Andorra: Types of Company
This page was last updated on 1 Feb 2019.
The Corporations Act 1983 governs corporations formed in Andorra. There are three types of company, the societat de responsabilitat limitada and societat per accions (both of which have shareholders with limited liability) and the societat colectiva (whose partners have unlimited liability.)
Until 2008, companies with commercial or profit-seeking goals had to be at least two-thirds owned by Andorran citizens. These are either people born in Andorra or ‘privileged residents’ – those with more than 10 years of continuous residence for French and Spanish citizens and 20 years for citizens of all other countries. In practice, the Andorran majority owner of a business (Catalan: titular) can be an Andorran individual or professional adviser who is willing to cede operational control of the business to the foreign 'owner', and sign a share transfer in blank, in return for a fee (Catalan: prestanom.)
In practical terms the titular is a nominee, but not in legal terms. Although this system is in everyday use in thousands of companies, and though formal contracts are entered into between the parties, the inescapable legal fact is that the titular can wield considerable power if he or she wants to. Presumably one is on fairly firm ground with an established, professional titular.
In 2007 the parliament unanimously approved the Law on Business Accounting under which accounting is obligatory for all companies, and any business with turnover of €100,000 or more annually will have to file accounts with the government. A new Law on Companies was also passed, regulating the behaviour of the companies in the Principality, regardless of whether they are limited companies or Plcs.<
In addition, discussions took place on proposed changes to the law under which the limit on foreign participation would be raised to 40%, and non-Andorrans would be able to own 100% of certain types of company, including audio-visual production and marketing, technological and scientific research, production of medicines, e-commerce, and broadcasting. Further sectors may also be opened up. This process crystallised into the Foreign Investment Law, which came into effect on 7 November 2008, and allows the opening up of 200 economic sectors to entrepreneurs and businesses from other countries. As a result of the new legislation, foreigners can now hold 100% - until now the limit was 33% - of the capital of a business in any of the designated sectors.
The package of three laws is intended to increase the international competitiveness of Andorra, attract foreign investors into high value added sectors and strengthen the legal framework for business.
The government introduced legislation providing for a corporate income tax, initially on non-resident entities, at a rate of 10% as of 1 April 2011. From 2012, resident entities were subject to 5% corporate income tax. Also from 2012, individuals operating a sole proprietorship or any type of business activity were subject to a 5% tax. These rates rose to 10% in January 2013. In 2013 a value-added tax regime was introduced with the main rate being 4.5%.