Andorra Offshore Tax and Law

The term 'offshore' is not used in Andorran legislation or in describing company forms. Indeed there is no 'offshore' sector as such, since there is no significant direct taxation of Andorran entities in any event. See Direct Corporate Taxation for details of the few taxes that impinge on business; see Personal Taxation for details of taxes impinging on individuals.

The Foreign Investment Law, which came into effect on November 7, 2008, allows the opening up of 200 sectors of the Andorran economy to entrepreneurs and businesses from other countries. This is viewed by the government as an important step in Andorra's programme of reforms which are aimed at opening, modernising and diversifying the national economy.

As a result of the new legislation, foreigners can now hold 100% of a business in one of the 200 designated economic sectors, including among others, industrial production, research and development, e-commerce, audiovisual production, plastic surgery and education and training. Previously the limit was 33%.

In December 2007, the parliament unanimously approved the business accounting law, which forms part of Andorran government's efforts to modernise and open the national economy. The new law makes accounting obligatory for all companies. Any business that generates more than EUR100,000 annually will have to file accounts with the government.

The government anticipates the adoption of two additional laws. One is intended to establish a tax rate on the profits of companies of between 5 and 10%. The other will create a value-added tax of around 4% that will replace all of the existing indirect taxes.

In June, 2004, Andorra was obliged to accept the EU's Savings Tax Directive, and as from July, 2005, is imposing a withholding tax of 15% (20% from July 1, 2008) on returns on savings paid to citizens of Member States of the EU, of which 75% is remitted onwards to the States concerned.

The following information was written prior to the introduction of the Foreign Investment Law.

Andorra Forms of Offshore Operation

The corporate forms available for external operations in Andorra are the same as those available for internal operations - see Forms of Company.

Andorra Fees Payable by Companies

The annual fee (tax) payable to the Government by a Societat Limitadad is 463 euros; and by a Societat Anonima is 1,000 euros.

Andorra Taxation of Foreign Employees of Offshore Operations

This section refers to the taxation of foreign employees in Andorra. See Domestic Personal Taxes for the general principles of individual taxation in Andorra, which also apply to the resident employees of foreign entities. There are in fact no personal taxes as such in Andorra and there is no distinction between the employees of resident or non-resident operations, because all employers have to be Andorran and resident.

Andorra Exchange Controls

There are no exchange controls in Andorra; indeed there is no national currency. Most of the important world currencies are accepted freely.

Andorra Offshore Activities

Since there is no offshore sector as such in Andorra, and all trading or business activity has to be carried on by entities which are majority-owned by Andorran nationals or long-stay residents. Other than the rules concerning ownership, there is very little legislation to restrain business activity, which takes place in a liberal environment. However, the Penal Code and the Law of Protection of Banking Secrecy and of Prevention of Laundering of Money and Assets Deriving from Crime 1995 contain severe penalties for criminal activity; and the Government is very watchful in this respect. (Tax avoidance and evasion do not count as crimes.)

Andorra Employment and Residence

All foreigners wanting to work in Andorra need work permits. These are obtained by employers, whether Andorran individuals or companies, on behalf of employees. Self-employment is not allowed until after 10 years' residence or trade in Andorra.

A new immigration law finally passed in 2002 was highly contentious, but legalised the situation of about 7,000 'pink slip' long-term immigrant workers, as well as setting new rules for the issuance of work permit quotas which give preference first to citizens from Andorra's neighboring countries, then to citizens from the countries of the European Union, then to citizens of countries with which the principality has signed international agreements, and finally immigrants from third party states. Under the law, the government sets annual quotas for new issues of renewable work permits.

There are separate types of non-renewable work permit for temporary and seasonal workers, to which the quotas don't apply. The holder of such a work permit must leave the country within one month of expiry of the permit.

Renewable work permits are issued first for 6 months, extensible for a further year; then a temporary residence card is issued valid for a renewable 2 years; then, a 5-year ordinary residence card is issued; and finally a 10-year privileged residence card is issued. Fees are modest.

Tourist visas are issued freely, but for longer-term stay it is necessary to have either a work permit (which will ensure issue of a residence permit) or a Passive Residence Permit (PRP). Permanent residence means a stay of more than 183 days in the year.

The Law on Passive Residence Permits November 2006 established that a quota would be determined periodically according to the “economic and social needs of the Principality of Andorra”.

An initial quota of 500 such permits was set. Passive residents do not work of carry out professional activity in the principality.

New entrants to the Principality must: