Andorra is located in the high mountains of the Pyrenees between France & Spain.

Fiscal Advantages

• Low income tax
• No inheritance tax
• No trade barriers, country is easily accessible
• No custom duties
• No foreign exchange control

Regulatory Advantages

• 100% foreign ownership Andorran Companies
• A resident will not be liable for any withholding tax
• Financial Disclosure Agreements have been signed between Andorra and many countries
• The concept - “economic rights” does not exist - a foreign resident need not wait to own a business in their name

Limitations

• Disclosure of details if required to
• Disclosure of Bank details
• Investment is not permitted to jurisdictions that fall under the OECD list of suspect jurisdictions
• A special provision in the law, bans non-resident property development companies from developing property in Andorra

• Societat de Responsabilitat Limitada (SL)
• Societat Anonima (SA)
• Branch of a foreign corporation

Societat de Responsabilitat Limitada: It is a Limited Liability Company, usually used for trading locally. It requires a minimum paid up share capital of € 3,000 and can be incorporated by one or more partners. It is a common form of incorporation.

Societat Anonima is a joint stock company with limited liability. Minimum paid up share capital is € 60,000.

The Corporations Act 1983 governs corporations formed in Andorra. There are three types of company, the Societat de Responsabilitat Limitada and the Societat per Accions both having shareholders with limited liability, and the Societat Colectiva, whose partners have unlimited liability.  

Shareholders are liable for company debts only up to the limit of their contributions or holdings in the company. Their personal assets are not liable on the condition that the company is entered in the Company Register. 

Any company in Andorra must have a registered office in Andorra. While registering the company, it has to apply for authorisation of its activities in the commune where the registered office is located. 

Incorporation of a company may take up to 3 months.

• Copy of Passport
• Certificate of Good Behaviour of the country of residence
• Description of the following in the Application form of Incorporation:
  1. Application for a company name
  2. Nature of the activities
  3. Market orientation
  4. Value of the planned investment
  5. Expansion plans
  6. Economic linkage and strategic partners
  7. Planning of resources, public and private and their financing
  8. Form of corporate social responsibility
• Application for permit to incorporate company

• No income tax levied as of 2014
• No inheritance tax
• National Insurance Contributions (NICs) are paid by employees
• Employees also need to pay certain municipal property taxes

From Jan 1st 2015,

• Andorra will levy both Income tax and CGT
• Income tax will be charged at a maximum rate of 10%
• For earned income (which includes salary, pension income, consultancy fees and rental income) earned both in Andorra and overseas tax will be charged on individuals as follows:
  • Income of up to € 23,999 per annum – exempt
  • Income between € 24,000 and € 39,999 at 5%
  • Income above € 40,000 at 10% thereafter
• Married or legal couples will pay tax at the following rate:
  • Income of up to € 40,000 per annum – exempt
  • Income above € 40,000 per annum at 10% thereafter
• Dividend income, and interest from bonds, bank deposits or loans, will be taxed at 10% on amounts above € 3,000

• Capital gains tax on property at Andorra, levied at 15%, reduced by 1% per year of residence
• Corporation tax levied at 10%
• On January 1^st 2013, the new indirect tax system was introduced called IGI (Impostos Generals Indrectes) of 4.5%. This is the start of the VAT or IVA, a general levy on most goods and services

The Foreign Direct Investment Law of July 2012 states that, any foreigner, whether resident or not, may now be the titular of any trading enterprise in Andorra and may own 100% of any company. 

The owner may or may not be a foreign physical person or a foreign company, and is not a resident, that investment is considered as foreign investment with a few regulations and declaration obligations. 

The new Personal Income Tax system in Andorra (IRPF) was passed on 24^th April 2014, effective from January 2015 onwards. It states that,

• The personal allowance in all cases starts at 24,000 euros, and from 24,000 euros to 40,000 euros there is a 50% deduction (that is 5% tax), thereafter at 10%
• The tax is set at 10% after deductions of all appropriate allowances
• No capital gains tax on shares and company assets after 10 years
• Profit and loss on assets held outside Andorra for 10 years will be exempt
• Separate savings tax for bank accounts, which will be subject to 10% tax with an annual allowance of 3000 euros
• Inheritance, dividends on Andorran Investment funds, sale of property, certain pensions, incapacity benefits etc., are exempt from calculation of IRPF
• Law has introduced a reduction for income derived from other countries that has already been subject to tax there
• All fiscal residents of Andorra are subject to IRPF on all of their worldwide income and gains 

All fiscal residents need to register for a Tax number (NRT) and need to file a tax return between 1^st April and 30^th September annually for earnings of the previous year.

Special concession for passive residents is the option to pay annually 30,000 euros for a period of 3 years in lieu of filing a tax return. Post 3 years, they will then resume normal tax returns and will be liable for tax as prescribed by the law.