Company formation in Andorra
The first thing to pay attention to is that there is no such thing as a "ready company" in Andorra.
The company's incorporation act (memorandum of association) must be specific and suited to the type of commercial activity in a different way than in many other countries where the company may change the type of business by a management decision, for example: a clothing seller in an IT company.
Establishing a company is similar to company incorporation in Poland.
In Andorra, the establishment of a company by non-residents must first be approved by the Ministry of Economy, which does not want to support the creation of low-cost "offshore" companies. Companies from Andorra are definitely "onshore" but as will be seen below taxed very low.
Of course, you can change the statute or expand the scope of activities to allow you to take up new commercial activities, but for new companies with a different scope of activity, it may be difficult to get a quick approval.
Therefore, it is best to use advice on how to make statutes with the widest scope of activity without risking a refusal. You can always buy an existing company - from time to time some are available at a reasonable price - if the statute is suitable for the new owner, you will still need to submit a proposal to make corrections.
After approval by the government, the incorporation of the company must be confirmed by a notary public who will issue an official act of incorporation on behalf of all shareholders and determine their shares. As in the case of subsequent sale of any shares in the company, it must be registered and confirmed by a notary public.
You must have a company statute written by a lawyer or specialist and the whole process of starting a company from the beginning to the end costs about 1,000 EUR.
Foreigners may legally own 100% of shares in a commercial enterprise or in a non-commercial holding company in Andorra, approval by the Ministry of Economy is required. In the case of any non-resident interest, 10% (or more) of capital should be approved before the notary.
If the foreigner is not yet an official resident in Andorra, the permit is extremely difficult to obtain for majority shares.
The nominees are allowed, but strict controls on the actual beneficiaries of the shares are made to ensure compliance with the Money Laundering Act.
Bearer shares are not permitted by law.
Types of companies in Andorra
The most popular forms of economic activity in Andorra include:
1. Societat Limitada (S.L.)
This is the equivalent of a limited liability company. This form of activity will be suitable for small businesses. This company is actively used in local trade and service industry.. 3,000 EUR of share capital is required to register company S.L. The final registration fee is around 600 EUR. Annual government fees are around 850 EUR.
2. Societat Anonima (S.A.)
It is the equivalent of a joint-stock company. This form of business is convenient for large enterprises with a large number of shareholders. The share capital is 60,000 EUR. The final registration fee is around 800 EUR.
3. Andorra Societat Colectiva
It is a type of company in which capital is divided between partners with unlimited liability.
All transactions to buy shares and sell shares must be made by way of a private contract and registered by a notary public.
Corporate taxes in Andorra
It should be noted, that having a company does not entitle the same to trade or work in Andorra. For commercial purposes, the company must obtain a commercial license and register IGI (VAT tax) and corporate income tax.
VAT tax is set at 4.5% and corporate tax on net profit is 10%. It is unlikely to change these stakes in the short or medium term. An additional incentive for companies to develop software, licenses and intellectual property rights may move here because they can apply for a special 2% tax.
To get a job in Andorra, you must have a work permit. You can legally work as a passive resident ("resident without gainful activity") in Andorra as the company's director. Non-resident shareholders should be aware that there is a 10% tax on each income generated in Andorra by a non-resident.
Residents of shareholders and directors do not incur any further private tax liabilities if they choose their benefit in the form of dividends in Corporation Tax, which was paid in the amount of 10% on the net profit of the company due to the exemption in the Income Tax Act.