Formation of Holding Limited Liability Company in Andorra
Andorra Holding Company (Limited Liability Company – S.L.)
Foreign nationals and companies can open companies in Andorra with 100% foreign ownership in all business sectors; however the formation of a new Andorran company by non-residents must first be approved by the Ministry of the Economy.
Basic Company Requirements:
A company name must be chosen and approved by local authorities. This procedure usually takes 2-5 working days. Names must end with S.L. It is advisable that the chosen name be at least Catalan-sounding.
A minimum of two shareholders is required. Details of shareholders are kept at the local registry. Bearer shares are not permitted.
The minimum capital requirement is €3000. The share capital must be fully paid up in advance of incorporation. This amount must be deposited with an Andorran bank in a designated company incorporation type account. The bank must then release a special certificate, addressed to the designated notary, responsible for concluding incorporation formalities.
Directors And Company Secretary
A minimum of one director is required, who must be a natural person. The directors’ details must be kept at the registered office and this information should be available for public inspection. There is no requirement to appoint a local director. If the company is actively trading it is recommended to hire a local employee with power of attorney on a part time basis.
The second officer, who must be a natural person, will act as a Company Secretary and may be a non-resident of Andorra. The details of all officers must be retained at the registered office address and this information is available for public inspection.
Every company is required to have a registered office and address in Andorra.
Annual board meetings should be conducted in Andorra.
Usually between 1-3 months.
Basic Tax Notes
It should be noted that having a company does not entitle you per se either to trade or to work in Andorra. In order to trade, the company must obtain a trading license and register for IGI (similar to VAT). VAT is set at 4.5% and Corporation Tax on net profits is set at 10%. These rates are unlikely to change in the short or even medium term and there is an added incentive for companies in the software development, licensing and intellectual property fields to relocate here as they can apply to be granted a special 2% tax regime.
The Andorran companies are the best solution for holding of shares in foreign companies. All the dividends received by these Andorran holding companies are exempt from taxation in Andorra. Profits distributed by the holding companies to their shareholders, with a charge to the exempt income, are exempt from Corporation Tax.
Capital gains are treated as ordinary business income taxable at a rate of 10%, but capital gains derived from the transfer of qualifying participations are exempt. Capital gains derived from the transfer of immovable property are taxed at a progressive rate ranging between 1% and 15%, depending on the length of time the property has been held. No tax is levied if the property is held for more than 10 years.
Interest paid to a non-resident is tax exempt. The withholding tax on royalties paid to a nonresident is 5%.
Accounting And Audit
The accounting must be kept in conformity with the current regulations in the Principality of Andorra, to make a chronological follow-up of the transactions and prepare the accounting documents and inventories.
Accounting documents: The accounting documents must be preserved, including the vouchers for the various entries, for a period of 6 years from the date of approval of the accounts for the relevant year.
In certain cases, depending on the annual business turnover, the number of employees and the total assets, the company must submit the financial statements to an audit. The financial statements must be filed obligatorily in the Companies Registry.