Why open a company in Andorra
The main reason is tax: Andorran corporate tax is 10% on profits, well below Portugal's 21% IRC or Spain's general 25%. Add to that a 4.5% IGI and a personal income tax with a maximum rate of 10%, which makes Andorra one of the lowest-tax territories in Europe.
Beyond the savings, proximity works in its favour: it is just a few hours from Barcelona or Madrid, shares a language and time zone, and makes it relatively straightforward to operate with the rest of the European market. If you are comparing jurisdictions, see our guide on where to open a company in Europe.
The Andorran SL: capital and company types
The Sociedad Limitada (SL) is the most common legal form for opening a company in Andorra. Its minimum share capital is €3,000, a figure that is affordable for most SMEs. If the project has a single partner, you can opt for the SLU (single-member limited company), which maintains the same limited liability protection.
Other legal forms, such as the public limited company (SA) or the general partnership, exist but are reserved for larger structures or specific cases.
Key points
- SL: limited company, minimum capital of €3,000
- SLU: single-member limited company, for a sole partner
- SA: public limited company, for larger structures
Residency requirements and foreign investment authorisation
For an Andorran company to operate, a percentage of its partners or directors must meet certain residency requirements. If you also want to benefit from the 10% personal income tax as an individual, you will need to be a tax resident in Andorra, which means residing in the country for more than 183 days a year.
Foreign capital is subject to foreign investment authorisation by the Government of Andorra. In practice, for investors from EU and European Economic Area countries the procedure is quicker, but it is worth preparing it well so as not to delay incorporation.
Key points
- Foreign investment authorisation for non-Andorran capital
- Residency in Andorra (more than 183 days) to apply the 10% personal income tax
- Director or representative with a residency link in the country
Taxation in Andorra: Corporate Tax, IGI and Personal Income Tax
Andorran corporate tax (IS) generally taxes profits at 10%. It is a single, straightforward rate, without the tangle of surcharges and brackets found in other countries. For comparison, the Portuguese IRC is 21% and the French corporate tax is 25%.
The IGI (Impost General Indirecte) is the equivalent of VAT, with a general rate of 4.5%, one of the lowest in Europe. At the personal level, personal income tax has a maximum rate of 10%, both for employment income and for dividends and capital gains.
Key points
- Corporate tax (IS): 10%
- IGI (equivalent to VAT): 4.5% general rate
- Personal income tax: maximum rate of 10%
Incorporation process, costs and timelines
The process for opening a company in Andorra includes reserving the name, applying for foreign investment authorisation, depositing the share capital, signing the articles of association before a notary and registering with the Companies Register. With all documentation in order, the usual timeframe is 2 to 6 weeks.
As for costs, incorporation and maintenance are budgeted on a case-by-case basis, with a lower starting point in Portugal, but the tax difference usually offsets this within a few years.
Key points
- Name reservation and foreign investment application
- Deposit of share capital (minimum €3,000)
- Signing of articles of association before a notary and registration
- Usual timeframe: 2 to 6 weeks
Key points for Spanish SMEs before starting
Before taking the step, define whether the goal is only to reduce corporate tax or also your personal taxation, as this determines the residency requirement. Bear in mind that moving residency has implications in Spain, where rules such as the 183-day rule and effective residency apply.
Having local advice is key to processing the foreign investment authorisation and complying with Andorran accounting and tax obligations. If your expansion plan is broader, we recommend our SME internationalisation guide.
