Guide to Starting a New Business in Andorra in 2021

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Nestled in the Iberian Peninsula is the microstate of Andorra. It’s flanked on either side by Spain and France, and has a population of just 77,543, making it one of the smallest nations anywhere on earth. With its stunning scenery and agreeable climate, it’s a favourite among tourists – but its very attractive 10% rate of corporation tax makes it extremely appealing for business, too.

Why do Business in Andorra?

The microstate is right on the border between France and Spain, and enjoys extremely close economic ties with both countries. Most Andorrans have heritage from either country, and thus setting up business here will allow you to enjoy a wealth of knowledge on both countries. If you’re looking to sell to the French and the Spanish, therefore, setting up in Andorra is a fantastic way to go.

What’s more, as we’ve mentioned, there’s the tax rate. 10% is the maximum rate of taxation – for certain sorts of business, the rate can be as low as 2%. This creates an enormous draw for businesses looking to set up their head offices.

The rates of VAT in Andorra are also among the lowest on the continent. VAT here is applied at 4.5%, and 1% for essential industries like education, health, food, and culture. While this will only apply to the sales you’re making to the Andorrans themselves, it’s still an advantage worth considering.

As for capital gains tax, you’re looking at a rate of 10%. There are workarounds, here, however. If you’re selling shares in a company that you own less than 25% of, then you can do so without worrying about taxation. The same applies if you’re transferring qualifying participations in a holding company.

Andorra’s system of education is enviable, and there’s a wealth of talent to draw from. The country has a 100% rate of literacy, and most people educated here end up speaking many languages. The cost of living is also extremely reasonable, especially when you compare the microstate to other low-tax principalities, like Monaco. 

Company Formation in Andorra

When you’re forming a company in Andorra, you’ll need to register the business. This means choosing the appropriate structure. Societat Limitada and Societat Limitada Unipersonal are types of limited liability company, which need to have at least €3,000 are the time of formation. Then there’s Societat Anonima, which is more appropriate for larger businesses with multiple shareholders, but which requires at least €60,000 of capital upon registration.

On top of the capital requirements are the fees you’ll need to pay to get the company registered. This costs just under a thousand euros.

At the outset, you’ll need to have determined the type of company that’s being registered, and to meet all the regulatory requirements. If you’re not a resident of Andorra, then you’ll have more hoops to jump through. 

If you’d like to become a resident of the country, then you can do so, even if the majority of your economic activity takes place outside of it. You’ll need a full criminal background check, and you’ll need to be earning three times the country’s average salary – which is around thirteen thousand euros.