Published on and written by Cyril Jarnias
Creating a company in Andorra is not just about filling out a few forms. Behind the image of a small mountain state with favorable taxation lies a highly structured legal framework, centered on two main forms – the Societat Limitada (SL) and the Societat Anònima (SA) – along with their variants (SLU, SAU), private foundations, holdings, and other more specific structures.
Before you start, understand the differences between legal forms (capital, governance, liability, taxation). This choice impacts investor entry, partner exit, startup costs, banking relationships, and obtaining residency.
A Legal and Tax Environment Designed to Attract Companies
Andorra has positioned itself as a credible alternative to major European hubs by combining moderate taxation, openness to foreign capital, and a strong banking framework. The corporate income tax rate is capped at 10%, with no progressive scale: the same rate applies from the first euro of profit. In certain situations, an effective minimum taxation of around 3% is provided, but this remains a very competitive environment compared to neighboring countries.
The IGI, the local equivalent of VAT, is one of the lowest in Western Europe, with a reduced rate of 1% for certain essential goods and a rate of 9.5% for banking services.
Another key element: since a major reform, foreign investors can hold 100% of the capital of an Andorran company, with no requirement for a local partner. Neither shareholders nor directors are required to be residents in order to create the company. However, in practice, this does not eliminate the requirement for “real economic substance” to fully benefit from the Andorran tax regime:
The company must have at least one active resident director or employee, a physical office or an approved coworking contract, and management decisions must actually be taken from the territory.
Without this substance, there is a risk that the shareholder’s country of residence may consider the Andorran structure as a mere “hidden” permanent establishment and re-tax the profits.
The Legal Framework: Two Main Commercial Forms, SA and SL
Andorran company law is relatively simple: it provides for only two main types of capital companies for standard commercial activity:
– the Societat de Responsabilitat Limitada (SL),
– the Societat Anònima (SA).
Based on these two foundations, there are their single-member versions (SLU, SAU), as well as additional structures such as the private foundation or the holding company subject to a special tax regime.
Once registered in the Companies Registry, a company acquires its own legal personality and full capacity. Consequently, partners are only liable for company debts up to the amount of their contributions, which limits their liability.
The table below provides an overview of the main basic differences between SL and SA.
| Criteria | SL (Societat Limitada) | SA (Societat Anònima) |
|---|---|---|
| Nature | Limited liability company | Joint-stock company / corporation |
| Target audience | SMEs, freelancers, e-commerce | Large projects, fundraising, regulated sectors |
| Minimum capital | €3,000 | €60,000 |
| Capital payment | 100% paid up upon incorporation | 100% paid up upon incorporation |
| Form of securities | Non-freely transferable partnership interests | Freely transferable shares |
| Governance | Manager(s) or board of directors | Formalized board of directors |
| Audit requirements | Depending on thresholds | More frequent, sometimes mandatory |
| Image / perception | Standard entrepreneurial structure | More prestigious “corporate” structure |
In both cases, company law requires a notarial deed for the articles of incorporation, registration with the Companies Registry, and a series of tax and administrative steps. The choice between SL and SA has no direct impact on the tax rate: in both cases, corporate income tax remains at 10%. What changes, however, is the degree of formalization, the ease of investor entry, and the fluidity of title transfer.
The Societat Limitada (SL): The Premier Form for Entrepreneurs
The SL is by far the most common form in Andorra. It corresponds to the spirit of the French SARL or the Spanish SL: a flexible structure, with modest capital, suitable for individual entrepreneurs, service providers, small businesses, or digital projects.
The minimum capital is set at €3,000, to be deposited in an Andorran bank account before signing the deed. This capital can be contributed in cash (deposit into the account) or, under certain conditions, in kind (contribution of assets). The law requires this capital to be fully paid up at the time of incorporation. The bank then issues a deposit certificate that will be presented to the notary.
The partnership interests of an SL (limited liability company) are not listed on a stock exchange and take the form of registered social quotas. Their transfer is strictly regulated by pre-emption rights, approval of other partners, and restrictions on the entry of third parties. This principle of intuitu personae values the identity of the partners in order to maintain shareholder stability and avoid any sudden change of control.
The management of the SL is generally carried out by one or more directors. It may be a single director, joint directors, several directors acting jointly or severally, or a board of directors functioning collegially. Directors may be natural or legal persons, residents or non-residents, even though the issue of residency becomes crucial as soon as we touch upon tax matters or active residency.
SLU: The Single-Member Version of the SL
The Societat Limitada Unipersonal (SLU) is an SL with a single partner. The minimum capital remains the same (€3,000), fully paid up and deposited at the bank before the deed. This formula is particularly relevant for the entrepreneur who wants:
– to operate alone without partners,
– while separating their personal assets from business risks,
– and benefiting from the more professional image of a company.
If a limited liability company (SL) with multiple partners becomes single-member through the repurchase of all shares, this single-member status must be registered in the registry within one month. If not complied with, the sole partner may lose the benefit of limited liability and be held personally and jointly liable for debts incurred during the undeclared period.
Here is a comparative summary between a standard SL and an SLU.
| Element | SL (multiple partners) | SLU (single partner) |
|---|---|---|
| Number of partners | 1 to… unlimited in practice | 1 single partner |
| Minimum capital | €3,000 | €3,000 |
| Liability | Limited to contributions | Limited to contributions (if single-member status declared) |
| Governance | Director(s) or board | The partner can also be the director |
| Target audience | SMEs, family companies, multi-partner projects | Freelancer, consultant, solo e-commerce |
SL and Active Residency: A Tool for Personal Strategy
For non-residents, creating an SL is also a lever to apply for active residency. Holding at least 34% of the capital and serving as a director opens up, depending on the applicable categories, the possibility of applying for a residence permit. This route is subject to conditions:
– obtaining the foreign investment authorization,
– a non-refundable deposit of €50,000 with the Andorran financial authority (AFA) in the context of certain residencies,
– a requirement of effective residency of at least 183 days per year for certain categories.
This mechanism shows how the legal form of the company (often an SL) is interwoven with mobility and tax residency strategies.
The Societat Anònima (SA): The Tool for Large Projects and Regulated Activities
The Andorran SA is similar to the French SA or the Spanish sociedad anónima. It is designed for:
– projects requiring significant capital,
– structures with many shareholders,
– fundraising operations,
– and highly regulated sectors (banking, insurance, finance).
The minimum capital is €60,000, to be fully paid up and deposited into a blocked account before the incorporation deed. Again, the bank issues a deposit certificate that the notary will attach to the incorporation.
The shares of an SA are freely transferable without a mandatory pre-emption right by default, allowing the welcoming of investors, the creation of different classes of shares, and the structuring of family or investment holding companies without affecting the continuity of the company.
In terms of governance, the SA is more formalistic. A board of directors is the rule, with increased obligations regarding:
– preparation and filing of accounts,
– transparency,
– statutory audit if certain thresholds of turnover, balance sheet total or workforce are exceeded.
In return, the SA projects a more institutional image, sometimes reassuring for banks and international partners.
SA
SAU: The Single-Member SA
As with the SL, there is a single-member version, the SAU (Societat Anònima Unipersonal). The minimum capital remains set at €60,000, and the liability of the sole shareholder is limited to their contributions, provided that the single-member status is duly declared.
The SAU is sometimes chosen for large-scale individual projects, to house a wealth-holding company, or for regulated activities that require the SA form, even with a single investor.
The following table illustrates the specifics of the SA compared to the SL.
| Criteria | SL | SA |
|---|---|---|
| Minimum capital | €3,000 | €60,000 |
| Primary audience | Entrepreneurs, SMEs, liberal professions | Large enterprises, holdings, regulated sectors |
| Transfer of securities | Restricted, approval, intuitu personae | Freely transferable in principle, no mandatory approval |
| Governance | Flexible, often a single manager | Structured board of directors |
| Publication / formalities | Less burdensome | More formal (publication, possible audits) |
| Incorporation cost (order of magnitude) | Lower | Higher (capital, notary, audits) |
Other Structures: Holdings, Private Foundations, Partnerships, Branches
Beyond the SL and SA, Andorran law provides for or tolerates several other forms or structures, useful for more specific needs: wealth management, optimization of international flows, subsidiaries of foreign groups, etc.
The Andorran Holding Company
Andorra has developed a special tax regime for holding companies (often incorporated as SL or SA). This regime, governed by the Corporate Income Tax Law, notably provides for:
– an exemption for dividends received from foreign subsidiaries under certain conditions,
– an exemption for capital gains on the sale of qualifying holdings,
– no withholding tax on dividends paid to shareholders, whether residents or not.
To benefit from this status, the company must:
– obtain authorization from the Ministry of Finance,
– have as its main purpose the holding and management of holdings in non-resident companies,
– demonstrate real substance (effective seat, Andorran bank account, accounting, effective management from the country),
– comply with certain criteria regarding subsidiaries (subject to comparable tax, minimum rate in the source country, minimum holding percentage or high acquisition value, holding period, etc., with possible adjustments in the most advanced regime).
This mechanism does not reduce the tax to 0% on all holding activity: only qualifying income (dividends, capital gains on securities meeting the criteria) is exempt. Any other activity (services, intra-group billing, etc.) remains taxed at the standard rate of 10%.
Private Foundations
The Andorran private foundation is a non-profit structure used for:
– asset protection,
– estate planning,
– philanthropic purposes.
The level of endowment often required by banks and authorities to guarantee real economic substance.
The foundation can hold stakes in SL or SA companies, own real estate, manage financial portfolios… while benefiting from the 10% corporate income tax on operating income, with some nuances possible depending on the nature of the income.
Partnerships: General Partnership and Limited Partnership
Alongside capital companies, Andorran law also recognizes forms of partnerships, such as:
– the Societat Col·lectiva (general partnership),
– the Societat en Comandita (limited partnership).
In a general partnership, there is no legal minimum capital, but the partners are unlimitedly liable for the company’s debts with their personal assets, and they manage the company jointly, unless otherwise stipulated. This form is sometimes chosen for family businesses or between partners with absolute trust, due to the high risk to individual assets.
The limited partnership, on the other hand, distinguishes:
– managing partners with unlimited liability,
– limited partners whose liability is limited to their contributions.
These structures are less common than SLs and SAs, but they can be interesting for transparent flow-through of results or avoiding double taxation.
Branches and Representative Offices
A foreign group may also consider a branch in Andorra. The branch has no separate legal personality: it constitutes an extension of the parent company, which assumes full responsibility for all commitments made locally.
Some characteristic points:
– no minimum capital required,
– obligation of a local manager and an Andorran bank account,
– registration of the branch in the Companies Registry and, if necessary, with the Andorran financial authority for certain activities,
– subject to the same tax regime as a local company for what concerns its Andorran permanent establishment.
A representative office, conversely, cannot carry out commercial operations or invoice locally. It serves for prospecting, liaison or market research missions, but does not allow the development of a genuine economic activity on site.
Incorporation Process: A Highly Structured Path
Regardless of the form chosen (SL, SA, single-member variant, holding…), the incorporation of a company in Andorra follows a rigorous procedural outline. Most deadlines and requirements are similar for SL and SA, with only variations in costs and complexity.
Foreign Investment Authorization
If a non-resident holds more than 10% of the capital of an Andorran company, a foreign investment authorization must be requested from the government. This step is mandatory for foreign entrepreneurs who want to control their structure.
The file includes notably:
– passport,
– apostilled criminal record extract (in some cases, from several countries: birth, nationality, residence),
– proof of lawful origin of funds,
– CV demonstrating experience or skills to carry out the activity,
– project or business plan detailing the planned activity.
The response time often ranges between 5 and 10 business days in simple cases, but the law may allow up to one to two months in more sensitive files. In the absence of a response within certain deadlines, silence may be considered a refusal.
Name Reservation and Banking Steps
In parallel, the company name must be reserved with the administration, by proposing several names in order of preference. The name must:
– be in Catalan or compatible with the Latin alphabet,
– not be too generic,
– reasonably reflect the activity.
The response time is generally 10 days, and the reservation remains valid for several months, often six.
Opening a constitution bank account in an Andorran bank (MoraBanc, Creand, BancSabadell d’Andorra, etc.) is often one of the most sensitive points. Banks apply strict due diligence: they examine the origin of funds, the profile of ultimate beneficial owners, the business model, and the compliance of the activity with their internal policies. It can take one to two weeks or even longer to obtain an account opening agreement.
Once the account is opened, the founder deposits the required minimum capital (€3,000 for an SL, €60,000 for an SA). The funds remain blocked until registration and are only usable by the company after its official registration.
Notarial Deed, Registration, Tax Registration
The deed of incorporation is signed before an Andorran notary, in Catalan. It includes:
– the company name,
– the corporate purpose,
– the capital and its distribution,
– the form of governance,
– the operating rules of meetings, etc.
The registration period with the Companies Registry, which confers legal personality on the company, is generally between 10 and 15 business days.
Once the company is registered, a Tax Registration Number (NRT) must be requested from the tax administration. This is the equivalent of a French SIRET or a VAT number, essential for:
– invoicing,
– declaring IGI,
– paying corporate income tax.
Commercial Authorization and Social Security Registration
For companies carrying out effective commercial activity in the territory, a commerce authorization must be obtained from the parish (Comú) where the registered office is located:
– proof of a professional premises or domicile,
– electrical certificate for the premises,
– contract for a compliant fire extinguisher,
– compliance with local regulations.
Finally, the company and its directors or employees must be registered with the CASS (Caixa Andorrana de Seguretat Social). Social security contributions remain generally moderate compared to neighboring countries, but represent a cost to be factored into the business model.
Overall, in the absence of special circumstances (regulated sector, banking complexity, etc.), the complete process of creating an SL or an SA typically takes between 6 and 10 weeks, sometimes longer for an SA involving additional authorizations.
Incorporation and Operating Costs
Setting up a company in Andorra has a cost, which breaks down into: legal fees, incorporation costs, and various taxes to be anticipated.
– administrative and notary fees,
– advisory fees,
– share capital (€3,000 or €60,000),
– possible translation and apostille costs for foreign documents.
The ‘turnkey’ flat fee for incorporating an SL, including domiciliation, secretariat, and translations, excluding share capital.
Annual registry fees are, according to various sources, approximately €850 for an SL and €950 for an SA. Added to this are the costs of accounting, auditing if necessary, domiciliation, etc.
The table below summarizes the main financial items related to SL and SA.
| Cost Item | SL | SA |
|---|---|---|
| Minimum capital | €3,000 | €60,000 |
| Government + notary fees (order of magnitude) | €2,000 – €2,500 | €2,000 – €2,500 (often more services) |
| “Turnkey” incorporation package | ≈ €11,500 (including services) | Higher depending on services |
| Annual registry fee | ≈ €850 | ≈ €950 |
| Profit taxation | 10% (with effective minimum ±3%) | 10% (with effective minimum ±3%) |
| Dividends paid to resident partners | In principle exempt from IRPF | In principle exempt from IRPF |
These figures do not include the possible €50,000 contribution to the AFA for certain active or passive residency regimes, which is a separate issue but often linked to the creation of the structure.
Liability, Governance and Corporate Life
In terms of liability, SL and SA offer similar protection: partners are only liable for company debts up to the limit of their contributions, provided that the company is duly registered and legal obligations are met. This protection is voided or weakened in cases of fraud, commingling of assets, or non-compliance with obligations (e.g., failure to declare single-member status).
Corporate bodies are comparable:
Presentation of the two essential bodies of the company: the general meeting and the management body
Sovereign body of partners or shareholders for major decisions: amendment of bylaws, approval of accounts, appointment and removal of directors, transformation, merger, demerger, dissolution.
Composed of a single director, joint directors, or a board of directors.
Decisions are taken by a majority of the represented capital, with specific rules depending on the nature of the resolutions. In single-member companies, the sole partner exercises the powers of the general meeting, with an obligation to record their decisions in writing.
The law also requires the creation of a legal reserve: each year, 10% of the profit must be allocated to it until it reaches 20% of the capital. This reserve can only be used to absorb losses when no other reserve is available.
How to Choose Between SL, SA and Other Options?
Ultimately, the choice of legal form is less about taxation (identical for SL and SA) than about a combination of criteria: size of the project, capital needs, partner profile, prospects for opening up capital, regulatory constraints.
For a freelancer, consultant, e-commerce operator, small digital agency or a family project with no fundraising ambitions, the SL or SLU is almost always the obvious choice: modest capital, flexible governance, lower incorporation and operating costs, control over shareholding through the intuitu personae nature.
For an international group, an investment platform, or a regulated banking, insurance or financial activity, the SA or SAU is the natural legal form. It offers substantial capital, freely transferable shares, formalized governance, and better acceptance by regulators and markets.
The holding company is relevant when the main objective is the management of holdings and the optimization of dividend and capital gains flows within a framework compliant with OECD standards. It does not replace SL or SA, but often overlays them.
The private foundation mainly interests significant estates for transmission, protection and possibly philanthropic purposes, within a more rigid institutional framework.
Finally, partnerships (general, limited) or the branch remain niche tools, useful in very specific configurations but rarely suitable for standard international entrepreneurship.
In all cases, the most prudent approach is to proceed with caution and reflection before making a decision.
– clarify the type of activity (local or international, regulated or not),
– estimate capital needs and the likely evolution of shareholding,
– integrate residency and economic substance strategies,
– and rely on local advice that masters both company law, taxation, banking practices, and the new regulatory requirements for foreign investors.
Only under this condition can the creation of a company in Andorra – whether it is an SL, an SA or a more sophisticated structure – become a true development lever, rather than a mere administrative setup exposed to risks of reclassification and unforeseen additional costs.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
