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Executive Summary
Principality of Andorra is a small landlocked state located in Western Europe in the Pyrenees, it boarders with France and Spain. Its area covers 468 sq. km. The choice of a favourable tax regime together with highly developed tourism industry, contribute to a stable and prosperous economy. The average age of Andorra’s population is one of the highest in the world, reaching 83 years. Andorra Vella is the capital of Andorra, and Catalan is its official language.

Andorra is a parliamentary principality, in which the President of France and the Bishop of Urgell (Spain) are co-princes. The state has adopted a parliamentary representative democracy, and the Prime minister is the head of the government.

Summer and winter resorts attract 9 million tourists to Andorra every year, which results in around 80% of the annual income of the state. Financial sector, particularly banking industry, is highly developed in Andorra. Most agricultural products are imported to the country, but local production mainly concentrates on tobacco and furniture production. Andorra is not a member state of the EU, but enjoys most of its regulations, due to the geographical position. It has adopted Euro currency and plans to issues its own Euro coins in the nearest future.

Geography
Andorra is a state located in the Pyrenees mountains, the highest peak of which reaches 2,946 metres, and the lowest point is 870 metres above the sea level. Andorra enjoys a temperate climate, but due to its location in the mountains, it is usually colder in winter and cooler in summer in comparison to the neighbor countries.

Map, Flag and Coat of Arms


Types of Company


Societat Limitadad (SL)
The minimum share capital required for such a company formation is 6,000 Euro, and there should be at least two shareholders. In case a company is involved in trading, special applications should be submitted to the government that can take some time for approval. In case a company is used only as a holding company, the registration procedure is significantly faster.

Societat Anonima (SA)
This type of company is usually chosen for conducting a larger business, with more shareholders and the obligatory initial capital is 30,000 Euro. The registration procedure is similar to that of the SL, but government checks and due diligence requirements might be more stringent.

Socientat Colectiva
Partners of this type of compay have unlimited responsibility, and its capital is shared among them. Its establishment and registration process is similar to the SL and SA types of companies.

Partnership
Limited partnerships does not exist in Andorra.
Private agreement can establish a partnership between two or more persons with unlimited liability. Following the rule of 67% local ownership, an Andorran national should sign the contract within which he provides the rights to a foreigner to manage company’s operations and finances, if another country’s representative wishes to establish this structure.

Sole proprietorship
Only a person who has been resident in Andorra at least for ten years can register as a sole trader, but he will need to obtain a trading license from the local government office.

Branch of a Foreign Company
This type of company is available only to international insurance organizations.

Taxation

Personal
Residents of Andorra are individuals who remain within the country at least 183 days a year. Non-Andorran individuals can become residents by obtaining a work permit or a passive resident permit.

Individuals are not liable to income, inheritance, gift and capital transfer taxes in Andorra.  In 2007 capital gains tax has been introduced with the aim to decrease real estate inflation. Individuals are liable to pay national insurance contributions and several taxes on property. Custom duties are applied on some imported goods. As a directive imposed by the EU, Andorra was obliged to introduce withholding tax (now 20%) on savings returns paid to citizens of the EU, of which 75% are paid to their states of citizenship.

Employers pay 13% of the gross salary and employees pay between 5% and 9% as a social security contribution. Self-employed persons are liable to 18% tax on their earnings.

Corporate
There is no corporation, capital gains taxes nor tax on dividends. The only payable government taxes are fees for company registration and business licenses, social security contributions and property taxes. It is planned to introduce the VAT at a rate of 4% that will replace all the indirect taxes.  There are no exchange controls.
 
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