The liberalization of foreign investment in Andorra

The liberalization of foreign investment in Andorra

Since 2011, the Andorran government has introduced several new laws aimed at encouraging private foreign investment. The goal of these laws is to diversify the economy through the creation of new economic sectors and by increasing competition among existing companies. Ever since these laws favoring liberalization were put into place, foreign investors have flown into the country much as the snowmelt from Andorra’s snow capped mountains transforms into gushing waterfalls. A new economic framework was introduced, allowing Andorra to step down from its isolated mountaintops and join its neighbouring countries in a more egalitarian economic competition.

 

Recently introduced Andorran laws favor the liberalization of foreign investment

Prior to 2012 several laws were put into place designed to modernize Andorra’s legal structure and to increase economic activity. These changes acclimated the economy to foreign capital, laying the foundation for the Law 10/2012 on Foreign Investment in the Principality of Andorra.

This law granted the liberalization of foreign investments, opening up all economic sectors to foreign inventors in the hopes of diversifying Andorra’s economy. This law coupled with the signing of agreements preventing double taxation with France, Spain and Luxembourg have placed Andorra on the global economic chessboard, attracted new economic sectors and companies while increasing competition within the country. These changes have introduced a wide array of international ideas, transforming Andorra into an increasingly attractive destination for foreign investors to develop their businesses.

 

Foreign investments in Andorra may occur in several settings:

• Non-Andorrans or individuals who are not residents (expatriates with temporary residency permits are subject to the law)

• Foreign public entities

• An Andorran company which has a foreign shareholder

• Permanent establishments or company branches in Andorra owned by foreigners of non-residents

The above foreign investors are permitted to make the following types of investments in Andorra:

• Invest in shares of companies already established in Andorra

• Purchasing property or partial share in property located in Andorra

• 100% ownership of an Andorran company

Investments are not permitted under the following circumstances:

• The funds to be invested are from countries not signatory to FATF (Financial Action Task Force on Money Laundering)

• Individuals or legal entities who have received negative reports from FATF

• Foreign investments which may have negative effects on the Andorran government, economy, the public, national security or the environment

Taxation on income generated by foreign investment

The Andorran government considers an individual to be a fiscal resident if they reside in Andorra more than 183 days a year or if the individual’s main economic activity is directly or indirectly centred in Andorra. All fiscal residents are subject to IRPF income taxes. IRPF income tax-rates are extremely low however they vary depending on the individual’s net income; see the following chart for details:

 Income  IRPF income tax-rate
 Less than €24,000  Exempt
 Net income €24,001 – €40,000  5%
 Net income of more than €40,000  10%
 Income from savings the first €3,000  Exempt, the remainder pays 10%

How to set up a company in Andorra

Due to new Immigration Laws foreign investors are now allowed to create and own 100% of an Andorran Company. Expatriates looking to form their own company should apply for an Active Residency permit once their business proposal is accepted. The following list gives detailed information on how to set up a company in Andorra:

• Legalized police certificate from your main country of residence

• A copy of your passport which bears the Apostille of the Hague Convention

• An Andorran bank account

• Obtain a local trade license (or Obertura de Comerç in Catalan) and reserve a company name

• Obtain a work permit for the shareholder(s)

• Apply to Andorra’s social security system, CASS

• Provide proof of a rental contract or property title

• Certificate of civil status

Once a foreign investor looking to set up a company has compiled the above papers a public deed needs to be drawn up by an Andorran Notary. Once this process, which can take up to 15 days, is completed the company gains its legal identity and is entered in the Andorran Company Register.

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