Andorra has the lowest corporate tax rates in Europe, bringing many investors and entrepreneurs to the principality. Combine this with a favorable business environment and you have everything you need to set your business up for success.
While the rules and regulations for company formation in Andorra differ from other countries — just like all things here — the process is streamlined and quick.
The Andorran government used to place limitations on foreigners owning Andorran corporations. This has now been revoked and foreigners can own 100% of an Andorran corporation, even if they don’t reside in the principality. Passive residents who reside in the country for 90+ days a year are also allowed to form corporations here.
Whether you’re looking to incorporate your company in Andorra or start a new company altogether, this guide will help you grasp everything you need to get started.
Why Incorporate in Andorra: Top 5 Benefits
In comparison to tax havens like Ireland and the Netherlands, Andorra offers many more benefits. The corporate taxes are non-existent for income earned from outside the principality which means you’ll pay 0-2% effective tax rates.
Andorra’s infrastructure is world-class and open to foreign investors who can own 100% of their corporations registered in the principality. Incorporating in Andorra is also one of the main requirements of the investor resident program. Some of the many benefits of incorporating your business in Andorra are listed below.
Low Registration Costs
The registration fee for an Andorran corporation (the equivalent of a US Limited Liability Company, or LLC) is €3,000. This is a one-time fee that you pay to the Andorran government, not including agency fees.
The maintenance cost on an entity of this corporation is roughly €800/year. The low registration fees and tax benefits provide great savings over the long-term and the process can be completed in as little as four weeks.
Lowest Corporate Tax in Western Europe
The corporate tax in Andorra is the lowest in Western Europe. Companies making a profit in Andorra only pay a flat rate of 10% per year. For comparison, in the UK the tax rate is 19% and in Germany, it’s 15%.
If the company retains offices in Andorra but does not generate revenue in Andorra, it is eligible for tax cuts from 2% down to 0%.
Low Social Contributions
Labor costs in Andorra are on par with Spain and France, but the employers have to pay significantly less due to lower social contributions.
The total social contributions for healthcare and other benefits are capped out at 15.5% and the employee pays 6% while the employer pays 9%. This makes it easier for employers to pay their employees higher net salaries without overspending.
Andorra has fully opened up for foreign incorporation since 2012 when the government lifted restrictions on foreign ownership. It used to be that foreign non-residents could own up to 49% of an Andorran company but now that number is 100%.
The only requirement for owning an Andorran company as a foreigner is to seek approval from the Andorran Department of Foreign Investments. This department can give you permission in only a few days and we can help you form the corporation to serve as your offshore company.
Doing business in Andorra is convenient and simple since it has a highly developed business and banking infrastructure that facilitates the fast and secure transfer of capital. You can open a bank account in Andorra in 20 minutes and deposit cash that can be used for incorporation, residency payments, and property acquisitions.
Office space is easy to obtain and there are hundreds of foreign companies operating all over Andorra. Investor residency programs require you to have a 20 m2 registered office space in the country which can be rented for €400-500/month. The entire country has fiber optic coverage and some of the fastest internet speeds in the world.
Types of Company Formations in Andorra
There are 3 main options to incorporate in Andorra and the minimum investment requirement is €3,000. This fee does not include agency fees.
The highest investment amount is €60,000 for Societat Anonima (S.A) entities and the formation time is between 1-3 months, depending on the size of the corporation and the paperwork involved.
Societat Limitada (S.L.)
- Capital Requirement: €3,000.
- Processing Time: 4-6 weeks.
The Societat Limitada (S.L.) is the equivalent of a Limited Liability Company in the United States. This company formation is available for most small businesses and you only need €3,000 in start-up capital to form this corporation type.
S.L. structures must have multiple owners/shareholders which means you can’t be the sole owner of the company. The processing time for an S.L. corporation can be as little as 3-4 weeks if all the documentation is ready and you don’t apply during the holidays.
Societat Limitada Unipersonal (S.L.U.)
- Capital Requirement: €3,000.
- Processing Time: 4-6 weeks.
The Societal Limitada Unipersonal (SLU) is an LLC with a single shareholder who is the owner, hence the “unipersonal”.
S.L.U. is similar to the S.L. structure, but the main distinction is that there’s only a single shareholder. We recommend this corporation type for self-employed professionals and entrepreneurs who wish to reside in Andorra on a full-time basis. The minimal investment capital for an S.L.U. is €3,000, not including agency fees.
Societat Anonima (S.A.)
- Capital Requirement: €60,000.
- Processing Time: 8-12 weeks.
Societat Anonima (S.A.) is a corporate structure for larger, established companies who want to relocate to Andorra. This corporation type has a minimum investment requirement of €60,000 and takes 8-12 weeks for processing.
There are multiple owners and shareholders in an S.A. corporation. We recommend S.A. structures for companies who generate revenue in excess of €1M a year.
How to Form an Andorran Company
Once you’ve narrowed down on which company type fits your business needs the best, you can begin the company formation process. The steps are listed below.
Step 1: Pick a Company Name
The first step of incorporation is to pick an available name — one that doesn’t already exist in the Andorran registry. This is done to avoid confusion with other registered companies. Your company name doesn’t have to be in Catalan; any language with Latin characters will do.
Under certain circumstances, it is possible to use a company name of a foreign company that exists elsewhere but is not established in Andorra. If you have an available name, you can start the application by sending a personal identification document such as your passport or government ID.
Step 2: Start the Application
To start the incorporation application, you must have approval from the government to operate under that name. The following documents are required for a successful application:
- Government authorization certificate for the name
- Draft articles of association
- A business plan that shows future plans and predictions of future earnings
- Bank certificate from an Andorran bank certifying that you have met the minimum investment requirements for that company formation (usually over €3,000, sometimes €60,000+)
- Copy of a passport or government ID. This applies to all co-owners and associates.
- A clean criminal record for the owner and associates issued by the local police where they reside
Step 3: Hire a Notary
Your next step is having a notary register your company. The notary will draft up a document containing essential information about your company that will be registered in the Trade Register of Andorra (Registre de Societats Mercantils).
Step 4: Wait for Approval
The final step is to obtain government approval for the formation of the company. Even if you aren’t a resident of Andorra, your application will be successful if you meet the financial requirements.
The Andorran government will analyze the documents submitted such as your business plan, bank account balance, articles of association, and criminal record. Once the government is satisfied with the application, you will become the owner of an Andorran corporation. This is usually done within days of applying.
What Happens Next?
After successful incorporation, the company will receive a tax registration number, known as Número de Registre Tributari (NRT). The company must start conducting business within 6 months of gaining approval from the authorities, or else, it will be deleted from the company registry.
Ready to Incorporate in Andorra?
We can help you get your corporation up and running in as little as 4 weeks. To know more about our company formation services, or to book a consultation, contact us today.