Andorra Company Formation: How to Set Up a Business

Costs of company formation

Understanding the full cost structure helps in planning your company formation budget. Costs vary depending on whether you handle the process yourself or engage professional services.

Government and registration fees

• Company registration fee: approximately EUR 3K for an SL (government fee)
• Notary fees: approximately EUR 2K
• Name registration: included in notary fees
• Foreign investment authorization: processing fee varies by business activity

Professional service fees

If you engage a corporate services provider, expect additional fees ranging from EUR 2K to EUR 5K or more. These services typically include document preparation, liaising with government authorities, and ensuring compliance with all requirements.

The minimum investment requirement is EUR 3K for an SL, while an SA requires EUR 60K . This capital must be fully paid before incorporation.

Ongoing costs

• Annual accounting and audit fees
• Tax filing and compliance costs
• Registered office address (if not owned)
• Social security contributions if you have employees

Tax benefits of an Andorran company

The tax advantages of operating an Andorran company are substantial compared to most European jurisdictions.

Corporate income tax

The headline corporate tax rate is 10%, but various deductions can reduce the effective rate to as low as 2%. Investment companies may qualify for a reduced rate of 2%, while holding companies meeting specific requirements can achieve a 0% rate. New businesses with annual income below EUR 100K benefit from a reduced 5% rate on the first EUR 50K for the first three years.

Dividends taxation

If you are a tax resident of Andorra, dividends received from an Andorran company are entirely exempt from personal income tax. Andorra does not levy withholding tax on dividends paid to either resident or non-resident shareholders, avoiding double taxation concerns entirely.

However, if you receive dividends from foreign companies as an Andorran tax resident, a 10% tax generally applies.

Value added tax

Andorra's VAT rate is only 4.5%, significantly lower than the 21% rate in neighboring Spain or similar rates throughout the European Union. This provides a competitive advantage for businesses selling goods or services.

No wealth or inheritance taxes

Holding companies in Andorra benefit from the absence of wealth taxes. This makes Andorra particularly attractive for asset holding structures and family wealth management.

First-year incentives

All new taxpayers receive a 50% reduction on the settlement fee in their first year of operation, reducing the initial tax burden for startup companies.

Double taxation agreements

Andorra has signed double taxation treaties with Spain, France, Portugal, and the United Arab Emirates. These agreements prevent income from being taxed twice, making cross-border business operations more efficient.

Timeline for company formation

How long does it take to set up a company in Andorra? The complete process typically takes between 4 and 12 weeks, depending on several factors.

Foreign investment approval

The authorization from the Ministry of Presidency, Economy and Business takes 5 to 10 working days for straightforward applications. Complex business activities or incomplete documentation can extend this to one month.

Bank account opening

Opening a company formation account with an Andorran bank typically takes 1 to 2 weeks. Banks conduct due diligence on shareholders and directors, which may require additional time for foreign applicants.

Notarization and registration

Once the capital is deposited and authorization granted, the notarization and registration process takes approximately 1 to 2 weeks. The public deed must be executed before an Andorran notary, and the company must then be entered in the Companies Register.

Overall timeline

From initial application to receiving all company documents and beginning operations, expect 4 to 12 weeks. Working with experienced advisors who understand Andorran requirements can expedite the process and help avoid common delays.

Connection to active residency

Forming an Andorran company is closely linked to obtaining active residency in the principality. Active residency allows you to live and work in Andorra while operating your business.

Requirements for self-employed active residency

To qualify for active residency through self-employment, you must own more than 34% of an Andorran company and act as its director. Some requirements specify a minimum ownership of 20%, but owning a majority stake ensures eligibility. You must also exercise a real business activity in the country with minimum income generation.

Financial deposit

Active residency applicants must make a refundable deposit of EUR 50K to the Andorran Financial Authority (AFA). This deposit is returned if you leave the country. Companies focused on promoting the digital economy or innovation in Andorra may be exempt from this requirement.

Physical presence requirement

Active residents must stay in Andorra for at least 183 days per year. You must also establish your domicile in the country by purchasing or renting property.

Social security obligations

Active residency through self-employment requires registration and payment into the CASS social security program as a self-employed worker or autònom. This is mandatory and provides access to Andorra's healthcare system.

Permit validity and renewal

Self-employed active residency permits are valid for one year and can be renewed annually. After several years of continuous residency, you may qualify for permanent residency.

The combination of company formation and active residency provides a complete pathway for entrepreneurs seeking to relocate to Andorra while benefiting from its favorable tax regime and high quality of life.

Why choose Andorra for your business

Beyond the attractive tax rates, Andorra offers several compelling advantages for business owners. The country combines low taxation with political stability, strong rule of law, and a transparent financial system that complies with international standards. Its location between Spain and France provides easy access to European markets.

The principality has modernized its regulations to attract international business while maintaining its reputation for financial privacy within legal boundaries. Whether you're establishing a consulting firm, e-commerce business, investment company, or holding structure, Andorra's regulatory environment supports diverse business activities.

With streamlined processes, professional service providers, and government support for foreign investment, Andorra has emerged as a serious contender for entrepreneurs seeking a low-tax European jurisdiction that balances favorable regulations with international credibility.