Holding companies, trading companies and others

abc assessors

With the entry into force of the Law on Corporation Tax, and other direct and indirect taxes, the Principality of Andorra has begun a strategy to harmonize its taxation with other countries of the European Union.
Andorra has left behind being labelled as a tax haven to become a competitive country at both financial and tax level, and to be a country attractive both for foreign investment and for all those Andorran asset holders who wish to channel their investments abroad from Andorra.

Now all those people, assets and business groups wishing to obtain a structure which enables them to optimise the different types of income (dividends, capital gains, fees, royalties, etc.) have the possibility of finding in the Principality of Andorra a suitable country for the formation of a company which meets their objectives.


At ABC Advisors and Consultants we offer professional, personalised advice, always thinking of the type of structure best suited to the needs and particularities of each client.
The Andorran Law on Corporation Tax envisages four types of companies with clear tax advantages:
  • Holding companies for holdings in foreign entities
  • Companies for the exploitation of intangibles
  • International trading companies
  • Intra group management and financial investment companies (Cash pooling)


HOLDING COMPANIES FOR HOLDINGS IN FOREIGN ENTITIES

These are Andorran companies with the exclusive object of the management and maintenance of holdings in foreign companies.
All the dividends received by these Andorran holding companies, and the results that they obtain from transfers of holdings in other companies, are exempt from taxation in Andorra.
Profits distributed by the holding companies to their shareholders, with a charge to the exempt income, are exempt from Corporation Tax on the member when it is an Andorran company.

COMPANIES FOR THE INTERNATIONAL EXPLOITATION OF INTANGIBLES

These are Andorran companies which are active in the international exploitation of intangibles, that is to say, which make concessions for use, grants or licences of rights, transfers of assets, goods or rights over: patents, designs, industrial models and drawing, trade marks, domain names, plans, secret formulas or procedures, literary, artistic or scientific works, applications, computer systems and rights connected with copyright.
Fiscally, these companies have a tax treatment which means a tax rate on their profits of approximately 2%.
These companies have the obligation to:
•    Exploit the assets in their own name in the framework of their financial activity
•    Employ one person for at least half days and have premises for exclusive use with a minimum area of 20 square metres, in Andorra
•   Ensure that the assignee of the rights of use uses these rights in the development of some type of economic activity and that the results of this use do not generate tax deductible expenses in the assignor entity when they are linked entities
•    That the assignee of the right is not an entity or individual resident in Andorra for tax, and that the right is not used directly in the Principality

INTERNATIONAL TRADING COMPANIES

These are Andorran companies active in international trading in goods and as commission agent or intermediary in general in international trade in goods and any other type of assets, including real estate, located outside Andorra.
For tax purposes, these companies have a tax treatment which means that the tax rate on their profits is approximately 2%.
These companies have the obligation to:
•    Employ one person for at least half days and have premises for exclusive use with a minimum area of 20 square metres, in Andorra
•    That the receiver of the services uses these services in the development of some type of economic activity and that the results of this use do not create tax deductible expenses in the entity providing the service when they are linked entities
•    That the receiver of the services is not an entity or individual tax-resident in the Principality of Andorra and the service is not used directly in the Principality

INTRA GROUP MANAGEMENT AND FINANCIAL INVESTMENT COMPANIES (CASH POOLING)

These are Andorran companies whose activity is obtaining loans from linked entities or third parties which, together with their share capital, are used in the making of loans to linked entities non-resident for tax in Andorra.
Intra group management and financial investment companies can also carry out activities of:
•    Management and investment of their own treasury or of linked entities non-resident for tax in Andorra
•    Services of invoicing, leasing and management of receivables and payables with other linked entities non-resident for tax in Andorra
•    Cover of exchange risks in the group
•   Issues of bonds, preference holdings and other instruments which can be used to recruit resources for the group in the international capital markets.
For taxes, these companies have a tax treatment which means that the tax rate on their profits is approximately 2%.
The minimum share capital for this type of company is 250,000 euro and they must employ one person for at least half days and have premises for exclusive use with a minimum area of 20 square metres, in Andorra.