Formalities and requirements


The development of the Principality of Andorra on the legislative level in recent years, which is still going on, is placing our country in a more and more open economy and an ambit of taxation in which indirect and direct taxation are being introduced for both individuals and legal entities.

At ABC Advisors and Consultants we offer a service of company formations in Andorra, always thinking of the specific needs of each client.

We can advise you on the best structure or legal form to take up, we deal with all the steps inherent to forming the company and we can also extend our service to the employment, accounting and tax management of the company or business.













BASIC INFORMATION ON ANDORRAN COMPANIES


LEGAL REGIME

In the Principality of Andorra trading companies can take the form of “sociedad anonima” (SA) or “sociedad de responsabilidad limitada” (SL). Any of them can be formed by a single member (single member company) or by more.
These companies have their own legal personality when registered in Companies Registry.

SHARE CAPITAL

The minimum share capital for an SL is €3,000 (there is no upper limit to the capital) and for the SA it is €60,000.
All the shares or equity units have to be subscribed for an amount at least equal to their nominal value, and this has to be paid up in full by an effective capital contribution to the company.

LIABILITY OF THE MEMBERS

The members only answer for the company’s debts up to the limit of the value of their contributions or holdings in the company and do not answer with their own assets, provided that the company is registered in Companies Registry.

REGISTERED OFFICE

Andorran companies must have their registered office in the territory of the Principality of Andorra.

ADMINISTRATION

The General Meeting of members is the sovereign organ of the company and takes resolutions over the most important questions in the company’s life (altering the constitution, approving the financial statements, the application of the result for the year, the appointment and dismissal of administrators, the transformation, merger, splitting, dissolution of the company, etc.). The resolutions are taken by majority of capital (which must represent at least one third of the share capital).

The General Meeting will define and determine the system for the ordinary administration of the company:

  • Sole administrator
  • Joint administrators (acting jointly)
  • Joint-and-several administrators (acting individually)
  • Board of Directors (acting in collegiate form)

The administrators of the company can be both individuals and legal entities.
In the single member company the competences of the General Meeting are taken on by the sole member.

PROCESS OF FORMATION OF AN ANDORRAN COMPANY

1) Obtaining the certificate of the company name. This certificate must be applied for by one of the future members of the company to be formed. The certificate is requested from Companies Registry by submitting the relevant form, on which the interested party must ask for three alternative names, in order of preference.
2) Application to the Government for authorization for the formation of the company. The application (made with the necessary form) must be accompanied by the following documentation, in addition to that  determined by whether the member is a legal entity, a foreigner, if it is an SA and there are non-cash contributions, etc:
      • A draft of the company constitution
      • A list of the founder members
      • The identity of all the administrators
      • The company name certificate
3) Public deed. Having obtained Government authorization to form the company, the public deed of formation is granted before an Andorran notary, necessarily having to produce a bank certificate accrediting the deposit of the share capital.
4) Registration. Registration in Companies Registry is obligatory and it is at that moment that the company acquires legal personality.
5) Obtaining the Tax Registration Number. When the company is registered in Companies Registry, the Taxation Registration Number (NRT) has to be applied for from the Tax Authorities

ADMINISTRATIVE AUTHORIZATIONS FOR THE EXERCISE OF COMMERCIAL OR INDUSTRIAL ACTIVITIES OR SERVICES

1) Reserve the trading name in the Commune (Town Hall)
2) Commune authorization
3) Government authorization
4) Registration and entries at tax level with the Tax Authorities
5) Registration of the trade with Social Security (CASS)

MERCANTILE, ACCOUNTING AND TAX OBLIGATIONS OF ANDORRAN COMPANIES

MERCANTILE OBLIGATIONS

Title to holdings: Holdings have to be documented by titles (or certificates), which must be nominative and individually numbered. One or more units can be included. The certificate is the basis for entry in the Register of Members.
Register of Members: Obligatory. It must contain the identity of the original members and new acquirers, their address, and all the successive transfers of shares or equity units and every constitution of rights in rem and burdens over them.
Minutes of the General Meeting: Obligatory. The minutes must necessarily include the date, place and time of holding the meeting, the form and full text of the summoning, the identity of the members attending and the capital represented, the agenda, the content of the resolutions adopted and the result of the votes, with an indication of which way the members voted and the abstentions. If it is a Universal General Meeting, all the members must sign the minutes.

ACCOUNTING OBLIGATIONS

Accounting: The accounting must be kept in conformity with the current regulations in the Principality of Andorra, to make a chronological follow-up of the transactions and prepare the accounting documents and inventories.
Accounting documents: The accounting documents must be preserved, including the vouchers for the various entries, for a period of 6 years from the date of approval of the accounts for the relevant year.
Financial statements: These comprise the Balance Sheet, Profit & Loss Account, Statement of Changes of Net Assets, Cash Flow Statement, Notes and proposal of distribution of the result.
Audit: In certain cases, depending on the annual business turnover, the number of employees and the total assets, the company must submit the financial statements to an audit. 
Filing the financial statements: These must be filed obligatorily in the Companies Registry, with the certificates of approval of the financial statements and the resolution relating to the application of the result, together with a copy of the financial statements and the audit report, if necessary.
Distribution of dividends: Dividends can only be distributed when the carrying value of the net assets is not less than the figure for the share capital, and will not fall below it as a consequence of the distribution.
The distribution of profits is prohibited until the establishment expenses and research and development expenses have been fully written off, except when the amount of the available reserves is, at least, equal to the amount of the expenses not written off.  
The distribution of profits is also prohibited until the goodwill is fully written off, unless an available reserve is set up for an amount equal to the goodwill figure in the assets.
Legal reserve: Companies have to reserve 10% of the positive result for each year to form the legal reserve, until this represents 20% of the share capital. The legal reserve can only be used to set off losses and when there are no other reserves available.

TAX OBLIGATIONS

Andorran companies have tax obligations and, therefore, have to file tax returns and settlements for the General Indirect Tax (IGI), and the following direct taxes:

• Corporation tax: This tax is foreseen at a rate of 10%
• Tax on the income of tax non-residents: The Law obliges Andorran companies which pay for services contracted with businesses not resident for tax in Andorra, to apply a withholding of 10% on the amount of the invoices to be paid.