Did you know that setting up an offshore company in Andorra comes with surprising tax advantages? In this article , we will discover how to set up an offshore company in Andorra with all the tax benefits that this could give you!
Today we'll be diving into the tiny but promising principality of Andorra, located on the border between France and Spain. Let's discover why Andorra has become a preferred destination for tax-savvy individuals and businesses alike.
The Appeal of Andorran Companies
First and foremost, let's discuss why opening a company in Andorra is an attractive option. One of the main advantages is its favorable tax system. The principality imposes a low flat tax rate of 10% for both personal and corporate income tax. This makes Andorran companies highly competitive and appealing for entrepreneurs looking to maximize profits.
Path to Residency Through Company Ownership
But that's not all! For individuals seeking residency in Andorra, owning a company can provide a clear and straightforward path to obtaining a residence permit. The process involves minimal physical presence requirements, making it an excellent option for those looking to establish a base in Europe.
Non-Resident Companies
Andorra's business-friendly approach extends to non-residents as well. Recent changes in the law now allow non-residents to form or partially own an Andorra-based company with the same rights as residents. This opens up new possibilities for investors and entrepreneurs worldwide
How to set up a Company in Andorra?
Here will give you a step by step so you can have a clear guide!
Open a Company Bank Account: The first step is to open a company bank account in Andorra to facilitate financial transactions for your business.
Deposit the Share Capital: Once the bank account is set up, you must deposit the required share capital of €3,000 into the account. This amount serves as the initial funding for your company.
Visit a Public Notary: Schedule a visit to a public notary in Andorra to proceed with the company formation process. At the notary, you will sign the Certificate of Accession, an essential document in the incorporation process.
Understand the Timeframe: Be aware that company formation times in Andorra can take up to 3 months. Unlike some other jurisdictions, Andorra does not offer "off-the-shelf companies," and each company must undergo formal approval by the government.
Reputational Advantage and Paperwork: Although the longer timeframe may not be ideal, this formal approval process adds a reputational advantage to your company. However, it also means that more paperwork and documentation are required.
Apply for Foreign Investment Approval: As part of the company formation process, you need to apply for Foreign Investment Approval. Prepare all relevant documents and ensure they are apostilled and officially translated into Catalan, the official language of Andorra.
Required Documentation: You will need to provide the following documents:
A police certificate from your country of birth.
A copy of your passport ID page (you can also have your passport notarized locally).
A business resume, outlining your business activities and experience.
Seek Accredited Translation Services: To avoid procedural delays, it's advisable to use local, accredited translation services. Ensuring that your documents are professionally translated into Catalan increases the chances of smooth processing.
Andorra's Business-Friendly Tax System
Now, let's delve into the heart of Andorra's tax system. The country boasts some of the lowest tax rates in Europe. Notably, the corporate tax rate is a flat 10%, offering significant savings for businesses. Furthermore, profits derived from outside Andorra can potentially enjoy an even lower 2% tax rate, subject to government approval.
Personal Income Tax Benefits
Andorra's tax advantages extend to individuals as well. The personal income tax is set at a general rate of 10%. Tax residents also enjoy an exemption on their income of up to €24,000. This, combined with the overall low tax rate, makes Andorra an appealing option for entrepreneurs and high-net-worth individuals.
While Andorra's tax system is business-friendly, we must consider other tax aspects. The country levies a 10% withholding tax on various income sources, such as dividends and interest. Additionally, capital gains tax stands at 10%, but it decreases over time, reaching 0% after 13 years for certain properties.
Your Obligations as a Taxpayer
It's essential to understand your obligations as a taxpayer in Andorra. Tax residents must file tax returns and register for social security payments if they employ workers in the country. The best part? You don't need to be physically present for 183 days to be a tax resident; simply declaring Andorra as your primary economic base is sufficient.
Considering Double Taxation
However, before you start packing your bags for Andorra, remember to consider double taxation. While Andorra has some double taxation treaties, it may not have agreements with all countries. Here we leave you a list of the lucky ones:
United Arab Emirates
Austria
Belgium
Portugal
France
Ireland
Luxembourg
Malta
San Marino
Liechtenstein
Cyprus
Qatar
Seychelles
Andorra has emerged as a tax haven with its favorable tax system, making it an appealing choice for those seeking a commercial base or residency in Europe. However, it's crucial to conduct thorough research and seek expert advice to optimize your tax strategy and ensure compliance with international regulations