Andorra is one of the promising European jurisdictions where starting and doing business is possible under austere conditions. First of all, this is evident in the simplified registration procedures. The country's economy is rapidly developing and open to foreign capital. Andorra's most developed sectors are the financial sector, trade, and tourism. Incorporating a business in Andorra la Vella can make available the following benefits.
Why registering a company in Andorra is beneficial
The decision to open a company in Andorra will automatically provide access to the following benefits:
- strategic location in the European region;
- ability to do business in an environment that is stable economically and politically;
- a high level of asset protection;
- simple and transparent procedures for the incorporation of a new company;
- high level of confidentiality;
- extremely favorable tax environment (one of the lowest income tax rates in Europe);
- existing double taxation treaties with key European jurisdictions (Spain, France, Luxembourg, and others).
Organizational and legal forms in Andorra
Andorra can open a business or establish its legal presence alternatively in one of several forms:
- Limited Liability Company (SL, the equivalent of LLC) is the most popular type of business due to its ease of start-up and the minimal formalities that must be observed. It is also important to note that the liability of the shareholders of this company is limited solely to their contributions. Incorporating this legal entity requires an initial share capital of €3,000. 2 shareholders can register a business in this form. It perfectly suits small businesses.
- A joint-stock company is a type of company registered to attract external capital in large volumes. The JSC issues shares that can be freely disposed of to third parties. The liability of the shareholders can under no circumstances exceed the value of their shares - the participants will not cover the potential losses of the JSC above this amount. A minimum of 2 shareholders can register a JSC. A minimum of 60,000 euros of capital is required to establish this business. This legal form is suitable for developing medium-sized as well as large companies.
- A branch allows foreign legal entities to enter the market with minimal monetary and time expenditures. The establishment of a branch requires a simplified registration procedure. A branch will not have legal entity status, and the parent company will be 100% responsible for its operation. A branch is convenient because it organizes interaction with local partners and clients.
- Representative office - the format is suitable for a foreign company that plans to promote goods/services in Andorra and explore local markets. The status of a legal entity is also not granted in this case. Only a simple registration procedure is required.
How to start a business in Andorra
You can register a company in Andorra after passing the following approximate steps:
- Selection of a suitable legal form for the future business, considering its specifics and objectives.
- Drawing up a business plan and selecting the most optimal types of activity under it.
- Search, formulate, and reserve a unique commercial name for the company.
- Collection of the required data on the participants, the parent company (if any), the ultimate beneficiaries, and the company's managers.
- Depositing the amount of the share capital in a temporary bank account.
- Drafting and certifying the required incorporation documents and filling out the application forms.
- Prepare the registration documents package, including a bank statement confirming the registration fee paid. Creation of a new entry in the Commercial Register concerning the registered company in the event of a favorable decision on the document review results.
- Subsequent registration of the established business to pay taxes and required social charges.
- Opening of corporate bank accounts for the new company in Andorra.
- Application for a license (may be required for certain regulated activities).
Legislation and regulatory environment
Andorra is interested in attracting foreign capital. Therefore, the country has lifted some restrictions that apply to foreign investors. For example, now foreigners here enjoy equal opportunities to do business on an equal basis with local citizens, and sole ownership of the company is allowed (previously, foreigners were allowed to own at most 49% of the company). Nevertheless, foreign investors must provide many specific documents, which relate to the lack of criminal record of the participants of the future legal entity, confirmation of the source of their income, the justification for the choice of Andorra as a jurisdiction, as well as a realistic business plan. Prifinance lawyers are ready to assist with all the nuances of the local legislation so that you can take full advantage of the low tax burden in this jurisdiction.
Taxation in Andorra
If you want to open or buy a company in Andorra, this decision should be considered along with such nuances of the local tax system:
- Income tax - 3-10%*
- Personal income tax - 5-10%
- VAT - 4.5%
- Income source tax - (1) dividends - 0% (2) interest - 10% (3) Royalties - 5%
- Capital Gains Tax - none. Income is included in the personal income/income tax base.
*can be reduced to 0% under certain conditions.
How Prifinance experts can assist
Suppose you are evaluating establishing or buying a company in Andorra. In that case, Prifinance lawyers are ready to practically implement this option through legal support of the following aspects of business registration in Andorra:
- To request and collect all data and documents to open a business in Andorra;
- To accompany, on behalf and in the interest of the client, all negotiations with local authorities and banks;
- Arrange the legal address, accounts, and employees, as well as all required application documents for the future company;
- Provide comprehensive legal support for the further functioning of the new legal entity in Andorra.
The portfolio of Prifinance specialists is formed by more than 11,000 cases in the field of registration and support of the international business. The lawyers will apply this experience to your project goals.