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 applies a top personal income tax of 10% and a corporate tax of 10%, versus Spain's 47% personal rate and 25% corporate rate.

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.

Honest comparison with the US LLC

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 real personal taxation (5-10% IRPF).
If you want to optimize taxation without relocating, a US LLC offers 0% federal in the US (pass-through) 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 IRPF 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 OECD; more changes could come in the next few years (BEPS, rate adjustments).

Typical scenarios where it 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.

Frequently asked questions

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.

Conclusion

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% IRPF, exempt dividends, no wealth or inheritance tax), a safe environment and European proximity.

For profiles not wanting to move, a US LLC 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.

How to read the Andorra company question as a profile mapping rather than as a brand promise

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.

Before going further, put numbers on your case: the Exentax calculator compares, in under 2 minutes, your current tax bill with what you would carry running a US LLC properly declared in your country of residence.

> Free consultation, no strings attached

At Exentax we can help you analyze your case, calculate real numbers before and after the move, and design the corporate structure that best fits your life in Andorra. At Exentax we review your case with real data: book a free consultation for 30 minutes.

Tax compliance in your country: CFC, controlled-foreign rules and income attribution

A US LLC is a fully legal, internationally recognized vehicle. But compliance does not end at incorporation: as an owner who is tax-resident elsewhere, your local tax authority still has the right to tax what the LLC earns. The key is under which regime.

By jurisdiction

Spain (LIRPF/LIS). An operative single-member disregarded LLC (real services, no significant passive income) is generally treated under income attribution (art. 87 LIRPF): the LLC's net profits are attributed to the member in the year they arise and integrated into the general IRPF base. If instead the LLC elects corporation treatment (Form 8832) and is controlled by a Spanish resident with mostly passive income, the CFC regime (art. 91 LIRPF for individuals, art. 100 LIS for companies) can apply. The choice is not optional: it depends on economic substance, not on the label.
Information returns. US bank accounts with average or year-end balance >€50,000: Form 720 (Law 5/2022 after CJEU C-788/19, 27/01/2022, penalties now under the general LGT regime). Related-party transactions and dividend repatriation: Form 232. US-custodied crypto: Form 721. Now is the moment to ask for help. At Exentax we open the case, file what is missing and reply to the relevant authority for you.
Spain–US tax treaty. The treaty (BOE 22/12/1990, Protocol in force 27/11/2019) governs double taxation on dividends, interest and royalties. An LLC without a permanent establishment in Spain does not by itself create a PE for the member, but effective management can if all activity is run from Spanish territory.
Mexico, Colombia, Argentina and other LATAM jurisdictions. Each has its own CFC regime (Mexico: Refipres; Argentina: foreign passive income; Chile: art. 41 G LIR). Common principle: profits retained inside the LLC are deemed received by the member if the entity is treated as transparent or controlled.

Practical rule: an operative LLC with substance, properly declared in your country of residence, is legitimate tax planning. An LLC used to hide income, fake non-residence or shift passive income with no economic justification falls within art. 15 LGT (anti-abuse) or, worse, art. 16 LGT (simulation). The facts decide, not the paperwork.

At Exentax we structure the entity to fit the first scenario and document every step so your local return can be defended in case of review.

What moving company and residency to Andorra really involves

Andorra offers effective rates of 10 % on corporate income and between 0 % and 10 % on personal income tax, with a reasonable social security (CASS) and no wealth tax. But Andorra is not a shortcut: the move has three dimensions - administrative, substantive and operational - that should be deployed in parallel. These are the critical points based on the real cases we see at Exentax.

Active or passive residency. Active requires forming an Andorran company, hiring a professional firm with substance and residing more than 183 days per year in Andorra. Passive requires minimum investment of 600,000 € (50,000 € deposit + 550,000 € in Andorran assets), at least 90 days/year and private health insurance. Active is the usual choice for the entrepreneur with operational activity.
Andorran company - 10 % CIT. The general corporate income tax is 10 %; an Andorran holding can access 2 % rate when meeting qualified participation requirements. For companies with foreign income, the participation exemption regime (Andorran-ETVE) needs care, still being shaped by case law.
Spain-Andorra treaty. In force since 2016, avoids double taxation but contains a strict tie-breaker clause: a superficial move remains tax resident in Spain if the centre of vital interests has not effectively moved. Spain audits these cases closely, especially the first 5 years post-move.
Exit from Spain - exit tax. If you emigrate with a qualified securities portfolio (>4M € market value or >25 % stake in company >1M €), art. 95 bis LIRPF applies: taxation of latent capital gains. Plan it before you leave, not after.

What we are asked the most

Can I keep Spanish clients from Andorra without issue? Yes, as long as billing is done from the Andorran company, services are rendered from Andorra and no permanent establishment is created in Spain. Sporadic presence at a Spanish client does not create PE; an open office in Madrid does.

Will the Spanish tax authority audit me for sure? Not automatically, but a profile billing more than 300,000 €/year with prior Spanish residency has a high audit probability in the following 4 years. Defence is built with documented substance (CASS, lease, family schooling, days in Andorra), not arguments.

At Exentax we walk through the whole chain: Andorran company, residency, treaty, clean exit from Spain and the subsequent annual operations, with a local Andorran firm when on-the-ground execution is needed.

References: sources on structures and jurisdictions

The comparisons and quantitative data on the jurisdictions cited here rely on official sources updated to today:

United States. Delaware General Corporation Law and Limited Liability Company Act, Wyoming Limited Liability Company Act (Title 17, Chapter 29), IRS Form 5472 instructions and IRC §7701 (entity classification).
Andorra. Llei 95/2010 de l'Impost sobre Societats (10% IS), Llei 5/2014 del IRPF and the active/passive residency framework of the Govern d'Andorra; annual reports of the Departament de Tributs i de Fronteres.
Estonia. Estonian Income Tax Act (deferred-distribution corporate tax at 20/22%) and official documentation of the e-Residency programme.
Spain. Ley 27/2014 (IS), Ley 35/2006 (IRPF, arts. 8-9 on residency and art. 100 on CFC) and the inbound-expat regime (art. 93 LIRPF, "Beckham Law").
OECD. Pillar Two (GloBE) and OECD Model Tax Convention with Commentaries.

Choosing a jurisdiction always depends on the holder's actual tax residency and on the economic substance of the activity; review your specific case before taking any structural decision.

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

On the same topic

What if HMRC, the IRS or my local tax authority asks about my LLC?

It's the question every client raises in the first consultation, and the short answer is: your LLC isn't opaque, and a properly declared structure closes any inquiry in standard forms. Your tax authority can request the state Certificate of Formation (Wyoming, Delaware or New Mexico), the EIN issued by the IRS, the signed Operating Agreement, the Mercury or Wise statements for the year, the Form 5472 plus pro-forma 1120 you filed, and the bookkeeping that reconciles income, expenses and movements. If all of that exists and is delivered in order, the inquiry doesn't escalate.

What tax authorities do pursue, and rightly, is sham ownership (nominees, paper residency) and undeclared foreign accounts. A well-structured LLC is the opposite: you appear as beneficial owner in the BOI Report when applicable (verifiable at fincen.gov/boi), you sign the bank accounts and you declare the income where you actually live. The structure is registered with the state Secretary of State, with the IRS and, when European banks are involved, inside the CRS perimeter of the OECD standard.

The mistake that really sinks an inquiry isn't having an LLC; it's not attributing the income correctly in your domestic return, not declaring foreign accounts when the year-end balance exceeds the local threshold (€50,000 in Spain via Modelo 720; the equivalent FBAR / Form 8938 in the US for residents; T1135 in Canada), and not documenting related-party transactions between the member and the LLC. Those three fronts are worth closing before any request arrives, not after.

## What an LLC does NOT do

- It does not exempt you from tax in your country of residence. If you live in Spain, France, Germany or Portugal, you are taxed there on worldwide income. The LLC organises your US side (zero federal tax for non-resident SMLLC pass-through, absent Effectively Connected Income); it does not switch off your domestic taxation. The income tax is computed on the attributed profit, not on the dividends actually paid.

- It is not an offshore vehicle or a BEPS scheme. It is a US entity recognised by the IRS, registered in a specific state with physical address, registered agent and annual informational filings. Classic offshore jurisdictions (BVI, Belize, Seychelles) leave no public trace; an LLC leaves a trace in five different places.

- It does not protect you if you commingle funds. The pierce the corporate veil doctrine kicks in as soon as a judge sees the LLC and the member behaving as the same wallet: mixed accounts, personal expenses paid from the LLC, no signed Operating Agreement, no bookkeeping. Three suspicious transactions are enough.

- It does not save you social security contributions at home. If you are self-employed in Spain, France or Germany, your monthly social contribution remains identical. The LLC handles the trading side with international clients; your personal contribution is independent.

- It does not exempt you from declaring foreign accounts. Spain residents file Modelo 720 / 721; UK residents, the SA106; Portugal residents, the Anexo J of Modelo 3 IRS; Germany residents, the Anlage AUS. Those obligations belong to the individual, not to the LLC.

At Exentax we cover those five fronts every year alongside the US federal calendar (Form 5472, pro-forma 1120, FBAR, state Annual Report and BOI Report when applicable). The goal is that no inquiry finds a loose end and that the structure withstands a 5-to-7-year retroactive review.

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