Setting up a company in Andorra: steps and requirements for incorporating a company
Andorra has the best direct taxation system in the Eurozone, so many entrepreneurs are starting business with the Principality of Andorra.
Setting up a company in Andorra to complete an activity is undoubtedly a good option for the entrepreneur looking for a better tax optimization and a better quality of life.
In Andorra, the maximum tax rate is 10%, so it is very interesting to create a company in Andorra.
The article «Taxes in Andorra» contains detailed information about taxes and life in Andorra. Read it here.
Why set up a company in Andorra?
Setting up your company in Andorra offers you numerous advantages compared to other countries. For example:
For whom is it a good idea to set up a company in Andorra?
In general, all those who have a company abroad and can move their business to Andorra.
This does not work for example for businesses such as bars, restaurants, shoe shops, etc.
They must be businesses that can be susceptible to be transferred to Andorra, such as an online marketing company.
This will also imply that the partner must live in Andorra.
How much does it cost to set up a company in Andorra?
The cost to set up a business in Andorra varies between 5000 and 7000 €.
The cost of this service includes professional, governmental and non-commercial services.
Professional fees are estimated between 3000 and 4000 euros, depending on the type of business, whether it is a business or for a specific purpose.
At this point you should keep in mind that it is preferable that in this process you go hand in hand with a lawyer and not a simple agency. Although it is true that the managers in Andorra are usually cheaper, they are not experts in law or taxation, so you can have a scare after having finished the process.
The public costs oscillate between 2500 euros based on the capital and the type of company.
Examples of the cost of residency procedures in Andorra
Of course, each case has its own details and here are several quotes to guide your choices. In general, the factors that influence the final price are the type of business you want to set up in Andorra, the state of financial compliance, the type of activity or the number of partners.
The professional fees, for example, can vary, but what will not vary is the cost of the notary when setting up a company in Andorra, or the commercial fees and other extra expenses related to the company in Andorra.
All this ranges between 3,000 and 3,800 euros.
How long does it take to activate the Andorran company?
It takes about 3 months to create a company in Andorra.
It is not a fast or agile process, so it is not easy either. There is a lot of bureaucracy involved in the process of incorporating a company in Andorra.
That is why we always recommend that you go hand in hand with a lawyer and not a manager, in this process.
It is also very important that at the moment you decide to create a company in Andorra, you take into account this time to be able to obtain the advantages of having the fiscal residence in Andorra that year.
Who should incorporate a company in Andorra?
Andorra attracts specialized people whose professional interests do not belong to a specific region. Influencers, sportsmen, consultants, digital marketing experts, programming professionals, gaming professionals, lawyers, financial investors, Crypto investors.
In most of them (except possibly liberal jobs, i.e. engineers or doctors), there must be a company in Andorra to obtain an active residence and thus be able to pay and thus benefit from the beneficial Andorran tax regime.
Therefore, all those who can move their company in Andorra, could live in Andorra through the incorporation of a company in Andorra.
Now, keep in mind that not only you must know the requirements to create a company in Andorra, but you must also take into account the requirements to reside in Andorra through the residence obtained by creating a company in Andorra.
What documents are needed to create a company?
In Andorra, the State and its financial institutions must strictly comply with the rules against money laundering and therefore must act with due diligence.
It will validate your qualifications and experience. You will need to present all your documents to the compliance department of the Government and the bank with the Hague apostille or otherwise duly legalized.
This normally lasts three months from the date of issue.
The most important documentation that you will have to provide in the process of creating a company in Andorra and also to apply for your residence in Andorra is:
- Notarized photocopy of the DNI or apostilled passport.
- Certificate of criminal record of the country of nationality and residence apostilled. If you have formally lived in other countries you will also need the apostilled criminal record certificate from that other country.
In addition to this documentation, you will have to present to the Govern d’Andorra your CV and your professional experience, since you will have to detail to the Govern d’Andorra what you have been doing during all this time and what you are going to do once you have passed the process to live in Andorra.
Can I take my company to Andorra?
Yes, you can take your company from another country to Andorra.
However, it is not recommended, since the cost of doing this is much higher than the cost of leaving your company in your country and creating a new company in Andorra.
Andorra offers you more advantages when incorporating a company in the country, instead of moving it from a foreign country.
What is economic substance?
The OECD aims to curb tax avoidance practices worldwide.
This is mainly reduced by eliminating the effect of tax base erosion.
Under this term, multinational corporations use tax scheme strategies to exploit discrepancies, gaps and inconsistencies within the national tax system.
They also launched the international BEPS project with 15 actions aimed at curbing tax evasion.
But how can my company in Andorra have substance?
It’s simple, to avoid having problems with the tax authorities in your country, the company in Andorra must have some substance:
One of the partners must effectively live in Andorra and work from Andorra.
There must be at least one commercial premises and at least one worker hired on a part-time basis.
However, be careful with the second requirement, because that person must act practically as a partner. He/she must know the company in Andorra well, he/she must be able to make executive decisions from Andorra, that is to say, the company must operate practically without the need of supervision of any partner.
Approximate time and cost
The total cost of incorporating a company in Andorra is relative and can generally be classified into two categories: incorporation costs (done only once) and maintenance costs.
Before proceeding, it is important to remember that costs obviously depend on the type of activity and the size of the business, these being typical examples in digital businesses. Estimated constitutional duration: approximately 3 months.
Once you have your company in Andorra, you must take into account that the company in Andorra will have to pay a corporate tax every year, that company will have to fulfill some formal requirements of presentation of accounting documentation before the Government, etc.
Keep in mind therefore to have good accountants who can help you to reduce the costs of your company and thus to optimize better fiscally the benefits of your company.
The models of entities to create companies in Andorra
In Andorra there are several models for companies, among them:
Limited Company: This is a type of company that requires a minimum share capital of 3,000 euros.
Limited Company: It is a company designed for more partners, whose minimum share capital is 60,000 euros.
Steps to create a company in Andorra:
From here, we start with the formalities of registering a company.
These procedures must be taken into account that they have some costs and that they are procedures that can be referred to a third person to do them on your behalf.
Thanks to being able to delegate these procedures on your behalf, (even paying the costs on behalf of your law firm), you will be able to carry out the whole registration process from anywhere in the world and you will only have to travel once to Andorra (or more depending on your priorities).
But you should know that the whole procedure can be carried out without the need to go to Andorra, just once (to go to the bank and incorporate a company in front of a Notary).
Application for a company name
Applications are similar in all European countries. The Andorran government offers a form to validate the social affiliation in order to obtain a successful application.
It usually costs about 5,36€ and takes about ten days.
Previously you must apply for an Andorran Identification Number in case you are a foreigner and proceed to the creation of a company in Andorra.
Submission of the Foreign Investment Application Form
The foreign investment authorization is perhaps one of the most professionally burdensome points for clients. This is because the foreign investment authorization is what determines whether or not you can invest in the country.
Depending on the government’s decision, you will be able to continue with the process or not.
The Foreign Investment application is a form filed with the Government of Andorra and is completed by non-residents who want to create a company in Andorra and who own more than 21% of the shares of a future company in Andorra or who want to buy part of the share capital of a company in Andorra.
However, this form must also be completed when a company already established in Andorra has non-residents who want the participation of the company in their lives. A copy of the criminal record of the country of residence must also be provided to the interested party.
This procedure has no additional costs, but it takes approximately one month.
Foreign Investment File
This file is not easy to complete. It consists of 10 pages and you must be very meticulous with the information that is established in the foreign investment form.
It must coincide with the corporate name form previously requested.
Drafting of the Articles of Association
Once the application for foreign investment in Andorra has been approved, it is necessary to prepare all the necessary documentation to be presented to the Notary Public and to proceed to the public deed before the Notary Public and therefore to celebrate the incorporation of the company in Andorra.
The articles of association must also cover the legal forms of the company, the corporate name, the corporate purpose and the share capital.
It is very important that the articles of association reflect the activity of the company as well as all the rules established by the capital company law in the country.
At this point make sure that you have a lawyer and not a manager, so that he/she can advise you on this inscription before the Notary, since if there is some mistake, you will have to make again a public deed before the Notary to correct it and to pay the expenses.
Pre-opening of the bank account for the society
Applicants must submit an application to open a bank account using the documentation required by the bank.
You must describe your operation, your source of funds and show your profile in a completely transparent manner. It takes a week to get the account inspected and approved.
The bank’s compliance department will review all the documents previously obtained: company name, NIA, foreign investment application, etc. As well as all the documentation you can provide about the origin of your funds, such as your corporate tax prior to incorporation, your income tax for the last few years, a bank statement for one year, etc.
Opening a bank account for the deposit of share capital
It can be a complicated process to make bank compliance decisions. In this regard, the origins and activities must be described. Unless a person is using cryptocurrency, these steps are often tedious.
Once the bank has given the OK to your activity, the process continues by making the deposit of the share capital (of the most important requirements) into your bank account of the company.
Banking in Andorra (banking secrecy, ease of opening…)
Since January 1, 2016 Andorra has collected all the banking information of your bank account, the information was delivered to the Treasury since 2018. Andorran Bank is based in close cooperation with other banks, in particular the neighboring country. In Andorran Bank time to hide the money goes back to the distant past.
The legal burden that banks have in the new opening of bank accounts, has made them look more closely at the client’s profile. Depending on whether the client presents all the supporting documentation of the origin of the funds or not, the bank account will be opened.
It is also important to note that in Spain, for example, there are more than 3 banks. In Andorra there are only three, so it is more complicated to open a bank account here than in Spain.
Signing before a Notary Public and Registration in the Companies Registry
After fulfilling this requirement, it is time for the public incorporation. For this purpose, a founder must apply to the Notary of the Principality of Andorra and issue the negative certificates of corporate name if necessary.
The incorporation of the company will take place before a Notary and this incorporation will already require a registered office for the registration of the company.
With all the previous documentation: foreign investment, social denomination, bank certificate of the social capital, etc, the public deed will proceed before Notary for the creation of the company.
Make sure that no document has expired, such as the foreign investment, otherwise it will not be possible to proceed with the incorporation of the company.
You will also have to take into account the costs of registration of the company at this moment of incorporation.
Registration in the Register of Companies
A notary will register and incorporate the public declaration within a maximum period of 15 days from its publication in an Andorran company register.
Now, keep in mind that the process is not finished, you will need the trade register (the commercial opening) one of the most important requirements, to start invoicing with your company and to pass the final compliance from the bank.
Even if the companies finish the incorporation procedure before a Notary and the registration has been done, the company will still not have the commercial authorization to start invoicing customers.
NRT and Registry of Commerce and Industry
It is time to apply for the Tax Registration Number (NRT) of your company.
You will also proceed to apply for commercial registration, which is mandatory for all companies that need to issue invoices. By then your company must be notified.
Opening of the company’s business
It is very important that at this point you already have an address (your apartment) or premises where you can establish your company’s business.
Keep in mind that if there is another company or companies registered at the same address, the commercial opening will be put on standby and you will need to enter another application in order to continue the process and obtain the commercial authorization.
Once this commercial registration is obtained, you will proceed to the final bank compliance and thus obtain the bank authorization thanks to the commercial authorization.
Note regarding Social Security
Once you have completed the incorporation procedure, you will need to pay the self-employed fee in the country.
This fee is approximately 500 euros per month and allows you to reside in Andorra and have access to the retirement pension and public health care.
Other reasons to set up a company in Andorra
Many people want to work in Andorra. This is because the minimum wage in Andorra is much higher than in other countries.
Currently at almost 1,300 euros, it makes many people want to live in Andorra and work in Andorra, rather than for example in Spain or France.
Although it is also one of the main problems, as the cost has risen so much in the country that it is difficult to stay in Andorra as a worker.
As a YouTuber, which company should I set up?
Youtubers have generally chosen the system of creating a company and paying 3,000 euros of share capital in order to obtain residency in Andorra.
Andorran passport
Andorran passports can be easily obtained by descent, birth, naturalization or marriage.
However, if you want to obtain the Andorran nationality by being a resident in Andorra you must spend 20 years without interruption.
You must also pass an exam about Andorra, in addition to being a resident of the Principality. The exam must be written in Catalan as a native speaker.
Advantages of creating a company in Andorra
The advantages of creating a company in Andorra are clearly related to the taxation of companies.
Companies in the Principality are subject to very low taxes. This allows companies to have more benefits in taxation and therefore to better optimize their profits.
Companies created in Andorra are not companies created in a tax haven. Andorra has not been a tax haven for more than ten years.
If you want to create your company in Andorra, you will see that as a partner you will have many advantages compared to Spain, since the personal income tax will be much lower, as well as the dividends, which are completely exempted.
Other taxes that you will have to take into account are the corporate tax and the value added tax (VAT), called IGI in Andorra.
How to obtain an active residence permit in Andorra
Any partner of a company in Andorra who holds more than 21% of the share capital of this company, can apply for the Active residence permit in the Principality for foreign investment in an Andorran company.
Obtaining residency in Andorra through the incorporation of a company implies that you can pay your taxes (including corporate tax) in the Principality.
The residence is subject to the following requirements:
- The creation of a company or having more than 21% of the share capital of any company.
- To be the administrator of the companies.
- To reside in Andorra more than 183 days a year.
- To make a transfer of 50,000 euros, to the corresponding Andorran department (AFA).
If I have paid in Spain, do I have to pay in Andorra?
There are double taxation agreements on this point.
However, each procedure is different, nevertheless, thanks to these double taxation agreements with the Andorran Principality, there is the option to avoid paying tax twice in some activities.
Contact us
It is very important that you have a good advice when creating a company in Andorra because you can fall into tax fraud if you do not do well the procedures.
Many clients prefer to avoid a report on taxation of their companies or on the option of Andorran residency, but nevertheless, it is highly recommended to avoid possible charges or tax fraud later on.
If you have any doubt about taxes, social security, or the necessary formalities to become a resident in Andorra, or to obtain any registration, authorization or registration, do not hesitate to contact us.
Thanks to our free first consultation system, we will be able to help you in a first advice about your activity.
We understand your needs and those of your companies.