1. Openness To, and Restrictions Upon, Foreign 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 Andorra Business ( https://www.andorrabusiness.com ), Andorra’s economic development and promotion office, to provide counseling services to both Andorran companies looking to grow and foreign investors wanting to start new businesses in Andorra. Andorra Business’ mission is to increase competitiveness, innovation, and the sustainability of the economy.
Andorra Business’ five key objectives are:
Promoting key sectors for the diversification of the economy.
Being a motor in the improvement of the public sector and microeconomic environment.
Attracting and supporting both foreign and local investment in key sectors.
Providing support to Andorran businesses to be more competitive on a National and International scale.
Creating favorable conditions for innovation and entrepreneurship, in both the public and private sectors, to create an environment for testing new innovations at the country level.
The Andorran Chamber of Commerce, Industry, and Services of Andorra ( https://www.ccis.ad/ ) 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 ( www.cea.ad ).
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 in July 2014.
From 2011 to 2019, the Parliament approved direct corporate, non-resident, capital gains, and personal income taxes. At 10 percent, well below the European average, Andorra’s corporate tax is more competitive than rates in neighboring Spain or France.
While foreigners may own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. The approval can take up to one month and can be rejected if the proposal is found to negatively impact the environment, the public order, or the general interests of the principality.
On June 2021, the IMF released a report detailing Andorra’s macro-economic trends and investment climate. In the past five years the Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO), or the United Nations Conference on Trade and Development (UNCTAD) have not conducted an investment policy review. The government of Andorra, in responding to the economic downturn of COVID, released Horizon 23, an economic recovery roadmap to increase investment competitiveness
In the past five years, civil society organizations have not provided reviews of investment policy-related concerns.
Andorra established Andorra Business, 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 Andorra Business programs provide grants, counseling, and online resourced to small and medium size companies to foster competitiveness and facilitate internationalization.
The Andorran Chamber of Commerce ( www.ccis.ad ) helps companies search for business opportunities abroad and organizes, with the government, trade missions to explore international business exchanges.
3. Legal Regime
Andorra set out transparent policies and laws, which have significantly liberalized all economic sectors in Andorra. New foreign-owned businesses must be approved by the government and the process can take up to a month. Andorra is committed to a transparent process. Andorra has begun to relax labor and immigration standards; previously, foreign professionals had to establish 20 years of residency before being eligible to own 100 percent of their business in Andorra. This restriction has been lifted for nationals coming from countries that have reciprocal standards for Andorran citizens.
Following approval of the new Accounting Law in 2007, individuals carrying out business or professional activities, trading companies, and legal persons or entities with a profit purpose must file financial statements with the administration.
Although not a member of the European Union (EU), Andorra is a member of the European Customs Union and is subject to all EU free trade regulations and arrangements regarding industrial products. Concerning agriculture, the EU allows duty free importation of products originating in Andorra.
Andorra is negotiating a new association agreement with the European Union alongside Monaco and San Marino that will allow Andorrans to establish themselves in Europe and Andorran companies will be able to trade in the EU market.
Andorra holds observer status at the WTO, although it took steps in the past for full membership of the World Trade Organization (WTO). Andorra became the 190th member of the International Monetary Fund (IMF) in October 2020.
Andorra has a mixed legal system of civil and customary law with the influence of canon law. The judiciary is independent from the executive branch. The Supreme Court consists of a court president and eight judges, organized into civil, criminal, and administrative chambers. Four magistrates make up the Constitutional Court. The Tribunal of Judges and the Tribunal of the Courts are lower courts. Regulations and enforcement actions can be appealed in the national court system.
The Law on Foreign Investment (10/2012) entered into force in 2012, opening the country’s economy by removing the sectorial restrictions stipulated in the prior legislation. In this way, Andorra has positioned itself on equal terms with neighboring economies, enabling it to become more competitive for new sectors and enterprises. On March 2022, Andorra approved a sanctions package in line with EU sanctions against designated Russian and Belarusian individuals and entities.
Andorra Business is responsible for economic promotion and provides information on relevant laws, rules, procedures to set up a business in Andorra, as well as reporting requirements to investors. The organization also provides other services to facilitate foreign and local investments in strategic sectors.
The Law on Effective Competence and Consumer Protection (13/2013) protects investors against unfair practices. The Ministry of Economy is responsible for administering anti-trust laws and reviews transactions for both domestic and international competition-related concerns.
The Law of Expropriation (1993) allows the Government to expropriate private property for public purposes in accordance with international norms, including appropriate compensation. We know of no incidents of expropriation involving the U.S. entities in Andorra.
ICSID Convention and New York Convention
Andorra became a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards in September 2015, requiring Andorran courts to enforce financial awards. Andorra is not a member of the International Center for the Settlement of Investment Disputes (ICSID).
Investor-State Dispute Settlement
Andorran legislation establishes mechanisms to resolve disputes if they arise and its judicial system is transparent. The constitution guarantees an independent judiciary branch, overseen by a High Council of Justice. The prosecution system allows for successive appeals to higher courts. The European Court of Justice is the ultimate arbiter of unsettled appeals.
Contractual disputes between U.S. individuals or companies and Andorran entities are rare, but when they arise are handled appropriately. There have been no reported cases of U.S. investment disputes.
International Commercial Arbitration and Foreign Courts
Parties to a dispute can also resolve disputes contractually through arbitration. The Arbitration Court of the Principality of Andorra (TAPA) was established in July 2020 by the Chamber of Commerce, Industry and Services and the Andorran Bar Association in accordance with Law 16/2018. The main goal of this institution is to mediate both national and international business disputes to reach a fair settlement for both parties without having to go to court.
Andorra’s bankruptcy decree dates to 1969. Other laws from 2008 and 2014 complement the initial text and further protect workers’ rights to fair salaries and sets up mechanisms to monitor the implementation of judicial resolutions. Additionally, Law 8/2015 outlines urgent measures allowing Government intervention of the banking sector in a crisis.
6. Financial Sector
The Andorran financial sector is efficient and is one of the main pillars of the Andorran economy, representing 20 percent of the country’s GDP and over 5 percent of the workforce.
Created in 1989, and redefined with more responsibilities in 2003, the Andorran Financial Authority (AFA; www.afa.ad ) is the supervisory and regulatory body of the Andorran
financial system and the insurance sector. The AFA is a public entity with its own legal status, functionally independent from the Government. AFA has the power to carry out all necessary actions to ensure the correct development of its supervision and control functions, disciplinary and punitive powers, treasury and public debt management services, financial agency, international relations, advice, and studies.
The Andorran Financial Intelligence Unit (UIFAND) was created in 2000 as an independent organ to deal with the tasks of promoting and coordinating measures to combat money laundering, terror financing, and the proliferation of weapons ( www.uifand.ad ).
The State Agency for the Resolution of Banking Institutions (AREB) is a public-legal institution created by Law 8/2015 to take urgent measures to introduce mechanisms for the recovery and resolution of banking institutions ( www.areb.ad ).
Andorra adopted the use of the Euro in 2002 and in 2011 signed a Monetary Agreement with the EU making the Euro the official currency. Since July 1, 2013, Andorra has had the right to mint Euro coins.
The Andorra banking system is sound and considered the most important part of the financial sector. It represents 20 percent of the country’s GDP. The Andorran banks offer a variety of services at market rates. The main lines of business in the banking sector are retail banking, private banking, and asset management and insurance. The country also has a sizeable and growing market for portfolio investments. The country does not have a central bank. The sector is regulated and supervised by the Andorran Financial Authority (AFA).
The U.S. Internal Revenue Service has certified all the Andorran banks as qualified intermediaries.
Founded in 1960, the Association of Andorran Banks (ABA; https://www.andorranba nking.ad/) represents Andorran banks. Among its tasks are representing and defending interests of its members, watching over the development and competitiveness of Andorran banking at national and international levels, improving sector technical standards, cooperation with public administrations, and promoting professional training, particularly dealing with money laundering prevention. At present, all five Andorran banking groups are ABA members, totaling an estimated 51.7 billion Euros in combined assets for 2021.
Andorra adopted the Euro in 2002 and in 2011 signed a Monetary Agreement with the EU making the Euro the official currency. Since 2013, Andorra has the authority to mint Euro coins.
There are no limits or restrictions on remittances provided that they correspond to a company’s official earning records.
Andorra has no Sovereign Wealth Fund (SWF).