2023 Investment Climate Statements: Andorra

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 20 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. In July 2022, Andorra modified the Foreign Investment Law to make it easier for companies to establish in Andorra and to improve government oversight mechanisms.

The government of Andorra created Andorra Business , 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; and
• 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.

In collaboration with the U.S. Consulate General in Barcelona, Andorra Business produced a presentation, Direct Line Andorra, on investment opportunities in the country.

The Andorran Chamber of Commerce, Industry, and Services  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; protecting 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.

The Andorran Family Company  (EFA) is a non-profit civil association that brings together family businesses in Andorra. It works to bolster Andorra’s small businesses, improve the competitiveness of family-owned companies, and support sustainable long-term growth strategies for SMEs.

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 (passed in April 2008, and updated in June 2012 and July 2022).

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 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 affect the environment, the public order, or the general interests of the principality.

The Andorran government implemented new screening and approval procedures for inbound foreign investment with the reform of the Foreign Investment Law in July 2022. Foreign investment from countries that have a Double Taxation Agreement with Andorra or other special agreements related to foreign investment can proceed without prior administrative authorization. Investors from countries without a double taxation or foreign investment agreement with Andorra or a public entity in a foreign country must obtain prior authorization.

With the new law, Andorra is implementing investment screening protocols.
All inbound foreign investment presented and registered in the Registry is subject to a control mechanism that assesses risks to national security, sovereignty, public and economic order, and the environment. Emphasis is placed on threats to critical infrastructures, critical technologies, energy, raw materials, and food security.

Other Investment Policy Reviews

In June 2022, the International Monetary Fund (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), and 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.

Business Facilitation

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: a Limited Liability Company (Societat de Responsabilitat Limitada – SL), which has a minimum capital requirement of 3,000 euros; and a 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 for share acquisitions or transfers are 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.

Outward Investment

The Government’s Andorra Business programs provide grants, counseling, and online resources to small and medium size companies to foster competitiveness and facilitate internationalization.

The Andorran Chamber of Commerce  helps companies search for business opportunities abroad and organizes, with the government, trade missions to explore international business exchanges.

Transparency of the Regulatory System

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.

International Regulatory Considerations

Although not a member of the European Union (EU), Andorra has had an established Customs Union with the European Union since 1990 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.
The European Union receives Most Favored Nation treatment (MFN) from Andorra, which stipulates that arrangements applied to goods from third countries imported into the Principality of Andorra should not be more favorable than those applied to imports of EU goods.

Since 2015, Andorra has been negotiating a new association agreement with the European Union alongside Monaco and San Marino. This agreement, expected to be finalized in the second half of 2023, would integrate Andorra into the EU’s single market and allow the free movement of people, goods, services, and capital. The agreement entails harmonizing Andorran regulations with European ones, while maintaining its own specificities in foreign and fiscal policy. Provisions for Andorra to begin a path to EU membership are not included in the association agreement.

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 IMF in October 2020.

Legal System and Judicial Independence

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.

Laws and Regulations on Foreign Direct Investment

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. In July 2022, the government of Andorra modified the Foreign Investment Law to attract more foreign investment and improve government oversight of those investments.

In March 2022, the Andorran government broke its historic neutrality and approved a sanctions package in line with EU sanctions in response to the Russian invasion of Ukraine. The sanctions package impacted an estimated 700 Russian and Belarusian individuals and 50 legal entities with assets in Andorra.

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.

Competition and Anti-Trust Laws

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.

Expropriation and Compensation

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 U.S. entities in Andorra.

Dispute Settlement

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 signatory state or a contracting state to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (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 under Andorra’s legal system. 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.

Bankruptcy Regulations

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.

Investment Incentives

Andorra has been known for its favorable tax regime, which investors have used to promote products such as tobacco, alcohol, jewelry, cosmetics, and dairy. 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.

Andorra is actively seeking to attract foreign investment and to become a desired location for entrepreneurs, talent, innovation, and knowledge.

Andorra Business provides grants for small- and medium-sized companies to foster competitiveness and facilitate their internationalization. The ActuaTech 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 at the country level.

Andorra Research + Innovation  (ARI), established in 2021, supports projects to generate knowledge, promote sustainable development, and diversify the Andorran economy. ARI promotes innovation projects in the country, establishes synergies in the entrepreneurial ecosystem, and builds connections with national and international partners. Their online platform Andorra Startup  connects startups with investors and provides information about Andorra’s startup ecosystem.

In October 2022, Andorra Research + Innovation and Andorra Business launched the National Innovation and Entrepreneurship Strategy.  The objective of this strategy is to identify and address challenges facing Andorra’s innovation ecosystem to maximize the principality’s potential to develop new products and services.
The United States Embassy and the Consulate General in Spain accredited to Andorra, launched the first iteration of the Academy for Women Entrepreneurs  (AWE) in April 2022 aimed at fostering women entrepreneurship in Andorra.

Twelve female entrepreneurs from Andorra participated in the first iteration of AWE, held from May to October 2022. The women benefitted from a combination of in-person masterclasses given by Andorran mentors and intensive virtual coaching provided by the Thunderbird Business School at Arizona State University in the United States. In March 2023, the Embassy and Consulate launched the second edition of AWE in Andorra, which will connect participants with AWE’s large global network of more than 25,000 women from around the world.

Foreign Trade Zones/Free Ports/Trade Facilitation

Although not a full member of the European Union, 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 Andorran 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 subject to the Foreign Investment Law, as modified in 2022. As soon as the foreign investor receives authorization to invest in the country, national laws are applicable just like any other national investor.

A new data protection law, Law 29/2021, entered into force in Andorra in May of 2022. The text and structure are based on the European General Data Protection Regulation (GDPR), which includes new obligations to which Andorran companies and foreign companies operating in Andorra will have to adapt their processes. These requirements include keeping a detailed record of data processing operations, creating an impact plan, and appointing a Data Protection Officer.

Although Andorra is not a member of the European Union, it is a signatory to the European Union’s Convention 108 on Data Protection, which is the origin of many of Andorra’s current data protection laws.

Andorra does not follow a “forced localization” policy.

Real Property

Andorran law protects property rights with enforcement carried out at the administrative and judicial levels. Foreign investments for the purchase of property are possible in Andorra, subject to prior authorization. There is a 4 percent asset-transfer tax.

Secured property loans are available through the Andorran banking sector. The Andorran Financial Authority  (AFA) oversees the banking sector, including mortgages.

Andorra does not have a national Property Registry; however, there is a communal registry for each of its seven municipalities. It is mandatory to register property, which records its physical, legal, and economic characteristics. Information about registered properties is publicly available.

Intellectual Property Rights

The legal framework for Intellectual Property Rights (IPR) includes the Trademarks Act of May 1, 1995, the Law 26/2014 on Patents of October 30, the Law on Authors’ and Neighboring Rights of June 1999, and Law 23/2011, of December 29, 2011, on the Creation of the Society of Collective Management of Copyright and Neighboring Rights.

In 2012, the Society for the Administration of Authors’ Rights (SDADV) was created to manage the economic rights, neighboring rights, and the interests of copyright holders. Right holders can choose whether to participate in this voluntary collective arrangement, although in some cases, the collective arrangement system is compulsory.

Andorra joined the World Intellectual Property Organization (WIPO) in 1994 and is party to the Paris Convention, the Berne Convention, as well as the Rome Convention since 2004. Andorra is not a member of the World Trade Organization (WTO) but holds observer status. Andorra is not included in the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Protection of Intellectual Property Rights in Andorra does not currently conform with EU regulations; however, Andorra is negotiating an association agreement with the European Union to allow the free movement of people, goods, services, and capital. In annex XVII of the agreement, Andorra has committed to align its national legislation with the EU, including that which addresses IPR.. Once this agreement is ratified by the EU member states and by Andorra through a referendum, it would integrate the principality into the EU’s single market.

Additionally, Andorra is currently reviewing the adoption of two International Conventions in the field of protection of IPR:

• The Patent Cooperation Treaty
• The European Patent Convention

Businesses seeking to register a trademark or patent should contact the Andorran Trademarks Office and Patents Office.

Trademarks and Patents Office of the Principality of Andorra
Ministry of Economy
Edifici Administratiu del Prat del Rull
Cami de la Grau s/n
AD 500 Andorra La Vella
Tel. (376) 875 600
Email: ompa@govern.ad
http://www.ompa.ad/ 

Andorra is not listed in the U.S. Trade Representative (USTR) Special 301 Report nor included in the Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The Andorran financial sector is efficient and is one of the main pillars of the Andorran economy, representing 15 percent of the country’s GDP and over 4 percent of the workforce.

Created in 1989, and redefined with more responsibilities in 2003, the Andorran Financial Authority  (AFA) 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.

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.

Money and Banking System

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 15 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, 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 AFA.

The Andorran banking system is made up of three banking groups: Andbank, MoraBanc, and Crèdit Andorrà. The U.S. Internal Revenue Service has certified all the Andorran banks as qualified intermediaries.

Founded in 1960, the Association of Andorran Banks  (ABA) 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. The three Andorran banking groups are ABA members, totaling an estimated 61.5 billion euros in combined assets for 2021.

Foreign Exchange and Remittances

Foreign Exchange

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.

Remittance Policies

There are no limits or restrictions on remittances if they correspond to a company’s official earning records.

Sovereign Wealth Funds

Andorra has no Sovereign Wealth Fund (SWF).

Privatization Program

Andorra has no current plans to privatize any of its SOEs.

Climate Issues

The government of Andorra updated its National Energy Strategy Against Climate Change in February 2021. The national strategy commits to reducing greenhouse gas emissions (GHG) by a minimum of 37 percent by 2030 and pursuing carbon neutrality by 2050.

Andorra is responsible for an estimated 0.001 percent of global emissions, a figure that has continued to decrease since 2005. Since 2018, Andorra has implemented an energy transition law, approved the national strategic plan for the implementation of the United Nations 2030 Agenda for Sustainable Development, approved the declaration of a state of climate and ecological emergency, established a National Commission for Energy and Climate Change, and updated the National Energy Strategy for the Fight Against Climate Change. In June 2022, Andorra approved the Circular Economy Law, which bans the use of single-use plastics and implements measures to reduce food waste, among others.

The government of Andorra approved the Green Fund, through Law 21/2018, to encourage plans and actions for the development of climate change mitigation and adaptation initiatives. The fund is sustained by earmarked green taxes, complementary budgetary allocations, donations and contributions, and other assorted income sources ( https://www.govern.ad/taxaverda ).

Andorra has created a price for carbon as an additional element of the general branch of the excise tax on hydrocarbons whose use generates or is likely to generate greenhouse gas emissions. In 2022, Andorra joined the Carbon Pricing Leadership Coalition, which brings together leaders from government, private sector, academia, and civil society to expand the use of carbon pricing policies.

Additional Resources  

Department of State

• Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/)
• Trafficking in Persons Report ( https://www.state.gov/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 ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/)
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/)
• Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/)

Department of the Treasury

• OFAC Recent Actions ( https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions )

Department of Labor

• Findings on the Worst Forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  )
• List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods )
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab )
• Comply Chain ( https://www.dol.gov/ilab/complychain/ )

Resources to Report Corruption:

Unitat de Prevencio i Lluita contra la Corrupcio
Ministeri de Justicia i Interior
Govern d’Andorra
Ctra.de l’Obac s/n
AD700 Escaldes-Engordany
Phone: +376 875 700
Email: uplc_govern@govern.ad