These reforms aim to attract investment and businesses that have the potential to boost Andorra''s economic development and diversification. Prior to 2008, Andorra limited foreign investment, worried that large foreign firms would have an oversized impact on its small economy. For example, previous regulations allowed non-citizens with less than 20 years residence in Andorra to own no more than 33 percent of a company. While foreigners may now own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. The approval can take up to one month, which can be rejected if the proposal is found to negatively impact the environment, the public order, or the general interests of the principality.
Andorra is a microstate that accounts for .001 percent of global emissions and has demonstrated its ambition to the fight against climate change by establishing a national strategy that commits to reducing greenhouse gas emissions (GHG) by a minimum of 37 percent by 2030 and pursuing carbon neutrality by 2050. In addition to implementing an energy transition law, Andorra approved the Green Fund and a hydrocarbon tax to promote climate change mitigation and adaptation initiatives.
Andorra''s per capita income is above the European average and above the level of its neighbors. The country has developed a sophisticated infrastructure including a one-of-a-kind micro-fiber-optic network for the entire country that provides universal access for all households and companies. Andorra''s retail tradition is well known around Europe, thanks to more than 1,400 shops, the quality of their products, and competitive prices. Products taken out of the Principality are tax-free up to certain limits; the purchaser must declare those that exceed the allowance.
Table 1: Key Metrics and Rankings
Andorra has established an open framework for foreign investments, allowing non-residents to create companies in the country, open businesses, and invest in all kinds of assets.
The Foreign Investment Law came into force in July 2012, completely opening the economy to foreign investors. Since then, foreigners, whether resident or not, may own up to 100 percent of any Andorra-based company. The law also liberalizes restrictions on foreign professionals seeking to work in Andorra. Previously, a foreigner could only begin to practice in Andorra after twenty years of residency. Under the current regulations, any Andorran legal resident from a country that has a reciprocal standard can work in Andorra, although special working permits are required for specific professions.
The government of Andorra created Andorra Business ( https:// ), Andorra’s economic development and promotion office, to provide counseling services to both Andorran companies looking to grow and foreign investors wanting to start new businesses in Andorra. Andorra Business'' mission is to increase competitiveness, innovation, and the sustainability of the economy.
Promoting key sectors for the diversification of the economy.
Being a motor in the improvement of the public sector and microeconomic environment.
Attracting and supporting both foreign and local investment in key sectors.
Providing support to Andorran businesses to be more competitive on a National and International scale.
Creating favorable conditions for innovation and entrepreneurship, in both the public and private sectors, to create an environment for testing new innovations at the country level.
The Andorran Chamber of Commerce, Industry, and Services of Andorra ( https:// ) aims to promote and strengthen Andorra''s financial and business activity as well as provide services to foreign companies. The Chamber''s activities include organizing a census of commercial, industrial, and service activities; the protection of the general interests of commerce, industry, and services; promoting fair competition; and issuing certificates of origin and other commercial documents.
The Andorran Business Confederation (CEA) provides support to national companies to navigate within Andorra''s new legal, labor, and fiscal framework and facilitates companies'' international expansion projects. CEA also works to foster international investment into the country through its Iwand project , which provides information about Andorra''s economic and fiscal environment ( ).
The Andorran legal framework has also adapted to international standards. The most relevant laws passed by Parliament to accompany the economic openness include the law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012).
The OECD removed Andorra from its "tax haven list" in 2009 after the country signed the Paris Declaration, formally committing to sharing fiscal information outlined by the agreement. With the approval of the Law 19/2016, of November the 30th, on automatic exchange of information on tax matters, Andorra will exchange financial information with signatories of the "Common Reporting Standard" (CRS), developed by the G20 and approved by the OECD Council in July 2014.
From 2011 to 2019, the Parliament approved direct corporate, non-resident, capital gains, and personal income taxes. At 10 percent, well below the European average, Andorra''s corporate tax is more competitive than rates in neighboring Spain or France.
While foreigners may own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. The approval can take up to one month and can be rejected if the proposal is found to negatively impact the environment, the public order, or the general interests of the principality.
On June 2021, the IMF released a report detailing Andorra''s macro-economic trends and investment climate. In the past five years the Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO), or the United Nations Conference on Trade and Development (UNCTAD) have not conducted an investment policy review. The government of Andorra, in responding to the economic downturn of COVID, released Horizon 23, an economic recovery roadmap to increase investment competitiveness
In the past five years, civil society organizations have not provided reviews of investment policy-related concerns.
Andorra established Andorra Business, a public/private agency, made up of several ministries, government agencies, associations, and organizations from the private sector. It aims to increase competitiveness, innovation, and sustainability. It provides counseling services to Andorran companies and potential foreign investors to facilitate investment and economic diversification.
Andorran regulations allow for two types of commercial companies: Limited Liability Company (Societat de Responsabilitat Limitada – SL), which has a minimum capital requirement of 3,000 euros; and Joint Stock Company (Societat Anonima – SA) which is normally required for multiple shareholders and has a minimum capital requirement of 60,000 euros.
The business establishment procedures and for share acquisitions or transfers are quite similar to those of other countries, requiring the filling of a simple application form, with the additional unique condition of the presentation of any prior investment authorization received in the country. This same procedure is applicable for incorporation, establishment, extension, branching, or other form of business expansion. Once the company is registered, the foreign investment is established, and the investor is required to deposit the share capital with an Andorran banking entity and proceed to public deed of incorporation before a notary.
The Government''s Andorra Business programs provide grants, counseling, and online resourced to small and medium size companies to foster competitiveness and facilitate internationalization.
The Andorran Chamber of Commerce ( ) helps companies search for business opportunities abroad and organizes, with the government, trade missions to explore international business exchanges.
Andorra has bilateral agreements with France (2003), Spain (2003), and Portugal (2007). No bilateral investment treaty exists between Andorra and the United States.
Andorra has signed Tax Information Exchange agreements for the exchange of fiscal information with 24 countries. All those agreements have been ratified and are in force.
In 2014, Andorra became the 48th signatory to the OECD Declaration on Automatic Exchange of Information in Tax Matters, which commits countries to end bank secrecy for tax evasion purposes. Andorra is a member of the OECD''s Inclusive Framework base erosion profit shifting (BEPS). Additionally, Andorra ratified the Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, which came into effect January 1, 2022. Andorra signed a Non-Double Taxation agreement with France, Spain, Portugal, Luxembourg, Liechtenstein, Malta, Cyprus, United Arab Emirates, San Marino, and Hungary and is currently negotiating other such agreements.
Andorra set out transparent policies and laws, which have significantly liberalized all economic sectors in Andorra. New foreign-owned businesses must be approved by the government and the process can take up to a month. Andorra is committed to a transparent process. Andorra has begun to relax labor and immigration standards; previously, foreign professionals had to establish 20 years of residency before being eligible to own 100 percent of their business in Andorra. This restriction has been lifted for nationals coming from countries that have reciprocal standards for Andorran citizens.
Following approval of the new Accounting Law in 2007, individuals carrying out business or professional activities, trading companies, and legal persons or entities with a profit purpose must file financial statements with the administration.
Although not a member of the European Union (EU), Andorra is a member of the European Customs Union and is subject to all EU free trade regulations and arrangements regarding industrial products. Concerning agriculture, the EU allows duty free importation of products originating in Andorra.
Andorra is negotiating a new association agreement with the European Union alongside Monaco and San Marino that will allow Andorrans to establish themselves in Europe and Andorran companies will be able to trade in the EU market.
Andorra holds observer status at the WTO, although it took steps in the past for full membership of the World Trade Organization (WTO). Andorra became the 190th member of the International Monetary Fund (IMF) in October 2020.
Andorra has a mixed legal system of civil and customary law with the influence of canon law. The judiciary is independent from the executive branch. The Supreme Court consists of a court president and eight judges, organized into civil, criminal, and administrative chambers. Four magistrates make up the Constitutional Court. The Tribunal of Judges and the Tribunal of the Courts are lower courts. Regulations and enforcement actions can be appealed in the national court system.
The Law on Foreign Investment (10/2012) entered into force in 2012, opening the country''s economy by removing the sectorial restrictions stipulated in the prior legislation. In this way, Andorra has positioned itself on equal terms with neighboring economies, enabling it to become more competitive for new sectors and enterprises. On March 2022, Andorra approved a sanctions package in line with EU sanctions against designated Russian and Belarusian individuals and entities.
Andorra Business is responsible for economic promotion and provides information on relevant laws, rules, procedures to set up a business in Andorra, as well as reporting requirements to investors. The organization also provides other services to facilitate foreign and local investments in strategic sectors.
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