Andorra Company Formation
Andorra provides a favorable business environment for company formation. Why it is interesting to create a company in Andorra? Enjoy many of the advantages of Europe with a low tax regime. Andorra is a good place to register an offshore company if you are not an Andorran resident.
As there is no stock exchange in Andorra, state-run registries play a major role in monitoring how company ownership is traded. Rules to start a business may be different from what you would expect. Contact us to prepare a plan for Andorra company incorporation.
Create Company in Andorra: Entity Types
As in any other place in the world that has a formal structure for a business, Andorra offers many options when it comes to setting up a business.
First of all, choose the most appropriate type of company structure when registering. The options vary according to the level of responsibility that the owners want to assume and the size of the business. Here, the government allows the following types of registration.
Andorra Limited Liability Company (Societat Limitada – SL)
Societat Limitada is the formation of choice for most small businesses. Andorra limited company is the equivalent of an LLC – Limited Liability Company. A Societat Limitada must have a capital of €3,000 at the time of its incorporation.
Andorra LLC with Single Shareholder (Societat Limitada Unipersonal – SLU)
Societat Limitada Unipersonal is essentially an LLC with only one shareholder (hence the “unipersonal”). Likewise, an S.L.U. must have a capital of €3,000 at the time of its incorporation.
Andorra Public Limited Company (Societat Anonima – SA)
Large companies that want a multiple shareholder structure will want to opt for Public Limited Company registration. With €60,000 required, the minimum capital is higher than SL or SLU variants.
Andorra offers the possibility of forming a company with unlimited liability – a General Partnership (Societat Colectiva) or a sole proprietorship, but these are less popular. The costs of incorporation are low enough that it usually makes sense to do so to obtain the limits of liability.
Andorra Company Registration Costs
The total cost of registering an Andorran company will depend on whether you hire a consultant or not to help you to go through this process. If you decide to do it yourself, the costs of setting up a company in Andorra will be your responsibility:
- Societat Limitada: Approximately €1,800, including notary and name registration fees.
- Societat Anonima: Approximately €1,800, including notary fees and name registration.
The consultation option costs at least €3,500 and some companies may charge up to €20,000.
Setting up an Offshore Company in Andorra
Since October 2012, it is legal for an Andorran company to be owned (in whole or part) by a non-resident. If non-resident owners hold a total interest of more than 10% in your business, an additional level of government approval will be required.
Non-residents who wish to establish a company in Andorra must seek approval from the Department of Foreign Investment. If you are thinking of doing this, we invite you to consult our detailed guide to setting up an Andorra offshore company.
Andorra Company Incorporation Process
Once you have chosen a type of business, the process is quite simple. The steps essentially consist of:
1. Name registration
Make sure that your company name will not be easily confused with a name that is already registered. Any language that uses Latin characters can be used.
2. Application for investment authorization
Each non-resident shareholder/partner must apply for authorization of foreign investment in an Andorran company. The process takes approximately 2-4 weeks.
3. Pre-opening of the bank account for the company
A bank account opening application is submitted with the documents required by the bank. You must explain your activity, the origin of funds and present your profile with total transparency. Estimate between one week and up to 4 weeks to have your account pre-authorized. Read more about Andorran banks in a separate guide.
4. Company incorporation
This is a fairly intensive process that requires you to provide a fully documented business plan, draft articles of incorporation, identification documents for all directors, including criminal record checks from your country of birth and residence, and proof from your Andorran bank that you have an account with the required amount of capital deposited in.
5. Registering business with a notary
Hire a notary to register your business with the Commercial Companies Registry.
6. Filling out the government registration form
This step includes submitting a copy of your company’s lease to the municipality and applying for a tax identification number from the tax authorities (NRT) and CASS number.
7. Opening of the company’s business
Indicate the definitive address of your company, present an electrical installation certificate for your office or premises, and a maintenance contract for the extinguisher present at this address.
Buying an already operating company in Andorra may be an alternative to setting up a new one, but it is not always the best option. Analyze your priorities and, in particular, the risks of buying a company that has been established for many years.
How Long Does it Take to Set up a Company in Andorra?
All levels of government approval for a simple Limited Company can usually be obtained within one month. However, if there are complications in the process, it may take a little longer. In addition to not providing the required documentation, applications often run into difficulties when they are too evasive in defining how a company should operate.
The Andorran government seems to want to prevent the formation of “ready-made” companies that can be sold to future investors who want to avoid this process. If you have a multiple shareholder structure and decide to register a public limited company, it is probably appropriate to consult a lawyer who can guide you through the process, including the timing, as these are more complex.
The Basics of Opening a Business in Andorra
Andorra has a dynamic business environment, with a low corporate tax rate, a very generous capital gains tax, an increasingly favorable view of foreign investment, and a solid regulatory structure.
All this makes business creation in Andorra an attractive option.
Before laying the foundations for your business in Andorra, keep in mind that:
- You must decide what type of business you want to register.
- You will have to pay the appropriate fees and meet other regulatory requirements to document who you are and how your business will operate.
- If you are not a resident of Andorra, there will be additional steps in the process of setting up your company.
Although the process is fairly simple for setting up a company in Andorra, it can be difficult to find detailed information about its particularities. We hope that this guide will help you throughout this exercise. Remember that you can always contact our experienced consultants which are ready to help you.
If you do not have an Andorra residency permit or plans to reside in a Principality in the short term, you may need to consider hiring a part-time or full-time employee to run the day-to-day operations of the company. As a shareholder or managing director, you enjoy tax system benefits, which can be maximized by becoming a tax resident in Andorra. With 20% or more company shares, you can apply for Andorra’s active residency.
Advantages of Company Formation in Andorra
In addition to the many tax advantages granted when setting up a business in Andorra, the country is also very attractive, especially in terms of business and infrastructure costs.
Labor Cost in Andorra
The cost of labor in Andorra is much lower than in France or Spain. The fee that companies have to pay to Social Security is 15.5% in Andorra, while the rate is over 32% in France and Spain. This makes it easier for companies to hire in Andorra since it reduces the fixed costs of the entrepreneur who wants to set up a company in the country.
Salaries in Andorra
Salaries in Andorra are also very competitive. The average salary in Andorra is approximately €2100 per month, and the minimum wage in 2021 is €1,121.47 per month. According to the latest figures from the Instituto Nacional de Estadísticas, the salary in Spain is close to that in Andorra, but taking into account the difference in the costs of social security contributions, the average salary is 12% higher. As for France, the average salary remained at €2951 per month. Adding the 32% of costs corresponding to social contributions, it even reaches €3839 per month, while in Andorra it is around €2426 (average gross salary + employer’s contributions) per month, a difference of 36% between the two countries.
The advantages for French companies are very clear: from a tax point of view, they could save more than 23% on their profits and more than 40% on labor costs.
Infrastructure in Andorra
In addition to the many tax advantages offered by the Principality, many other criteria attract foreign companies to Andorra. The cost of renting offices or coworking space in Andorra is much lower than in France or Spain: count on the modest sum of €400 per month to set up your company’s offices in Andorra and take advantage of all the benefits of the tiny state.
Local taxes cost less than €800 per year, an amount that will have little effect on the profits of companies based in Andorra. The principality also has a very efficient healthcare system, thanks to the quality of its medical equipment and coverage abroad through international agreements. Besides, the Andorra education system has three distinct models of high quality and totally free of charge, in addition to numerous possibilities for private or specialized schooling.
Doing business in Andorra is more than attractive to foreign residents and companies. Communication routes are being improved and the country offers pristine Internet connection with 100% fiber-optic coverage throughout its territory, compared to only 35% for the European Union. It is also a very interesting destination for e-commerce and dropshipping companies selling from Andorra.
Company Formation in Andorra: FAQ
How Much Does it Cost to Set up a Business in Andorra?
The total cost of setting up a company in Andorra is between €4,000 and €5,500. The costs include fees and government/notary fees. Our partners charge between €2,500 and €4,000 in fees for all procedures. Government fees and notary fees total between €2,000 and €2,500, depending on the capital and type of company.
How Long Does it Take to Activate the Company in Andorra?
On average, an opening company in Andorra takes between 7 and 12 weeks depending on the type of company, profile of the shareholders, and the time of year. For example, the constitution of a holding company for a future Spanish shareholder residing in Andorra may take 7 weeks, while a non-European shareholder who does not plan to become a resident with a business activity requiring special authorization may take up to 15 weeks.
Can I Manage a Company Without Residency in Andorra?
Technically, you can be a non-resident partner and director of an Andorran entity. However, banks and local authorities require economic substance in terms of office space and human resources. We strongly advise the director and/or partner of the company to consider residing in Andorra.
Can I Buy an Existing Company That has Already Been Incorporated?
You can buy an already existing company in Andorra, but the time and money saved are not significant. Any non-resident wishing to create a new company or buy an existing one will have to go through the foreign investment authorization process.The change of shareholders and name must be submitted to a notary in the same way as when creating a new company. Finally, bank accounts must be reopened and the business authorization must be renewed in case of a change of address and business code. Also, the current owner may ask you for a price for the sale of the company and it is strongly recommended that you inquire about outstanding debts. Therefore, we recommend a new business creation.
What Documents are Required to Create the Company in Andorra?
In Andorra, the government and the banks are subject to strict anti-money laundering regulations and carry out a due diligence audit. They will check your references and background. Criminal records legalized with the Hague Apostille. Copy of passport - legalized in Andorra or with the apostille. Documents explaining your economic profile / your income / your qualifications for setting up the company (CV, income statement, etc.)
Do I Need to Rent an Office Space in Andorra?
Andorran law requires that each company has an office space with an individual electricity meter and a fire extinguisher. There are no mailbox or domiciliation systems for different companies without space. Be aware that this usually means that an office must be rented. However, the price of office space is affordable and a unit in a business center or private apartment are options that can cost less than €350 per month.