1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
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 the ACTUA-Invest program ( ) as Andorra’s economic development and promotion office in order to provide counseling services to both Andorran companies looking to grow and foreign investors wanting to start new businesses in Andorra. ACTUA’s mission is to increase competitiveness, innovation, and the sustainability of the economy.
ACTUA’s three key priorities are:
- Economic diversification through the development of priority industries such as blockchain, fintech, health, wellness, biotechnology, education, and sports, among others.
- Attracting direct foreign investment and supporting national companies throughout their internationalization process.
- Supporting entrepreneurs: promoting collaboration between the public and private sectors and giving support to the development of new business initiatives.
The Andorran Chamber of Commerce, Industry, and Services of Andorra ( ) is a public body that 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 ( ).
Limits on Foreign Control and Right to Private Ownership and Establishment
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 on July 2014.
From 2011 to 2019, the Parliament approved direct corporate, non-resident, capital gains, and personal income taxes. These regulations aim at establishing a transparent, modern, and internationally comparable regulatory framework. At 10 percent, well below the European average, Andorra’s corporate tax is more competitive than rates in neighboring Spain or France.
Other Investment Policy Reviews
In the past three years neither the Government nor any international organization has conducted an investment policy review, be it the Organization for Economic Cooperation and Development (OECD); World Trade Organization (WTO); or the United Nations Conference on Trade and Development (UNCTAD).
Andorra established the ACTUA program as 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 ACTUA programs provide grants, counseling, and online resourced to small and medium size companies to foster competitiveness and facilitate internationalization.
4. Industrial Policies
Andorra has been known for its favorable tax regime, which investors have exploited to promote tobacco, alcohol, jewelry, cosmetics, dairy products, among others. In recent years, Andorra has reached agreements with neighboring countries to limit and regulate duty-free sales with a view towards promoting economic integration, though smuggling continues to be an issue. Andorra is a member of the European Customs Union and therefore has no tariffs on EU-manufactured goods.
ACTUA provides grants for small and medium size companies to foster competitiveness and facilitate their internationalization. The ACTUA Tech Foundation was created in 2015, in collaboration with the Media Lab of the Massachusetts Institute of Technology, with the aim of employing Andorra’s unique economy as a “living lab” to promote innovation. Andorra, thanks to its size, recent liberalizing legislation, relative affluence, and its eight million visitors per year offers ideal conditions to test this technology. ( ).
Foreign Trade Zones/Free Ports/Trade Facilitation
Although not a full member of the European Union (EU), Andorra, as a member of the European Customs Union, is subject to all EU free trade regulations and arrangements regarding industrial products. Moreover, the EU allows duty free importations of products acquired by visitors in Andorra in the framework of the franchises covered in the Customs Union Agreement (1990). Concerning agriculture, the EU allows duty free importation of products originating in Andorra. No free trade zones exist in the country.
Performance and Data Localization Requirements
All employees wishing to work in Andorra must have work permits, issued by annual quotas established by the Government.
Both domestic and foreign private entities have the right to establish and own business enterprises. 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. For a foreign resident, the process for obtaining permissions takes up to one month and is automatically approved if there are no objections. An application can be rejected if the proposal is found to threaten the environment, the public order, or the general interests of the principality. As soon as the foreign investor receives authorization to invest in the country, national laws are applicable just like any other national investor.
The Government does not follow a “forced localization” policy.
8. Responsible Business Conduct
Local enterprises follow generally accepted accounting principles, and the Government has taken some measures to promote responsible business conduct, including Law 35/2008, which establishes a protocol for acknowledging companies that excel in their human resource policies, especially regarding non-discrimination and equal opportunities for men and women.
Over the years, the Andorran banking sector has been consolidating its voluntary responsible business conduct practices, mainly through their foundations. Rather than focus on a due diligence approach to lower risks, as promoted by international guidelines such as the OECD Guidelines for Multinational Enterprises or UN Guidance on Business and Human Rights, the banking sector initiatives reaffirm their commitment to the country through ad hoc projects in a variety of areas like culture, sports, solidarity, education, and the environment. There are no reported cases of human or labor rights concerns related to responsible business conduct.
Department of State
- Country Reports on Human Rights Practices;
- Trafficking in Persons Report;
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
- North Korea Sanctions & Enforcement Actions Advisory
Department of Labor