How do you organize a company in Andorra? The formalities for setting up a business
You just need to take three steps to organize a company in the Principality but first you have to choose which type you want to set up. Molines Patrimonis presents below the various steps to be followed and the types of companies that can be organized.
The various types of companies
Three main types of companies can be set up in Andorra.
Public limited company or Societat anònima (SA)
This type of company is ideal for a big enterprise since its capital is distributed among a large number of shareholders. The minimum share capital required to organize a societat anònima is 60,000€ and the registration and licensing fee is 850€.
In the event that a single person wishes to adopt this form of company, he or she should organize a Single-Member Public Limited Company or Societat Anònima Unipersonal (SAU).
Limited Liability Company or Societat limitada (SL)
This type of structure, which is similar to the Spanish S.L., is recommended for smaller companies, mainly including those in the commerce or services sectors. If a single person wishes to adopt this form of enterprise, he or she will be organizing a Single-Member Limited Liability Company or Societat Limitada Unipersonal (SLU).
A minimum capital of 3,000€ is required to set up a company of this type.
General Partnership or Societat col·lectiva
This is an unlimited liability company in which the capital is distributed among the members: the features of this form of enterprise are a mixture of those of the SAs and SLs.
The steps to be taken to organize your company in Andorra
Below we present information on the necessary documents and the steps to be taken to organize your company in Andorra.
Documents required to set up your new company in Andorra
To organize a company in the Principality of Andorra, you should present the documents listed below. Some of the documents will require the Hague Apostille (valid for 3 months). We recommend that you contact an Andorran lawyer to obtain more information.
- A certificate of criminal record of each of the partners with the Hague Apostille.
- The valid passport and the certificate of residence with the Hague Apostille of all of the partners.
- A business plan describing the investment strategy and stating the provisional budget, together with an analysis of financial results.
- A draft of the company’s articles of association.
- The reservation of the company name of the enterprise.
- Proof of the opening of a bank account in the name of the company in an Andorran bank and proof of having deposited the company’s share capital in that account.
The 3 steps to follow to set up your company in Andorra
With the aim to attract international investors, the Andorran government simplifies the requirements for organizing companies in our country. The average time required to organize a company in Andorra is 60 days, which includes the performance of all the formalities and the Andorran authorities’ assessment of the project’s interest. We recommend that you get in touch with lawyers or jurists specialized in the organization of companies here since the official language of Andorra is Catalan and all the pertinent documents are written in this language.
For companies in which 10% or more of the capital is held by a non-resident, an application for the authorization of foreign investment should first be submitted. A reply to the application is usually obtained within a month and a half.
Once the investment authorization has been obtained, an application should be submitted for a "Reservation of company name" for the future company, which should be in Catalan, not excessively general and clearly define the company’s activity. The application for the incorporation of the company should also be submitted, including the corporate purpose of the company, the address of its registered headquarters and a list of the members of its board of directors.
Lastly, a public instrument of incorporation should be granted before a notary, which will allow the company’s registration in the Andorran Government’s Register of Companies. From that moment on the company will possess a legal personality.
Advantages of organizing your company in Andorra
A favourable tax system for setting up a business in the Pyrenean paradise
Andorra’s taxes and charges are among the lowest on the European continent, making our country an attractive base for many foreign investors.
Corporation Tax (IS)
The low tax rate applicable to companies –10% on profits– is a factor to be taken into account when considering the organization of a company in Andorra. What’s more, various tax rebates based on several different factors are available during the first 3 months of the company’s activity.
Personal Income Tax (IRPF)
The Personal Income Tax, or IRPF, just as its name implies, applies to the income of all natural persons resident in Andorra. People who reside in Andorra for longer than 183 days a year are considered tax residents of the country. They are subject to a tax rate of 10% and natural persons who obtain an income of less than 24,000€ a year from work revenues are exempt from the payment of this tax. For a yearly income of between 24,000€ and 40,000€ from work revenue or economic activities, the tax rate is 5%. Capital revenues, even though they are included on the IRPF return, are treated differently and are taxed at a rate of 10% as from the sum of 3,000€ a year.
Indirect General Tax (IGI) and other taxes
This is the equivalent of VAT. The general rate is 4.5% and it applies to the performance of services or the purchase of goods. Companies that export goods or services are not subject to this tax as long as the beneficial owner of the goods or services is a company which is not resident in Andorra.
There are other taxes in Andorra which may affect companies:
- Consumption charge: a Customs duty that applies to most agricultural products which are imported into Andorra.
- Charge for the registration of the title-holders of economic activities: this charge ranges from 200€ to 800€ a year.
- Location tax on commercial, corporate and professional activities: this tax varies according to the specific nature of the activities and the location and surface area of the company.
Social charges for companies in Andorra
There is only one public social contribution fund in Andorra: CASS (the Andorran Social Security Fund), which covers all spheres of life: illness, old age, family benefits, etc. The contribution percentages are equal to about 20% of the wages received by workers (5% for the account of the worker and 15% for the account of the company). CASS refunds up to 75% of all the medical expenses of residents in Andorra.
Advantages for business operators who wish to organize a company in Andorra
If you organize a company or enterprise in Andorra, once it has been registered in the Register of Companies you will be entitled to request the status of active tax resident in our country. The Andorran authorities will grant you this status about 15 days after you have a medical examination at the immigration service.
Additionally, the cost of labour in Andorra is considerably lower than the average on the European continent, for example in comparison to France or Spain. The social charges that companies should contribute to CASS in Andorra total 15% while in our neighbouring countries, for example, these charges are at least 30%. In fact, it is much easier to employ workers in Andorra and our labour market functions more smoothly.