Andorra is one of the countries with the most attractive direct taxation in the Euro zone and that is why many entrepreneurs decide to set up their business center in the Principality by creating a company.

Setting up a company in Andorra to carry out an activity or to constitute a holding company is undoubtedly a great option to take advantage of the very attractive fiscal framework offered by the corporate tax, which is taxed at a maximum of 10%.

Why should you set up a company in Andorra?

Setting up your company in Andorra can offer many advantages over its neighboring jurisdictions.

Among these, the following are worth mentioning:

• It has one of the lowest corporate taxes in the Euro zone, with a maximum rate of 10%.
• The Foreign Investment Law allows non-residents to invest in Andorra.
• The Accounting Law is very similar to the Spanish one.
• There is no audit law that obliges you to audit the company when it invoices a certain amount.
• The incorporation and maintenance costs are much lower than in Malta, Luxembourg or Cyprus.

Steps to incorporate a company

Incorporating a company in Andorra seems simple but it is a process that involves a heavy workload and can take between two and four months, depending on the client’s profile.

Generally, the slowest procedures tend to be the banking compliance and the opening of trade.

These are the steps:

Company name reservation

The interested party can propose to the Andorran government three names in order of preference. The latter will have 10 days to respond.

Application for foreign investment

This procedure must be carried out in the case of non-residents who wish to acquire more than 10%. A very complete dossier must be provided and this procedure can take up to one month and 15 days.

Opening of a bank account for the deposit of the share capital

One of the most complicated procedures is to pass the compliance of a bank for the company. For this you will have to explain the SOF (source of funds) and your activity.

If you belong to the world of cryptocurrencies, this step is usually cumbersome.

Constitution and registration of the company in the register

The articles of association are formalized before an Andorran notary in order to create the company in Andorra in an official manner and the company is registered in the Andorran commercial register.

Commercial opening

In the corresponding Comú (town hall) of Andorra a license is obtained that allows to begin to operate and to invoice. This procedure nowadays is being quite costly given the generalized collapse of the comuns Andorran ones.

Application for the Tax Registration Number

The tax identification code is confirmed and the company is registered with the Andorran Social Security.

What documents are needed for the company formation?

Generally, setting up a company in Andorra involves gathering a lot of documentation. The administration and banks perform a due diligence and compliance function to avoid money laundering in the Principality.
Despite what many people think, setting up a company in Andorra complies with the highest standards of international transparency and is highly scrutinized to avoid money laundering.

In general, the documentation requested is as follows:

• Criminal records duly legalized with the Hague Apostille. They are usually valid for a maximum of three months from their issuance.
• Copy of your passport, legalized with the Hague Apostille.
• Documents explaining your work profile and business model (i.e. CV, business plan, etc.).
• Copy of your passport, legalized with the apostille of The Hague.
• Documents proving your tax compliance (previous tax returns) and the origin of your funds (accounting, annual accounts, etc.).

Who should incorporate a company in the Principality?

Andorra is very attractive for certain profiles whose core professional interests are not anchored to any specific country: influencers, youtubers, athletes, consultants, digital marketing experts, programmers, professional gamblers, lawyers, financiers, investors and crypto-investors….

In all these cases (except perhaps liberal professions such as engineers and doctors), the incorporation of the company is an indispensable requirement to obtain the active residence, to be able to invoice and therefore to benefit from the beneficial Andorran tax conditions.

Can I incorporate a company without living in the country?

Yes, it is entirely possible to set up a company in Andorra without living in Andorra. No law prevents you from doing so.

However, concepts such as the effective address or the economic substance (where the office is located, the workers…) are very important when determining the tax residence of a company.

Even if a company has been incorporated in Andorra, it must be taken into account that the tax administration of the country of origin can consider that the company is also resident in that country if it can prove that the effective management of the company is carried out there.

For example, no matter how much a company is incorporated in Andorra, if its country of origin proves that it is managed from there, it will have to pay the Corporate Tax of that country.

Can I take an existing company from another country?

While there is the possibility to redomicile an existing company from another country, it is not usual: the normal process is that the client dissolves the company in its country of origin and creates a new one in Andorra.

How to take the first step?

If you are seriously interested in changing your tax residence, we recommend reading the report “The definitive guide to living in Andorra”, with the most complete information on Andorran taxation, residence and company.

With the recent boom of youtubers who have changed their residence to the Principality, dozens of websites of fake advisors have emerged offering the service of incorporation of companies in Andorra, but they do not make the relevant legal and tax analysis.

It is necessary to emphasize the importance of being well advised: on more than one occasion we have encountered clients who chose unqualified advisors to create their company and ended up with serious problems before the tax administration of their country of origin.

At AndorraInc we guarantee the maximum rigor for the transfer of tax residence.