self-employment residence permit, the deposit of the deposit of €50,000 in the Andorran Financial Authority, which will be returned in full after the cancellation of the same permit is processed if there are no debts with the Andorran public administrations. In addition, a participation of 34% or higher in the company will be required.
This is due to the new changes in the immigration legislation, you can read more on our page about the Andorran residence. That is why currently the best option to reside in Andorra is be self-employed or a qualified professional.
7. NRT and Registry of Commerce and Industry
I know request the opening of the company's trade. All companies that carry out an industrial or service activity must be registered in the trade registry. By this time you must have the address of your company safe and specified.
8. Registration in the CASS and other procedures
Finally we would have to register with Social Security (CASS) to the administrators and also to their employees if it applies and request some digital files that are very useful for various management tasks in the company. Other procedures are also carried out if required.
- Local of at least 20m2
- Electrical installation
- Fire extinguisher installation and maintenance
- Criminal record and valid passport
- Business plan and investment strategy
- (*) For the business plan and the investment strategy we provide help, as well as for the KYC
Requirements to set up a company and maintain it
Economic substance criteria
- Registered office in Andorra
- Administrator or resident employee.
- Prepare quarterly and annual tax returns
- Pay municipal taxes (€ 800 per year approx.)
- Actual activity with operations and transactions
- At least one physical office (or local) employee
- Manage operations and decisions from Andorra
- Commercial premises: office, home, offices, etc. (from € 400 per month approx.)
Substance factor in international business
- Physical and registered office (not just postal address)
- Administrative meetings within the Principality
- Principal active bank account in Andorra
- Accounting and accounts management in the country
- Usual operating expenses in Andorra
What is the economic substance?
In 2013, the Organization for Economic Cooperation and Development (OECD) sought to combat tax avoidance practices at the international level. Specifically reduce if not eliminate the Base Erosion and Profit Shifting or BEPS for its acronym in English. With this term it designates the tax planning strategies used by multinational companies to take advantage of discrepancies, gaps, unwanted mechanisms and inconsistencies in national tax systems and transfer their benefits to countries with little or no taxation.
For this they launched the bEPS project at the international level and a report with 15 actions to be taken to combat this problem, seeking to reduce tax fraud. As well, one of the measures of this project it is precisely "improving the coherence of international tax standards, reinforcing its focus on economic substance and guaranteeing a more transparent fiscal environment", thus making the concept of substance a requirement to operate an international business.
In order to guarantee the economic substance in a coherent way, in the end, the most affordable and easiest thing to do is that the administrator of the company is at the same time a partner, a professional administrator and an Andorran resident, thus exercising economic activity and being able to justify it in a simple way.
Approximate time and cost
The total cost of a company in Andorra can be roughly divided into two types: incorporation costs (which are carried out only once), and maintenance costs. It should be noted before continuing that the costs obviously depend on the type of activity and size of the business, this being the most typical example for digital businesses.
Estimated time of constitution: about 3 months
- Government fees, notary fees, etc: ~ € 2,000
- Dispatch fees: ~€4,500
Annual maintenance costs
- Municipal or communal taxes: ~ € 800
- Accounting management fees: ~€2,500
Update to 2023
The update regarding the opening of companies in Andorra is the one corresponding to acquiring the residence and self-employment permit: the deposit is increased to €50,000 and the participation requirement of the company is increased to 34% of the shares. The duration of the entire procedure (company + residence) is still approximately three months.
On the other hand Andorra still trying to digitize the bureaucracy to make it easier to start and do business in the country.
Company in Andorra and operate in Spain
One of the doubts that people who want to settle in the country or move their company to Andorra have is whether it is possible to create, own and manage a company in Andorra and operate in Spain or reside in Spain or other European countries in their usual activities, either billing clients or having contracted suppliers and services.
- it's possible create a company in Andorra and continue living in Spain, so that the company would be taxed in the Andorran corporate tax and the person in the Spanish personal income tax, thus not enjoying the tax benefits that living physically in the Principality entails. However, it must be taken into account that it is very expensive, since in order to guarantee the economic substance, a fairly large operation must be carried out in Andorran territory.
- it's possible contract Spanish services and suppliers, as well as importing products from Spain, although customs procedures must be carried out in the case of physical goods.
- it's possible invoice and sell services to Spanish clients from the Principality, but if the sale takes place in Spain it will be subject to Spanish indirect tax legislation.
- Buy an Andorran company It is also possible to set up quickly, but it is expensive and probably not profitable for almost anyone to do so.
These three activities are equivalent in other countries of the European Union and the world. However, it is vital the Professional advice in this sense when it is going to be undertaken to interpret the treatment of each specific operation. Even more so when talking about transferring the company to Andorra, a complex operation that is carried out once or a few times in a lifetime.
Although of course it depends on the specific business, opening a company in Andorra usually costs about € 4,000 in fees + € 2,000 in fees and costs, to which must be added the share capital and the deposit to be deposited in the AFA for the residence.
It is totally viable and legal. The company would pay taxes in Andorra, and the businessman would be subject to Spanish regulations by maintaining his tax residence in Spain, without benefiting from the Andorran tax advantages.
In general, 10% on net benefits and approximately <€ 1,000 per year for maintenance. Dividends extracted are also exempt from Andorran personal income tax.
In general, demonstrate that the main activity is carried out: main bank account, accounting management, administrative meetings, registered offices, etc.