How to set up an offshore company in Andorra

If you’re looking for a European base with an investor-friendly tax system, Andorra deserves a place on your list. With corporate and personal income tax rates of just 10%, as well as other tax benefits for residents, Andorra can be an attractive option.

Advantages of an offshore company in Andorra

Andorra, although small, offers many tax advantages. Andorran companies allow you to take advantage of the country’s advantageous tax system with a tax rate of only 10%.

Non-resident companies

The legal changes now allow non-residents to establish, own or hold part of a company based in Andorra with the same rights as a resident.

Taxes in Andorra

Andorra enjoys one of the lowest tax rates in Europe with a corporate tax rate of 10%. This rate can be reduced to 2% for business income from abroad.

Capital Gains Tax

The standard capital gains tax rate in Andorra is also 10%. Exemptions are available for foreign real estate that has been held for more than a decade.

Value Added Tax (VAT)

VAT in Andorra (IGI) is the lowest in Europe at only 4.5%. Businesses also have to pay a local community tax called “Comú”.

Tax Obligations

Andorran taxpayers must file tax returns and register for social security if their company employs workers.

Although Andorra offers an attractive tax system with an income tax rate of 10%, it is essential to understand the tax obligations in your home country.

Everything you need to know about taxation in Andorra

Active Residence vs. Passive Residence

Many investors open companies in Andorra to take advantage of their residency program. There are two main ways of residency: active and passive.

• Active residency is the best option for founders and shareholders of a company in Andorra. It is granted either for the creation or acquisition of a company from a company in Andorra or for participation in a local company. To obtain a work permit, you must set up your own business with a minimum share capital of €3000, or acquire more than 20% of a local company, for which you must at least sit on the board of directors. As a director of your own company, you will obtain active residence after the incorporation and activation of your Andorran company, all the procedures of which must be administered physically and locally by the competent authorities and drawn up exclusively in Catalan.
• Passive residency requires an investment of at least €600,000 with a deposit requirement of €50,000 for the main applicant.

Everything you need to know about residency in Andorra

How to set up an Andorran company?

The process of setting up a company in Andorra includes opening a bank account, depositing the share capital, and signing the membership certificate at a notary’s office. The process can take up to three months due to government approval.

FAQs about Andorran companies

• Can I open a company in Andorra? Yes, foreign residents and non-residents can do so.
• Is Andorra in the EU? No, but it uses the euro as its currency.
• Is Andorra a tax haven? Officially not, but it has the lowest tax rates in Europe.
• Does Andorra have tax treaties? Yes, with several countries, including France, Spain and Luxembourg.
• Does Andorra tax foreign income? Yes, but at low rates.

Does Andorra have tax treaties?

Andorra currently has tax treaties with the following countries:

• Cyprus
• Czech Republic
• France
• Hungary
• Iceland
• Liechtenstein
• Luxembourg
• Malta
• Monaco
• Portugal
• San Marino
• Spain
• United Arab Emirates

At the time of writing, the last treaty ratified was that of the Czech Republic, in January 2023. Other countries awaiting ratification are Croatia, Lithuania and Germany.

Conclusion on Andorran companies

Andorra offers an attractive tax system and considerable freedom of movement. It is essential to consider certain factors and look for alternatives to avoid double taxation. Get professional tax advice before you get started.

Clickand can help you create an action plan to find the best organization to set up your offshore company in Andorra, minimizing taxes and maximizing profits.

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