Located in the Pyrenees between Spain and France, Andorra can be a strategic place to register a company.
The tax system makes setting up shop in Andorra very appealing, both in terms of company profit and sales taxes. Foreign investors clearly agree. In 2021, foreign direct investment (FDI) was almost twice that of 2019.
Crucially, Andorra has also changed its policies regarding company ownership. As an expat you’re able to own 100% of your company without the need for Andorran nationals to own a share, be a director, secretary or otherwise.
As with all countries and entities, there are some catches however.
In this guide, I’ll walk you through everything you need to know about setting up a company and doing business in Andorra.
Advantages of Starting a Business in Andorra
There are a host of benefits to doing business in Andorra:
- With its close proximity to major cities, Andorra isn’t wildly inconvenient to get to if you need shareholders or stakeholders to visit and sign documents.
- This same proximity is helpful if you’re using Andorra as your logistics base to pick, pack and send products from.
- Capped at 10%, corporate taxes in Andorra are among the lowest in Europe.
- Office space rental costs are generally lower than in France or Spain (though this is changing).
- Banks in Andorra are now part of the Single Euro Payments Area (SEPA), meaning payments are fast.
- With fibre connections to all homes and offices, as well as exceptional mobile coverage, you can be sure of fast and stable internet connectivity from almost anywhere in the country.
- Your company gets to leverage Andorra’s political and economic stability.
- If you’re considering moving to Andorra, forming a company enables you to become an active or passive resident.
- Andorra is keen to promote innovation and research, and works to support local companies.
- Electricity in the principality is of the lowest in Europe.
- Reporting requirements are not arduous.
- Credit card payment processing can be done at very low rates—1% for European cards is common.
- Changes to the company purpose, shareholders and more often require a visit to the notary. This means you need to visit the country in-person to get things done.
- Though many things can be done online, many administrative functions are still paper based.
- Fees when working with local banks aren’t as competitive as you may expect. These can be negotiated down to the sort of prices you’d expect from a bank in Hong Kong.
- Integrations with accounting software like Quickbooks and Xero aren’t available.
- Credit card payment processing isn’t ideal.
- RedSys doesn’t work ‘off the shelf’—you might need to work with a developer to have them build a solution for your website.
- Though Braintree is available, they aren’t approving accounts anywhere near as often as they were previously.
- Stripe is not available.
- Though PayPal is available, they cannot remit to your Andorran bank account.
- You need to withdraw funds to a USD bank account.
- The workaround is to use a Wise account for your company.
- So your client/customer may pay in EUR, which is converted by PayPal to USD, then remit to your Wise USD account. This is then converted to USD and sent to your Andorran EUR current account.
- The end result is paying a ton of fees, and creating a lot of accounting work in the process.
- Not all bankers understand the online business models that many of us use day to day. This can cause ridiculously long delays, or eventual refusal of an account. For this reason it’s really important to have the right contact.
Corporate Entities in Andorra
The first step is deciding on the type of corporate structure suits your needs.
Which one you go with will depend on the size of the company you plan on starting and how much liability you want to bear as an owner.
The different types of Andorran company registrations include:
- Societat Limitada (SL)
- Equivalent to an limited liability company.
- Best for small businesses.
- At least 2 shareholders are required.
- The most common entity used.
- Paid in-capital required: €3,000.
- Societat Limitada Unipersonal (SLU)
- Same as the SL above, but for individual owners.
- Only 1 shareholder required.
- Paid in-capital required: €3,000.
- Societat Anónima (SA)
- Equivalent to a public limited company.
- For large businesses with many shareholders.
- Increased privacy for shareholders.
- Paid in-capital required €60,000.
- Other Options
- Sole proprietorship
- General partnership (Societat col·lectiva)
- Both of these do not limit liability, and are therefore not suited to the needs of most business owners.
Andorran Company Formation Process
Once you have decided on the type of company you want to form, the process to register your business is fairly straightforward.
Please note, I didn’t say easy or quick. If you want to do it yourself, you should expect it to be time consuming!
Let’s take a look at the steps involved.
Foreign Investment Authorisation
The first step is to ensure you have approval to do business in the country. Without this, you may as well not bother proceeding.
Non-resident partners and shareholders with a larger than 10% stake in the business require foreign investment authorisation, which can take up to four weeks.
Registering the Company Name
The main thing to keep in mind when choosing a name is that there should be no risk of it being confused with one that’s already registered. While it doesn’t have to be in Catalan, it must be in a language that uses the Latin alphabet.
Make a list of options, choose your top three and submit those in order of preference to the government. You should hear back within 10 days.
Incorporation of Your New Company
The next step requires you to put together an in-depth and well researched business plan (including financial forecasts) and submit it along with the following:
- Authorisation for the name
- Articles of association of the company
- This portion of the process will require a visit to the notary
- These articles will be in Catalan and will specify how you run the company
- Proof of an Andorran bank account that contains the required capital amount
- Proof of ID for all directors (legalised in Andorra or apostilled)
- Criminal record checks for all directors (also with apostille)
Note: documents must not be older than three months.
Trade Register Entry
The penultimate step in the process is to have your company registered in the Registre de Societats Mercantils (Andorran company register).
Once your company has been added to the company register, you have six months to start trading.
Register With Your Local Government
Your company not only needs to be registered with the Govern d’Andorra, but also your local commune.
Different communes can be fast or slow, so this can take anywhere from 1-4 weeks.
Tax & Social Security
Finally, you’ll need to request a tax identification number, and also ensure that your company is registered with Andorra’s social security fund, CASS.
If this is your sole company and it’s used to gain active residency in Andorra you will need to pay CASS. This can either be paid by yourself as an individual, or by the company.
How Much Does It Cost to Get Set Up?
Starting a business in Andorra will set you back around €2,000 (including notary fees and name-registration fees) if you tackle the process by yourself. This of course, doesn’t include the cost of your time.
If you’re new to the country and don’t speak the language, hiring a consultant can help to get things right the first time. While it will cost more (the average seems to be around €4,000 these days), the initial outlay is well worth it.
Not least of all because doing so will greatly reduce your chances of hitting a snag due to incorrect documentation. They generally know how to ‘grease the wheels’ as well if needed.
The outlay can see you doing business a lot sooner than if you decide to fly solo.
How Long Does It Take to Start a Business in Andorra?
On the whole, you should expect the process to take anywhere up to three or four months. This will depend on:
- the type of company you’re registering
- the commune the company will be registered in,
- the category your business operates in,
- how clear your business plan is,
- what time of year it is, and
- where non-resident shareholders are from.
Failure to submit the correct documentation or being too vague in your business plan will result in delays. This is really where an agent can help a great deal, as they know what the government departments and banks want to see.
Remember, the more complicated your business setup is in terms of stakeholders, the longer and more complicated the registration process will be.
What About Buying an Existing Business?
Buying an existing business to speed up the process isn’t very common. The time saved is negligible at best. To begin with, whether you are starting a business or buying an existing one, as a non-resident you still require foreign investment authorisation.
Putting the company in your name will still need to be processed by a notary and lastly, along with transferring the company bank account and assets, which comes with its own set of hoops to jump through.
On top of that, there’s all the due diligence you’ll need to do to make sure the company is in good standing, outstanding debt is taken care of, and so on. Given all of this, starting from scratch can actually be easier and quicker.
This said, if your sole goal is to gain residency, it may be possible to buy a substantial share in an existing company. You’ll need to be a Secretary or Administrator of that company.
Obviously the difficulty in doing this makes it very uncommon—if you don’t yet know anyone in the country, it’s unlikely you’re going to get an offer to become a business partner!
Can You Start a Company Without Actually Living Here?
If you have commitments that require you to be elsewhere, doing business in Andorra is still a possibility. However, your company will need to have economic substance in the country to make this happen.
Without this, you won’t get the benefits of Andorra’s tax status, since that company will likely be domiciled in your personal place of residence.
In other words, you’ll need an office here, possibly in one of Andorra’s coworking spaces. The company will also need to employ a local director or secretary.
Ready to Start Your Business?
Andorra offers a friendly business environment, strong regulation, transparent policies and a welcoming approach to foreign investments. And let’s not forget low corporate tax (10%) and below average capital gains tax.
If you’re dreaming of forming a company in Andorra and putting down roots here, I don’t blame you. Doing business here poses some attractive benefits, with one being a clear path to residency.
Remember that, after first determining which type of business you want to incorporate and gathering all the relevant documentation, you’ll need an Andorran bank account, a capital sum of money to deposit into it, and a sound business plan.
If you’re ready to take the leap, keep the key takeaways from this article in mind as you embark on your exciting business adventure.