Andorra, known for its attractive taxation and high quality of life, has become a preferred destination for entrepreneurs looking to optimize the management of their international investments. One of the most common structures established in the country is the holding company. This article explores in detail how to create a holding company in Andorra, its benefits, and the steps required for its incorporation in 2024.
What is a Holding Company?
A holding company is an entity whose primary objective is to own shares in other companies, whether domestic or foreign. These companies allow shareholders to centralize the management of their investments and optimize taxation, especially in jurisdictions like Andorra, where there are special tax regimes for such structures.
Tax Benefits of a Holding Company in Andorra
Andorra offers a very attractive tax regime for holding companies. These benefits include:
- Exemption from taxes on dividends and capital gains: Holding companies in Andorra can benefit from significant tax exemptions, provided certain requirements are met, such as a minimum 5% participation in the share capital of the subsidiary for at least one year.
- Reduced corporate tax rate: While the general tax rate in Andorra is 10%, holding companies that meet the established criteria can benefit from even lower effective rates.
- No withholding tax on distributed dividends: Dividends distributed by an Andorran holding company to its resident shareholders are not subject to withholding tax, maximizing benefits for investors.
Requirements to Create a Holding Company in Andorra
To take advantage of these benefits, the holding company must meet certain conditions:
- Minimum participation: The holding company must own at least 5% of the share capital of the subsidiary and maintain this participation for at least one year.
- Real activities in Andorra: Andorran authorities require the company to have a physical presence in the country, with adequate office space and personnel.
- Payment of taxes in the source country: The subsidiaries must pay at least 4% corporate tax in their home country for the tax exemption in Andorra to be applicable.
Step-by-Step: How to Create a Holding Company in Andorra
1. Company Name Request
The first step in creating a holding company in Andorra is to request the company name. This process involves proposing up to three different names, one of which will be approved by the Andorran government.
2. Foreign Investment Authorization
If the shareholders of the holding company are foreign, it is necessary to obtain prior authorization for foreign investment in Andorra. This process can take between 2 and 4 weeks.
3. Bank Account Opening
Once the investment is approved, the next step is to pre-open a bank account for the company. This requires submitting documents that justify the company’s activity, as well as the source of funds.
4. Company Incorporation
With all the documents in order, the company’s bylaws are formalized before a notary and the company is registered in the Andorran Commercial Registry.
5. Obtaining the Tax Registration Number and Social Security Registration
Finally, the company must obtain its tax identification number and register with CASS (Andorran Social Security Fund), which is mandatory for all companies operating in the country.
Costs Associated with Creating a Holding Company in Andorra
The total cost of creating a company in Andorra ranges between 5,000 and 6,500 euros. These costs include:
- Professional fees: Between 3,000 and 4,000 euros, depending on the type of company and the complexity of the structure.
- Notarial and government fees: These vary between 2,000 and 2,500 euros.
Timeframe for Incorporating a Holding Company in Andorra
The estimated time for incorporating a holding company in Andorra ranges between 7 and 12 weeks, depending on the profile of the shareholders and the type of activity to be developed. For example, if one of the shareholders is a resident of Andorra, the process can be faster.
Recent Changes in Andorra’s Tax Legislation
It is important to note that Andorra has recently made modifications to its tax legislation to align its practices with international standards. Among the most relevant changes are:
- Elimination of special regimes: Some special tax regimes have been eliminated or modified, affecting companies that seek to benefit from reduced rates.
- Economic substance requirements: To continue benefiting from certain tax regimes, companies must demonstrate a real economic presence in Andorra, including offices and employees.
Conclusion
Creating a holding company in Andorra is an excellent option for investors looking to maximize their profits through tax optimization and centralized management of their investments. However, it is crucial to comply with all the legal and tax requirements that the Principality demands to ensure that the structure fulfills its purpose without setbacks.
With the recent legislative changes, it is even more important to have professional advice to ensure that the holding company is established in accordance with current regulations and to take full advantage of the benefits that Andorra offers.
For more information, do not hesitate to contact experts in tax planning and corporate law in Andorra.