Although Andorra is one of the smallest countries in Europe, it claims 12th place in the world in terms of level and quality of life and has one of the lowest income tax rates in Europe and the world (maximum 10%). With such small income taxation and the full reduction of taxes, if your annual income is lower than EUR 24,000, Andorra is one of the best countries for starting a business.
In the following article, we have compiled the necessary information and requirements for future entrepreneurs.
Disclaimer: This article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
The registration process for Societat Limitada Unipersonal (Single-Member Limited Liability Company) in Andorra
If you, as an individual, want to form a company in Andorra, you should register your business as a Single-Member Limited Liability Company (Societat Limitada Unipersonal). In this case, there are just a few requirements you have to fulfill to set up this company type.
Name (Comú) registration
You should make sure that your business title can’t be easily confused with one that is as of now registered. Any language that uses Latin characters can be used for the title.
Apply for Andorran company incorporation
This process takes about 4 weeks on average for S.L.U. You should provide the following documents:
- A certificate of criminal record
- Certified passport copy
- Certified proof of residence
- Business plan and financial forecast
- Bank letter of recommendation (proof that you have an account with the required amount of deposit – 3,000 euros)
Additional documents may be requested by the Registrar of Companies or Bank at any point to verify specific information. If the original documents are not in English, Spanish, or Catalan, the documents must be accompanied by a notarized translation.
Enter your business into the Register of Companies
You will have to work with a notary to have your company added to the Register of Companies (Registre de Societats Mercantils)
Obtain a tax identification number
You should give a duplicate of your company’s lease to the local commune and request a tax identification number from the tax administration.
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Business taxes in Andorra
As we have already mentioned, Andorra has a low-income tax rate with a maximum of 10%. In Andorra, there are no wealth taxes, gift taxes, inheritance taxes nor capital gains taxes.
Income tax depends on your salary, and is applied in the following way:
- If your annual salary is lower than EUR 24,000, the income tax is 0%
- If your annual salary is between EUR 24,001 and 40,000, the income tax is 5%
- If your annual salary is more than EUR 40,000, the income tax is 10%
Interest on bank savings and earnings will also be taxed under the personal income tax regime (but the first EUR 3,000 of interest earned is tax-exempt). Additionally, some real estate taxes apply and a Value Added Tax (VAT) rate of 4.5% applies to most goods and services. Andorra’s VAT is one of the lowest in the world (for example, in the neighboring Spain VAT is 21%, and in France, it is 20%).
