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Andorra company formation

Basic facts regarding Andorra

Principality of the Valleys of Andorra, is a small landlocked country in southwestern Europe, located in the eastern Pyrenees mountains and bordered by Spain and France. It is the sixth smallest nation in Europe having an area of 468 km2 (181 sq mi) and an estimated population of 83,888 in 2009. Its capital, Andorra la Vella, is the highest capital city in Europe, being at an elevation of 1023 metres. The official language is Catalan, although Spanish, French, and Portuguese are also commonly spoken.

The Principality was formed in 1278. The role of monarch is exercised jointly by the two co-princes, the President of the French Republic and the Bishop of Urgell, Catalonia, Spain. It is not a member of the European Union, but the euro is the de facto currency.

Andorra taxation

In Andorra there is no income tax, gift, inheritance or capital transfer taxes. Until 2007, there was no capital gains tax, but one was then introduced (on a sliding scale) in an attempt to slow property inflation. The nominal rate is 15%, but it is reduced by 1% for each year of ownership of the property being sold.

In June, 2004, Andorra was obliged to accept the EU's Savings Tax Directive, and as from July, 2005, is imposing a withholding tax of 15% (20% from July 1, 2008, 35% from 2011) on returns on savings paid to citizens of Member States of the EU, of which 75% is remitted onwards to the States concerned.

In late December 2010, Andorra published the Taxation of Non-Residents Act, 2010. It subjects non-resident companies and individuals to a 10% flat tax on local-source profits and income, minus permitted expenses and deductions. It plans to reduce capital gains tax on property from 15% to 10% in the near future.

The government plans on introducing a value-added tax to replace the existing consumption tax. Following the imposition of a 5% VAT, the government next intends to apply the 10% flat tax to resident companies and individuals.

Still, there is no income tax in Andorra for passive residents, and there is no income tax for any money earned outside Andorra by individuals or companies, furthermore there is no disclosure or declaration required of funds or monies earned outside Andorra.

Offshore business in Andorra

Andorra has a well developed financial infrastructure. In 2009, the Organization for Economic Cooperation and Development (OECD) designated and subsequently delisted Andorra as a tax haven due to its low or nonexistent taxes and maintains that Andorra still needs to make its banking system more transparent.

Offshore banking in Andorra

In the Principality of Andorra, bank secret has been and is a deeply rooted institution. This implantation by itself legitimizes the institution. The continuous and sustained practice of reserve by the financial institutions with regard to data obtained in the course of the commercial and internal contractual relationship between the banks and their customers has meant that bank secret automatically exists.

The development of the Andorran legal regulations on the basis of the principles enshrined in the Constitution of 1993 has been one step more in the recognition of the institution of bank secret, which benefits from explicit protection. In this way bank secret is structured as a duty or obligation imposed on bankers and their servants.

This duty or obligation constituted by bank secret is defined as a form of professional secret as is clear from a systematic interpretation of article 226 of the Andorran criminal code. This article 226 of the criminal code provides for sentences of up to 7 years' imprisonment for bank administrators or employees who reveal confidential information relating to customers.

There are currently only 7 banks in Andorra. Foreign banks are prohibited from opening branches and this is unlikely to change. Banking in Andorra is very efficient and Andorran banks have ties to Swiss banks. Main banks are:

1. Andbanc Grup Agrícol Reig (Andbanc)
2. Banc Internacional d'Andorra - Banca Mora (BIBM)
3. Banca Privada d'Andorra (BPA)
4. Banc Sabadell d'Andorra ('A)
5. Crèdit Andorrà

If you intend to open a bank account in Andorra, please contact our office.

International Cooperation

Andorra has executed Tax Information Exchange Agreements with Argentina, Austria, Belgium, Denmark, Faroe Islands, Finland, France, Germany, Greenland, Iceland, Liechtenstein, Monaco, Netherlands, Norway, Portugal, San Marino, Spain and Sweden.

[Sources: United States Department of State Bureau for International Narcotics and Law Enforcement Affairs; EscapeArtist; Association of Andorran Banks; Organisation for Economic Co-operation and Development]

Offshore companies formation