Andorra Holding Company
Creating a holding company in Andorra is a safe and legal way to optimize your income tax rates. Holding companies in Andorra are taxed differently from ordinary companies, with more advantages and tax benefits.
Numerous efforts have been made to improve the transparency of the tax system in Andorra, while there are still a large number of pros for individuals wishing to set up a company in Andorra. The Principality is as attractive for companies as it has always been, although the benefits are even greater for holding companies and international trading companies.
Andorra Holding Company: Attractive Taxation
Holding companies in Andorra are subject to particular taxation, different from the tax rates imposed on standard companies. Entities should be a Public Limited corporation or a Limited Liability Corporation.
Attractive taxation for holdings in Andorra with shares in other companies located in foreign countries is classified as Foreign Holding Entities (ETVE).
If you choose to establish a holding company in Andorra, you may be exempt from dividends tax and capital gains tax in the following cases:
- A non-resident company in a foreign country that has an Andorran resident holding company as a shareholder is subject to taxation in its own country similar to the Andorran tax;
- The percentage of participation – direct or indirect – in the company’s capital, shares, and assets, equity, or voting rights should not be less than 5%. The shares must be held for at least a period of one year before the dividends are distributed to the shareholders. If dividends are not distributed, shares must be held for as long as this period of time is completed.
Holding Company in Andorra: Optimize Taxation
One of the best options to benefit from Andorran taxation is to obtain residency in Andorra to create a company or holding company. The holding company in Andorra will be getting all the dividends from your foreign investments. If dividends come from countries, where you already paid a corporate tax, you will not pay tax again in Andorra, benefiting from the special regime of holding shares of other companies, also known as holding companies. For example, a company based in Spain would go from paying a minimum of 19% tax in its country of origin to only 5% in Andorra.
Creating a holding company in Andorra is really interesting from a tax point of view for the company and the shareholders. In fact, dividends received by an Andorran resident from an Andorran holding company are not taxed under the Personal Income Tax (IRPF).
The ideal option to optimize your taxation is to reside in Andorra and create a holding company to receive dividends or capital gains on the sale of shares without paying any tax.
When dividends are in your Andorran holding company, you will be able to distribute the income tax-free as an individual, since the capital gains of Andorran companies are taxable for Andorran residents. Another very interesting option is to reinvest these dividends in companies in any country where you have an economic interest.
Currently, Andorra has 8 agreements to avoid double taxation (Spain, France, Portugal, Malta, Luxembourg, Liechtenstein, Cyprus, and the United Arab Emirates) and is negotiating with the main European countries to extend the network of agreements. This will facilitate investments and transactions with the most important European countries and avoid double taxation.
Is Andorran Holding Company Exempt from Taxation?
An Andorran holding company is exempt from tax when:
- Dividends or shares of companies (non-resident in Andorra) are exempt from taxation in the Principality, in the same way as income derived from the transfer of the corresponding shares.
- If a non-resident company in a foreign country has a holding company in Andorra, it is subject to the payment of taxes similar to Andorran taxes in its own country.
- When a resident in Andorra receives dividends from an Andorran holding company, these are not taxed by the IRPF (personal income tax).
Create a Holding in Andorra
The team of professionals at Andorra Partner is happy to advise anyone wishing to set up a holding in Andorra. Do not hesitate to contact us so that we can examine your situation in detail and help you choose the most advantageous option to optimize the taxation of your company profits.
Andorra has a strategic position between France and Spain, in the heart of Europe and the Pyrenees, offering unparalleled living conditions. Thanks to its multicultural diversity, Andorra offers three different types of high-quality educational systems, as well as multiple private and specialized schools. The Andorran healthcare system is also one of the best in Europe. Besides, the Principality is a technologically advanced country with 100% fiber-optic internet coverage. For all these reasons, Andorra is more than an attractive country for anyone who wants to create a holding company.