Gains from commercial undertakings are intrinsically linked to the milieu within which the enterprise functions. The revenue accrued by a proprietor is diminished owing to an excessive fiscal encumbrance, while prospects for broadening the sales arena are frequently constrained by statutory interdictions within a specific nation. Establishing a company in Andorra facilitates the diminution of obligatory levies and secures more advantageous circumstances for collaboration with associates globally.
This jurisdiction is distinguished by an exceptional legislative framework, which engenders propitious conditions for the expeditious growth of enterprises and investments in diverse domains. Establishing a company in Andorra is an uncomplicated procedure, yet the entrepreneur must adhere rigorously to the prescribed ordinances.
In this treatise, we shall delve into the nuances of establishing a corporate entity in Andorra. We shall scrutinize the peculiarities of fiscal obligations and accounting services, dissolution, and the relocation of a juridical person to the domain of this principality.
Benefits of starting a company
Andorra is a diminutive principality situated in Europe betwixt Spain and France. It is not a constituent of the EU but is intricately interlinked with adjacent sovereignties. The topographical situation and regional characteristics of the governance of fiscal and economic undertakings render this principality a sort of “tax haven.” Entrepreneurs seek to establish a business in Andorra to diminish fiscal levies and accrue augmented profit without contravening statutes.
Let us examine the principal merits of laboring in this nation.
Optimized tax system
European edicts frequently necessitate the remittance of levies, which expropriate up to fifty percent of the revenue accrued by proprietors. The Principality of Andorra, albeit situated within the European Union, proffers attenuated rates. The corporate impost is merely 10%, rendering this polity one of the most alluring in Europe from a commercial perspective.
This fiscal amelioration confers a supplementary boon in the marketplace. The industrialist acquires extra pecuniary assets at his disposal, which assist him in advancing, penetrating novel markets, and broadening the spectrum of amenities proffered.
Partners and consumers in the EU
Strategically positioned on the cartographic delineation adjacent to French and Spanish dominions, streamlined boundary crossing protocols render business registration in Andorra a facile mechanism for engaging with all EU nations, and additionally affords the prospect of forging commercial linkages globally.
Simple legislative regulation
Regulatory edicts of the principality that govern economic endeavors manifest as a cohesive and comprehensible schema, emblematic of the majority of continental polities.
Moreover, the authorities are crafting propitious conditions to allure investors and entrepreneurs. Consequently, establishing a company in Andorra is markedly more facile and expeditious than in the majority of other states.
You can expedite the process as much as possible if you engage an intermediary firm to address this issue. Its agents are acquainted with the idiosyncrasies of the local protocol and can procure the requisite documents, circumventing administrative impediments.
Opportunity to obtain residency
The Principality is alluring not merely as a locale for employment. This diminutive sovereign entity proffers myriad advantages to inhabitants. Furthermore, acquiring perpetual resident status is relatively facile, particularly if one operates a commercial enterprise within its bounds.
Formulation of an Andorran enterprise autonomously bestows upon the proprietor the prospect of securing documentation for perpetual domicile within the nation. Furthermore, this applies equally to the entrepreneur and their cherished kin. The resident accrues the ensuing advantages:
- The prospect to reside in a congenial nation at the heart of Europe;
- Superior infrastructure;
- Excellent healthcare;
- Scenic environs, unblemished atmosphere, and pure water.
Reliable banks
Andorran jurisprudence stipulates robust safeguarding of banking confidentiality. Account proprietors within fiscal establishments in this nation can be confident of their discretion. Moreover, they are deemed among the most dependable for preserving capital.
The safeguarding of such assets is assured by the steadfast economic and political milieu in the nation and the lack of fiscal upheavals. The pecuniary interests of the investor will be amply shielded.
Who benefits from registering a business in the Principality?
The nation affords congenial labor environments for individuals in inventive vocations and experts unanchored to a fixed locale. Legislators, online commentators, sports professionals, financial evaluators, information technology practitioners, global legal advisers, and digital currency speculators establish enterprises and allocate resources in this setting.
In addition to alleviating the fiscal encumbrance, local entrepreneurs attain residency and may henceforth domicile within the precincts of the principality. Consequently, the enterprise affords them both pecuniary and quotidian advantages in Andorra.
What companies can be registered
Before determining to commence labor, one must contemplate its juridical configuration. The resolution rendered influences the opportunities for executing specific kinds of undertakings, attaining prescribed corporate objectives, fiscal encumbrance, stipulations for primordial capital, juridical repercussions in the eventuality of insolvency, and further considerations.
Various alternatives are feasible.
Limited Company (S.L.)
It is a localized variant of the well-known LLC. The enterprise constituted in this manner is apt for conducting trade on a modest and moderate scale. Moreover, it is preferred when establishing familial enterprises. The term “society” envisions the involvement of multiple persons or juridical entities that amalgamate their assets.
If an LLC is constituted by a singular individual, they opt for the S.L.U. alternative.
The prerequisites for such a business formalization are trifling. The primordial capital is merely 3 thousand euros. To administer the operations, a singular director is requisite, who may also assume the role of proprietor.
There are numerous familial enterprises in this nation that are possessed by multiple generations. In these, the principal role is assumed by the progenitor with a substantial input to the initial endowment, and the residual shares are uniformly held by other kinsfolk.
Society Anonymous (S.A.)
The subsequent prevalent modality of OPF for executing commercial enterprises within the confines of the principality is a joint-stock company. Its foundation may consist of a solitary individual or a consortium of persons who constitute the initial capital by acquiring shares. This alternative is appropriate if an entrepreneur intends to operate in the global market with substantial turnover. The minimum capital requisite is 60 thousand euros.
There exists a JSC form wherein all equities are vested in a sole proprietor. It is denominated S.A.U. In every instance, the administrative body must comprise a council of overseers with no fewer than three constituents. This is requisite to guarantee the appropriate stewardship of the juridical person.
The jurisprudence of the principality exhibits a unique characteristic. One may establish a corporation in Andorra concurrently in the guise of both a private and a public joint-stock company. Thus, a portion of the securities is allocated for dissemination among indigenous investors, while another portion is designated for public trading.
Collective Society
This option is selected by proprietors who wish to engage in the operational stewardship of their own enterprise. The entity functions as a “syndicate,” where the endowment capital is apportioned among the stakeholders. Each member affects decision-making and shapes the progression of the establishment.
The idiosyncrasy of this FPP is that the proprietors are accountable for encumbrances with their entire estate. Furthermore, liabilities are apportioned among all co-owners. This can be amended by executing a distinct accord between the parties, which delineates the prerogatives, obligations, and duties of each.
A cooperative is the sole juridical entity alternative that does not impose minimal capital stipulations. This is advantageous when originators wish to establish a business in Andorra with negligible investment.
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Who can open a company
The proprietor of a juridical person in the Principality may be a natural person or a corporation. This privilege is accessible to denizens of the realm and non-residents, as well as alien juridical persons. In the latter instance, a precondition is the designation of an individual who will formally represent the interests of the corporation in Andorra.
Kindly observe that this nation permits absolute foreign engagement in corporate establishment.
An ancillary advantage is that an enrolled entity is not mandated to utilize contracted manpower. As a juridical domicile, one may designate a leased bureau or a commonplace habitation that pertains to the investor.
Documents for registration
Although the Principality is not a constituent of the EU, the nation is proximate to EU territories and scrupulously complies with anti-money laundering statutes. When establishing a corporation, the progenitors must furnish documentation that attests to the lucidity of their objectives and the legitimacy of acquiring the dispensed capital.
To consummate the procedure, proprietors will need to furnish the ensuing: documents:
- Replicas of manuscripts that attest to the identity of the originators or the incorporation of the juridical entity - the originator;
- Records elucidating the occupational profile, the selected employment paradigm, etc. The format and substance of the record are not rigidly stipulated.
- The resolution to institute a corporation;
- Bylaws delineating the entitlements and responsibilities of members, the protocol for administration, dissolution, and reorganization of the corporation;
- Evidentiary papers verifying that the corporation possesses a juridical domicile;
- Vouchers for remittance of statutory levies.
All official documents must be ratified in accordance with the prescribed protocol. The Principality has an expedited protocol, thus it suffices to employ an apostille in accordance with the Hague Convention.
Sequence of actions to create a business
Establish a firm in Andorra. You may undertake this personally or via an intermediary who will act as a proxy on behalf of the founder. Furthermore, in the latter scenario, it is not requisite to dwell indefinitely within the principality.
Notwithstanding its simplicity, this process encompasses numerous subtleties and transpires in a rigorously delineated order.
1 - Select a name
Any juridical person must possess a distinctive appellation that is no longer extant in regional registries. To achieve this, you must tender a petition and await verification from administrative bodies. Frequently, this process consumes up to a fortnight.
2 — Preparation of the charter
The document must be formulated with due consideration of the peculiarities of local statutes. It delineates the fundamental doctrines of the company's function, governance protocols, spheres of endeavor, dissolution modus operandi, and additional characteristics.
3 – Notarized completion of the decision
The proprietors of the firm must compose a document concerning the formation of a juridical person. It may be executed subsequent to acquiring consent from municipal authorities. The autographs of contributors and their identities must be authenticated by a notary public.
Subsequent to this, the documents are tendered to the state registrar in the mandated fashion.
Kindly be apprised that upon the incorporation of a company in Andorra by a non-resident, it is requisite to furnish documents rendered into Italian. Furthermore, the translation must be executed officially and authenticated in the designated fashion.
The procedure of inaugurating a venture typically does not engender complications if the proprietor scrupulously conforms to regional stipulations. When his erudition is insufficient to finalize the process independently, it is advisable to enlist a proficient intermediary to assist him.
Taxation of the Principality
The reason why entrepreneurs want to do business in Andorra is the reduced tax burden without violating local and international legislation.
The Principality imposes several taxes, but in most cases their rates are significantly lower than in other European Union countries.
Corporate tax
Legal entities deduct tax payments on profits received range from 2 to 10%. This fact alone makes opening a company in Andorra one of the most profitable business decisions. For example, from an income of 100 thousand euros you will have to pay no more than 10 thousand, while in other jurisdictions this amount can be 2-3 times more.
An additional plus is that local authorities promote the development of new businesses and provide them with tax breaks during the first year after registration of up to 50%. If the income of a registered company alone does not exceed 100 thousand euros, then it needs to pay taxes according to an even more favorable scheme:
- 5% when receiving income up to 50 thousand euros;
- 10% for the rest.
VAT
In the Principality of Andorra, the value added tax rate is one of the lowest in Europe. If in Spain, a neighboring country, it is necessary to transfer 21% VAT to the budget, here the rate is only 4.5%.
But there are exceptions to this rule, depending on the type of goods produced and sold:
- 0% on goods and services in the field of education and healthcare;
- 1% on media and products, excluding alcoholic beverages;
- 2.5% on tourism services and works of art.
Please note that legal entities that provide banking and financial services must pay VAT at the rate of 9.5% of the added value.
Capital gains tax
Another advantage of the Andorra jurisdiction is comfortable conditions for investment. They are created, among other things, thanks to preferential taxation of certain types of investments.
In most cases, an investor who receives a profit from an investment will have to pay up to 10% personal income tax. But exceptions are made for some categories. For example:
- Income from the sale of JSC securities, provided that their share was less than 25% of the total capital, is not subject to taxes;
- Profit from the sale of assets that have been owned by the seller for more than 10 years also does not require payment of tax.
If an investor invests in the economy of the principality, including buying and selling bonds or receiving dividends from participation in local companies, he will also not pay tax.
Order of wealth
There is no such tax in this country, which goes against the legislation of most European countries. Many of the EU states charge up to 2% of available assets. If you place them in Andorra, you will not have to incur additional expenses.
Andorran tax legislation provides many advantages to the entrepreneur and investor who wants to receive income from their investments. Proper use of the benefits provided increases income received without the use of “gray” schemes to reduce the tax burden.
Double Taxation Issues
Payers of value added tax in the territory of the principality must strictly adhere to the rules for submitting reports to the tax authorities. To avoid violations of established rules, it is better to use the services of a local tax expert for this purpose. Errors in prepared reports may result in criminal liability.
If a company uses hired labor, it must be registered with the social security fund. The peculiarity of local legislation is that payments are divided between the employer and his employee.
Local regulations do not require residence in Andorra for 183 days to obtain tax resident status. However, when filing personal returns, you must indicate that the payer pays the bulk of the payments here.
Please note that paying taxes in this country does not exclude additional taxation in the state of which the company owner is a citizen. Andorra is not on the OECD blacklist, but was removed from it just under 10 years ago. This means that the authorities did not have time to conclude a sufficient number of agreements to prevent double taxation.
For this reason, when deciding on the elimination of double taxation, you should use the help of a professional consultant. It is best to contact an intermediary company that registers a legal entity in Andorra. They can provide advice on what benefits the owner of a legal entity will receive in terms of paying taxes.
Despite certain nuances, the principality continues to remain one of the most attractive areas for doing business, including due to reduced tax rates.
Business accounting
The accounting system in the country is generally similar to that used in other European countries. All companies are required to record the results of economic activities in accordance with the law and report on them to government authorities.
To maintain records, it is recommended to invite qualified accountants familiar with local legislation. In this case, the owner of the legal entity will receive the following benefits:
- Guaranteed compliance with standards. The Andorran accounting system complies with international financial reporting standards. Thanks to this, legal entities can easily undergo external audits and provide data to investors to attract additional capital. Transparency of business activities facilitates the search for international partners.
- Reducing the tax burden. Hiring a competent accountant at the stage of opening a business in Andorra will allow you to reduce tax deductions thanks to the competent choice of open pension fund, the use of provided benefits and tax incentives.
- Acceleration of development. High-quality maintenance of business activities allows you to increase the rate of profit growth and gain a competitive advantage in the local, European and international markets.
Frequently Asked Questions
Is it possible to complete the registration procedure from abroad?
The law does not require the personal presence of the company owner during the opening procedure. He may reside permanently in Spain, France or another country. The main requirement is to strictly adhere to the laws adopted to combat money laundering.
How much money will you need to start a business?
Registration of a legal entity in the form of an LLC requires the formation of an initial capital in the amount of 3 thousand euros. If a joint-stock company is created, you will need 60 thousand. However, to this amount you need to add the costs of paying government fees, notary services and an intermediary company.
How long will it take?
The duration of the described procedure is influenced by several external factors that cannot be predicted in advance. Most often, delays arise due to the slow performance by government agencies or banks of their functions and the speed of response to submitted requests. In most cases it will take 2 to 3 months.
Is it possible to redomicile a company to Andorra?
Yes, it is possible to transfer a legal entity from another jurisdiction to the territory of the principality. But this procedure is very complex and time-consuming; it requires the involvement of lawyers specializing in this process.
A simpler option is to liquidate a legal entity in another jurisdiction and open a new one in Andorra.
Does Andorra have tax haven status?
Officially, this jurisdiction is not considered such. Local authorities are taking measures aimed at increasing the transparency and legality of procedures, as well as combating money laundering. Register your company here possible to reduce the tax burden, obtain residency and easier cooperation with partners from the EU.
Conclusion
Company registration in Andorra is an opportunity to conduct business in the European Union while simultaneously receiving tax benefits. Owners of legal entities can count on obtaining local residency, which will allow them to save on personal income tax and capital taxation.
If you need to open a legal entity in this jurisdiction, contact the specialists of YB Case. They will solve this problem on a turnkey basis, freeing you from going through many bureaucratic procedures and reducing the time it takes to obtain the necessary documents.
