Company in Andorra: real advantages and residency requirements

10% and a corporate tax of 10%. Andorra offers 5-10% personal income tax, 10% corporate tax and 4.5% VAT, but requires you to actually relocate. Residency types, costs, banking and combining with a US LLC.

Andorra can be a powerful tax base, but it only works with real residence, substance, banking, calendar discipline and a documented exit from Spain.

In fifteen years Andorra has gone from being a shopping destination to becoming one of the favorite places for Spanish, French and Latin American entrepreneurs to move residency and company. Its combination of low taxation, quality of life, geographic proximity and a safe environment makes it a serious option, not a trick. But like any fiscal relocation, it requires actually moving: Andorra cannot be "bought" by mail.

At Exentax we work with clients considering the step. This guide explains in detail how Andorran taxation works, what corporate types exist, what residency options are available and what must be assumed before deciding.

Available company types

The most common structure for economic activity is the Societat Limitada (Andorran SL), equivalent to a Spanish S.L. There is also the SA (Societat Anònima) for larger projects.

Minimum share capital:

SL: EUR 3,000.
SA: EUR 60,000.

Incorporation: 4-8 weeks. Typical cost between deed, registration, advisory and procedures: EUR 2,500-6,000.

Incorporation always requires the partner or proxy to be physically present in Andorra to sign before the notary. Partners can be foreigners, but the manager is usually an Andorran resident (or the partner himself once they obtain residency).

Corporate taxation

The Andorran corporate income tax (IS) has a general rate of 10%. Reduced rates exist for the first EUR 50,000 of taxable base and special regimes apply to holdings, intellectual property and international trade.

For a standard operating services or trade company, the effective burden is around a real 10%. The taxable base is calculated using criteria similar to Spanish ones, with deduction of business expenses.

Add the IGI (Impost General Indirecte), equivalent to VAT, with a general rate of 4.5% (one of the lowest in the world). Reduced rates of 1% (food, medicines) and a super-reduced rate of 0% exist.

Personal taxation: the main attraction

The Andorran personal income tax has a very simple structure:

0% on the first EUR 24,000 of income.
5% between EUR 24,001 and EUR 40,000.
10% above EUR 40,000.

Maximum marginal rate: 10%.

Dividends distributed by Andorran companies to Andorran residents are exempt from personal tax (to avoid double taxation after corporate tax). This is an important difference compared to other systems: the dividend does not get taxed again at the personal level.

Capital gains on shares and interests, with certain conditions, are also exempt.

There is no wealth tax or inheritance and gift tax (with very specific exceptions). This, combined with a maximum personal rate of 10%, makes Andorra a very competitive jurisdiction for residents with significant wealth or income.

Types of Andorran residency

Andorra offers two main residency tracks with different requirements:

Active (lucrative) residency

For those who come to work or do business in Andorra. Implies:

Setting up an Andorran company where the applicant is manager or worker.
Living in Andorra at least 183 days per year.
Renting or owning a home.
EUR 50,000 deposit at the AFA (Andorran Financial Authority), refundable upon ceasing residency.
Social security contributions (CASS): approximately 22% on the manager's contribution base.
Mandatory health insurance.

This is the most common route for entrepreneurs maintaining economic activity.

Passive (non-lucrative) residency

For people who will not work in Andorra but want to establish residency. Implies:

Living in Andorra at least 90 days per year.
Minimum investment of EUR 600,000 in Andorran assets (housing, deposits, public debt, shareholdings in Andorran companies).
Additional EUR 47,500 deposit at the AFA (plus EUR 9,500 per family member).
Demonstrated sufficient income (worldwide, not necessarily Andorran).
Private health insurance.

Designed for investors, retirees with wealth or professionals receiving foreign income who want Andorran tax residency without operating locally.

Cost of living and operating costs

Andorra is an expensive country compared to most of Spain and LatAm:

Housing: 2-bedroom rentals from EUR 1,200-2,500 per month in popular areas (Escaldes, Andorra la Vella, La Massana). Purchase from EUR 4,000/m² upwards.
Car: practically essential.
Insurance, schooling, private healthcare: high European levels.
Services: limited compared to a major European capital.

Operationally, maintaining an Andorran SL costs between EUR 2,500 and EUR 5,000 per year in advisory, accounting and registry duties.

Andorran banking

The main banks (Andorra Banc Agrícol, MoraBanc, Crèdit Andorrà, BancSabadell d'Andorra) are solid and operate to European standards. Opening a corporate account requires presence, full KYC and usually a minimum deposit or relationship.

Andorra has been part of CRS since 2018, which means automatic exchange of tax information with Spain, France and other adhering countries.

Where Andorra outperforms and where the US LLC stays leaner

Andorra and the US LLC solve different problems:

If you want to actually relocate, Andorra is probably the best European option due to proximity, language, quality of life and a real 5-10% personal income tax framework.
If you want to optimize taxation without relocating, a US LLC offers a documented US federal outcome (<a href="/en/blog/llc-pass-through-with-real-tax-structure">pass-through</a>) and lets you remain a resident of your current country, declaring the net income after expenses.
If you combine both (Andorran residency + operating US LLC), you can reach a very low global tax burden with a working international business. This combination is becoming more common among our clients.

Andorra does not compete with the LLC: it complements it when you are ready to live there.

Pitfalls and frequent mistakes

Thinking it is enough to register: you must really live in Andorra. The Spanish tax authority strictly applies residency tests (183 days, center of vital interests, economic and family ties).
Underestimating cost of living: low personal taxation is partially offset by housing, school and service costs.
Not planning the Spanish tax exit: exit tax on latent gains, Modelo 720 (until its replacement), family companies, all must be planned before the move.
Underestimating CASS contributions: 22% on the manager's contribution base can add more than expected.
Thinking the Andorran SL runs itself: it needs advisory, accounting and compliance like any European company.

Real, honest risks

Life in a small country: 80,000 inhabitants, limited options in some services, distance to international airports.
Long winters and car dependency.
Reduced labor market if a partner needs to work locally.
Regulatory changes: Andorra has tightened its regime to align with the EU and <a href="https://www.oecd.org" target="_blank" rel="noopener">OECD</a>; more changes could come in the next few years (BEPS, rate adjustments).

Real scenarios where Company in Andorra: real advantages and residency requirements applies

Case 1: digital professional with 200,000 EUR/year willing to live in Andorra.

Optimal case. Active residency with own Andorran company, maximum 10% personal income tax and safe environment 90 minutes from Barcelona. Hard-to-match cost-benefit combination in Europe.

Case 2: retiree with 100,000 EUR/year passive income.

Andorran passive residency works very well. No activity required, reduced tax on income and wealth, high quality of life. High initial investment but profitable from 4-5 years.

Case 3: Spanish entrepreneur seeking only optimization without relocating.

Bad choice. Without real residency (at least 183 days or center of interests), the Spanish tax authority will apply simulation and the operation becomes a serious legal problem. Andorra only works with genuine residency.

FAQ on Company in Andorra: real advantages and residency requirements

Is Andorra really a tax haven?

No. Since 2010 it has signed OECD agreements, applies CRS and FATCA automatic exchange, has progressive personal tax and 10% corporate tax. It is a low-tax jurisdiction but fully cooperative, not opaque.

How long does active residency take?

Between 4 and 8 months after submitting complete documents. Requires demonstrating viable economic activity in Andorra, renting or buying a home and posting a 50,000 EUR deposit (refundable when residency ends).

And passive residency?

3-6 months. Requires 600,000 EUR investment (home, sovereign bond deposit or stake in an Andorran company), 47,500 EUR deposit and minimum 90 days per year in Andorra.

What happens to my Spanish pension if I move to Andorra?

Governed by the 2015 Spain-Andorra double taxation treaty. Public pensions generally taxed in Spain; private ones in the country of residence. Worth reviewing case by case before planning.

How to combine Andorra with a US LLC?

A common combination: LLC for international operations with global clients, Andorran residency for low-burden personal tax. Andorra recognizes LLC tax transparency and allows legal optimization without artificial structure.

Practical close on Company in Andorra: real advantages and residency requirements

Andorra is a serious option, not a trick. For entrepreneurs and professionals with a certain income level, willing to live there and meet residency requirements, it offers very competitive personal taxation (5-10% personal income tax, exempt dividends, no wealth or inheritance tax), a safe environment and European proximity.

For profiles not wanting to move, a <a href="/en/blog/us-llc-for-non-residents-tax-structure">US LLC</a> solves corporate optimization without needing to change country. For those willing to take the step, the combination of Andorran residency + US LLC is one of the most efficient structures we see.

Andorra only works with real residence and substance

The Andorra company question reads more usefully when it's treated as a profile mapping between the country of tax residence of the beneficial owner, the country where value is created and the country of customers, than as a brand promise. The mapping is stable: it doesn't change with the season.

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Exentax reviews Andorra only as a real relocation project: residence days, exit from Spain, company substance, banking, salary/dividends and the structure you will operate after the move. <a href="/en/book">Book a strategic review</a> if you need a relocation plan rather than a headline tax rate.

An Andorra company should be compared against the owner's real residence, management location, substance, banking access and client base. The jurisdiction can be attractive, but only when the business can actually support the Andorran story.

Andorra is a residence project, not a remote wrapper. The structure only makes sense if the move, substance, banking, calendar and exit from the previous tax country can all be documented.

_More on this topic: Bulgaria 10% corporate tax: the honest picture._