Offshore company formation. Andorra: 2% profit tax
The registry of companies and offshores in Andorra. To buy a company in Andorra with the opportunity to minimize taxation up to the level of 2% profit tax. “Active” residence with labor permit (Compte propi)
Starting from 2012 non-residents are allowed to launch private Andorran companies with the rights equal to the ones of the citizens of the Principality, though the application for such company should be first of all approved by the Department for Foreign Investments. A launched company should comply with certain requirements. Thus, due to the existing governmental policy of ecological balance preservation, the applications for industrial projects are declined in the majority of cases. The total amount of activity domains, welcomed by the Government of Andorra, makes up about 200: trade, tourism, high-tech, education, construction etc.
In accordance to new rules, any person that possesses 10% or more of a company has the right to claim for “active” or Category B residency.
Currently it is possible to register the following institutional types of private companies:
- Societat Limitada (S.L)
It is the analogue of limited liability company. This institutional form will be proper for small business. It is actively used in local trade and service industry. 3000 euro of charter capital is required for the registration of S.L. The final fee for registration is 563 euro. Annual Governmental fees make up about 850 euro.
- Societat Anonima (S.A.)
It is the analogue of joint-stock company. This institutional form is convenient for big enterprises with a large amount of shareholders. The charter capital makes up 60 000 euro. The final fee for registration is 803 euro.
- Andorra Societat Colectiva
This is the type of the company, where the capital is shared between the partners with unlimited liability. The procedures are the same as for S.L. and S.A.
Less popular institutional types of the companies:
–Andorra Sole Propriatorship
–Andorra Branch (a subsidiary of foreign company that can be launched only by insurance ventures)
The initial documents for the registration of the company:
–The legalized certificate from the police of birth country, the country where the passport was issued and the country of residence for the current moment (in case the place of domicile was alternated)
— (in case you are not in Andorra) a legalized copy of passport. That can be substituted by the copy, that was certified by a notary in Andorra.
–Company charter draft that we are ready to prepare for you in accordance to you plans and preferences.
–The certificate of company’s registration with the name of the company
–Business plan with the description of investment strategy and financial forecasts.
The primary application for obtaining the official name of the company in Catalan is send to corresponding authorities (it is viewed up to 5 days). It should be noted that certain names are prohibited. Further on, so called major application on foreign investments (in case there are any) and the application on launching the venture are submitted. The abovementioned applications are scrutinized at the Government of Andorra and the process may take up to 4 weeks.
Your presence will be necessary at the second stage after getting the permission from the Government. The opening of temporary account in a bank of Andorra and transfers of charter capital sum(3.000 euro for S.L. and 60000 euro for S.A.), that is blocked up to the moment of the society official registration in the Register of Companies, are implemented in your presence. Your presence will also be necessary for signing the society settlement act in the presence of notary officer (1 week after obtaining the permission from the government).
After the registration of the society in the Register of Companies, a notary registration number is inquired—NRT (the analogue of CIF in Spain). From this moment the society is considered valid and may file a request to the municipality of the registration place in corresponding Comu for getting commercial activity permission from the Trade Registry (Registre de Comerc). It is also necessary to obtain the permission of Comu for the operation of premises that you plan to buy or rent for your office. Rental payments for the offices in the center of Andorra la Vella or Escaldes Engordany start from 300 euro for 50m2 monthly. You may also rent an office at residential area, but the corresponding permission of the owner should obligatory be obtained. Besides, such apartment should have at least 20 m2 room for commercial and business activities. At that, the cost of 1m2 of the trading halls in the main trading streets of Andorra (Meritxell and Carlemany) may come up to 200 euro per month.
After that it is necessary to sign the agreement with a company that will provide account services of the activity. Monthly cost of minimal package of services starts from 200 euro.
The profit tax makes 10%, but there is an opportunity to decrease it to 2% in case the activity of the company is conducted abroad!!! In case the activity of the company is implemented on the territory of Andorra, it should make 4.5% IGI (VAT) reimbursements. Look for details here: “Taxation in Andorra”
A foreign citizen may acquire offshore in Andorra. In case he/she doesn’t plan to live or work in Andorra, the residential status is not obligatory. Thus, a company, for instance, may employ a local secretary or manager for the implementation of administrative functions in Andorra.
Otherwise, one may need the status of “active” resident and labor permit. In order to get a labor permit a person should be officially hired by a registered company. Thanks to new alterations that presuppose 100% foreign property, a foreigner, being the Director of his own company, may issue the labor permit for himself. Labor permit is not given to the whole company but to a certain employee.
*Attention of passive residence of Andorra: in Andorra you may also register an international company, but in this case a “passive” resident is deprived of the right to conduct trading activity on the territory of the Principality. Commercial activity within the bounds of the Principality presupposes “active” type of residency.
Which are the rules of social security payments?
The Social Security Fund submits the requirements, obligatory for both individuals and companies. At least one so called autonom should work in the company. Within the first 2 years the amount of monthly payments will make 100 euro, further on the amount of payments, depending on the profits of the company, will make maximum 400 euro monthly. The company is obliged to pay 20% of all salaries to Social Security Fund CASS .
Thus, in the company, where both spouses are the directors, the husband in accordance to his rights may elect trade union and hire his wife. In this case the company will pay 400 euro and 20% of the wife’s salary for the sake of the trade union. The payments to trade unions are fixed, i.e. you may earn 10 000 euro monthly. The incomes and the amount of floating assets are also not related to the payments for the sake of Social Security Fund.
The technologies of companies’ registration in Andorra (the extracts from ABA (Andorran Banks Association) report):
The registered offices of the companies in Andorra should obligatory be located on the territory of the Principality and should be registered in accordance to the Law 20/2007 from October 18, 2007 as limited liability or joint-stock companies. This law presupposes the following legal forms of the companies: the company with civil liability (societat anonima SA) and limited liability company (societat de responsabilitat limitada—SL) (both of the abovementioned variants may be personal properties).
It should be mentioned that due to the articles of the Law 20/2007 ,that regulate business activities and contracts, the Commercial Register of Andorra is aimed to improve the level of security of legal commercial deals. The activities, mentioned in Commercial Register, are regulated by the decree from February 20, 2008 that confirms the Control prescription over the Commercial Register. This prescription in its turn was amended by means of Decree from March, 26 2008.
The companies that for the moment, when the Law 20/2007 came into effect, were neither limited liability nor joint-stock companies, but were specialized in industry or the exchange of good by means of the market are considered to be unlimited partnerships. Their activity is regulated by the point of Directive on the Commercial Companies of Andorra, sanctioned by the General Council on May 19, 1983. In partnerships all partners are obliged to pay the debts of their company.
Foreign companies have the right to relocate their registered offices to the territory of Andorra, acquiring the state affiliation of the Principality in case of being correspondent to all the legal terms, presupposed by the Government of Andorra and in case of the absence of any controversies in reference to the legislation of the country of origin with the purpose of legal form preservation.
On April 8, 2008 the General Council has endorsed the Law 2/2008 on foreign investments in the Principality that came into effect on November 7, 2008. The structure of this new law presupposes the direct access to the foreign capital in several domains of the economy, that precedes the authorization of Andorran Government in cases when the volume of investments is equal or surpasses 50% of share capital in such sectors as audiovisual, electronic commerce, aesthetic medicine and healthcare, education, industrial production, based on new technologies and advanced developments. Nevertheless, after 4 years the reform on foreign investments proved to be insufficiently effective for attaining the compatible level, comparable to the economies of neighbor countries at the given terms.
Correspondingly, the deregulation of foreign investments together with signing the agreement on double taxation exemption and the implementation of direct taxation in reference to the companies and their economic activities favored immensely the economic development due to the economic diversification and high VAT rates. On June 21, 2012 the General Council endorsed the Law 10/2012 on Foreign Investments in the Principality of Andorra. Consequently, the liberalization of foreign investments within all economic domains is accompanied by the major reform that touches upon the economic rights for natural persons. Thus, it has been established that a natural person obtains his/her legal right simultaneously with the legal residential status in the Principality. In particular, the applicable legislation was improved in the part of liberal professions: the obligatory 20-year term of living for non-residents that practice their professions on the territory of Andorra was annihilated.
The banking structures of Andorra are regulated by the specialized legislation that controls financial sector, and in particular by the Law from May 13, 2010, that regulates the legal regime of banking structures and major administrative regime for the financial organizations, as well as by the Law 35/2010 from June 3, 2010 on the authorization regime with the purpose to launch new organizations that will function in the financial system of Andorra.
The Law 2/2008 from April 8, 2008 was complement by the Law 36/2008 from December 18, 2008 that clarifies the issues from the promulgation of the first law regarding the interpretation of the direct foreign investments interpretation procedure and its level of liberalization.
The companies of Andorra should obligatory preserve and file accounting records, prepare and sign annual reports together with the claimed revenue distribution for 6 months from the end of the year. They should also present annual reports for audit in case 2 of the conditions, presented below, will coincide for the upcoming years:
–The total amount of assets surpasses 3 600 000 euro;
–Net sales surpass 6 000 000 euro;
–The total amount of employees surpasses 25 persons.
Though, the obligatory audit procedure, presupposed by the Law 20/2007, is not valid until the Law on audit is endorsed.
In accordance to the Law 30/2007 on the Accounting of the company, valid for the financial years starting from January 1, 2009 and further on, the commercial companies and entrepreneurs of Andorra, that conduct business or practice professional activities, should obligatory maintain bookkeeping records that correspond by its nature and scale to the International accounting standards and International finance statement reports. This is mentioned in the General Governmental Plan of Bookkeeping accounts that was issued on July 30, 2008 and came into effect on January 1, 2009.
The Law 30/2007 on the Accounting of the company was complemented by the following laws:
–The Law 8/2010 presupposes disciplinary regime that guarantees complete correspondence to accounting obligations, presupposed by the Law 30/2007. It also enlarged the threshold volume of annual turnover up to 250 000 euro for the usage of facilitated accounting scheme. This gives a chance for a larger amount of business items to report in accordance to facilitated regime.
–The Law 26/2011 from December 29, 2011 has simplified accounting in general and the management regime in particular. The threshold level of annual turnover, when legal and natural persons are obliged to present accounting reports, was enlarged from 100 000 euro to 150 000 euro. The sum of 250 000 euro, that was previously considered to be the upper limit of the annual turnover for the usage of facilitated accounting regime, was annihilated. The threshold limit is determined by the Administration that in its turn makes the annual accounting reports consistent with the existing business-situation.
The Decree that confirms the Guidelines on the annual consolidated accounting reports preparation came into effect on December 28, 2010. It is complemented by the purview of the Law 30/2007, regarding consolidation scales.
It should be noted that in accordance to the Law on Foreign Investments in the Principality of Andorra, the liberalization of foreign investments in all economic sectors of Andorra is accompanied by the major reform that touches upon the rights of natural persons. Correspondingly, it has been established that a natural person obtains economic rights only from the moment of obtaining the status of legal resident in the Principality.
The goal of controlling Governmental organization (from June 12, 2008) is to make private enterprises congruent to the social demands as well as to implement the coordination of their activities, that present public and social interest, taking into consideration legal traditions and experience of neighbor countries.