Andorra corporate tax - guide for international expansion

Are you considering expanding your business to Andorra? Understanding the principality's corporate tax landscape is essential for making informed decisions about establishing operations in this unique European microstate.

Andorra offers an attractive business environment with competitive tax rates and modern regulatory frameworks. Whether you're exploring market entry opportunities or planning international expansion, grasping the corporate tax obligations will help you navigate this strategic location effectively.

For businesses looking to streamline their international operations, Wise Business can provide the financial infrastructure needed to manage cross-border transactions and local payments efficiently in Andorra's euro-based economy.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Andorra Corporate Tax Rate in 2025

The standard corporate income tax rate in Andorra is 10% for 2025. This rate applies to the worldwide income of Andorran tax resident companies and represents one of the most competitive corporate tax rates in Europe.¹

Andorra also offers reduced rates for specific types of entities and activities. New companies may benefit from a reduced rate of 2% during their first tax period if they meet certain conditions, including having their registered office and effective management in Andorra.³ Additionally, companies engaged in international trading activities may qualify for a reduced rate of 2% on income derived from such activities.²

The principality operates a territorial tax system for non-resident companies, meaning they are only taxed on Andorran-source income. This makes Andorra particularly attractive for international businesses looking to establish a European base with favourable tax treatment.³

Companies are considered tax resident in Andorra if they are incorporated under Andorran law or have their place of effective management in the principality. The tax year typically runs from 1 January to 31 December.³

Read more about Corporate Tax Planning best practices

How to Pay Corporate Tax in Andorra

Corporate tax payments in Andorra are made through the Andorran tax administration system. Companies must register with the Andorran Tax Department to obtain a Tax Registration Number (NRT) before commencing operations.⁵

The tax period coincides with the entity's financial year. Companies are required to submit their annual corporate tax return in the month following the six months following the conclusion of the tax period. Payment of the final tax liability is due at the time of filing.^{4 6}

Additionally, taxpayers must make a single advance payment of the tax settlement. This payment is due on the first day of the ninth month following the start of the tax period. It is calculated by applying a percentage of 50% to the settlement fee of the immediately previous financial year.⁶

Let's calculate the annual tax due for a company with a turnover of €1.5 million. Assuming a profit margin of 10%, the taxable profit would be €150,000. At Andorra's standard corporate tax rate of 10%, the annual tax liability would be:

€150,000 × 10% = €15,000

When expanding your business to Andorra, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to manage international finances. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Andorra

The tips to keep your company fully compliant with Andorran tax regulations:

• Register for taxes promptly: After incorporation, register with the Andorran Tax Administration to meet your obligations under the corporate tax system. This ensures your business can legally operate and remain eligible for benefits such as a potential corporate tax refund in some instances.
• Know your corporate tax due dates: Andorra applies a corporate tax rate of under 10%, one of the lowest in Europe. Corporate income tax filing is typically due within six months following the end of the financial year. Missing deadlines can result in penalties and interest charges, so timely submission is critical.
• File annual accounts: All companies must submit annual accounts and maintain accurate records of revenues, expenses, and balance sheets. These filings help ensure compliance and reduce the risk of disputes with tax authorities.
• Stay updated on VAT obligations: Businesses engaged in trading must also register for Andorra’s low general indirect tax (IGI). Filing VAT returns accurately and on time is part of ongoing compliance.
• Engage a tax professional: Many businesses rely on a corporate tax expert to manage corporate tax prep, ensure accurate reporting, and optimize filing strategies in line with Andorran tax and corporate law.

By tracking corporate tax due dates, managing corporate income tax filing accurately, and keeping proper records, businesses can avoid penalties and secure benefits such as a corporate tax refund in Andorra’s competitive tax environment.

International Expansion to Andorra

Andorra is the sixth-smallest country in Europe, but it has incredible growth opportunities for business considering expansion.⁷ The government is known for its low corporate tax rate, below 10% for company profits, personal revenue, and non-resident earnings. General sales tax is only 4.5%.⁸ This makes the tax and corporate law framework highly favorable compared to many European countries. Businesses also benefit from lower retention on investments and a simplified corporate tax submission process.

The strong economy of Andorra is driven by finance, tourism, and retail, generating a GDP of US$5.7 billion in 2023.⁹ Its GDP per capita of €40,511 is above the EU average, reflecting a stable and prosperous market.⁸ The unemployment rate is just 1.7%, one of the lowest in Europe.⁸ A robust digital infrastructure further supports growth. Around 94.5% of households enjoy high-speed fiber internet, averaging over 300 Mbps. Energy costs are also competitive, with Andorra ranking second in Europe for affordable electricity.⁸

Tourism is a significant driver of economic activity in this region. Over 9 million visitors each year are attracted to its ski resorts, summer activities, and duty-free shopping. The retail sector, supported by more than 1,400 shops, adds further opportunities for foreign companies.¹⁰ Manufacturing, including electronics, textiles, and machinery, makes up about 60% of exports. Imports focus primarily on consumer goods, food, and fuel, representing 80% of the total.⁹

Although not an EU member, Andorra benefits from trade agreements with France, Spain, and the EU customs union. This arrangement ensures duty-free access to EU markets for most goods. The principality’s location in the Pyrenees between France and Spain makes it strategically placed for cross-border trade and expansion.¹⁰

If you’re planning to take your business to Andorra, here are the steps you should take:⁸

1. Conduct market research to understand opportunities.
2. Build a business plan tailored to your target audience.
3. Choose a company name and register it with the Andorran Commercial Register.
4. Obtain a tax identification number through the Andorran Tax Administration.
5. Open a corporate tax account with a local bank.

Maintain a reliable bookkeeping system to ensure compliance with corporate dividend tax and other obligations.

Andorra’s favorable income tax vs corporate tax system creates a supportive environment for companies planning international growth. Together with developed infrastructure, access to EU trade markets, and reliable financial services provided by top banks in Andorra, the country stands out as an appealing choice for expansion in 2025 and beyond.

Discover the top 5 best Corporate Tax softwares

Incorporation of Business in Andorra

Investors need to follow several legal and administrative steps to incorporate a company in Andorra. Below is an overview of the process:⁸

• Authorization for foreign investment: Required if foreign ownership of the company exceeds 10%. Investors must submit a passport, a criminal record certificate, and proof of the legal origin of funds.
• Company name reservation: Several name options should be proposed and checked for uniqueness in the official registry.
• Deposit of share capital: The authorized share capital must be deposited into a corporate bank account in Andorra.
• Drafting and notarizing company documents: The articles of association and memorandum of association are prepared by lawyers and notarized locally.
• Registration with the Business Registry: The company is officially registered, a tax identification number (NRT) is issued, and a commercial license is obtained.

According to Andorra Business (2024), the principality has modernized its corporate regulations to simplify incorporation and attract foreign investors.¹² Today, foreigners can hold up to 100% ownership in most company types, and the Andorra corporate tax rate remains one of the lowest in Europe.

Types of Business Entities in Andorra

Under the Commercial Companies Act, entrepreneurs can choose between several legal entity types:^{13 11}

• Andorra Limited Liability Company (Societat Limitada – SL): The most common entity for small and medium businesses. Foreigners can now own 100% of an SL. It requires at least one director, two shareholders, and a minimum share capital of €3,000.
• Andorra Public Limited Company (Societat Anònima – SA): Designed for larger companies with the potential to go public. It requires two shareholders and a minimum capital of €60,000.
• Branch Office: An extension of a foreign parent company. It must operate with a local management team and maintain its own corporate bank account in Andorra.
• Representative Office: Used for research and promotional activities. It cannot conduct sales or sign contracts within Andorra.

Companies should engage a corporate tax expert for accurate corporate tax prep. This is to ensure smooth compliance and efficient tax planning.

International Corporate Tax Best Practices

Managing corporate tax obligations across multiple jurisdictions requires strategic planning and adherence to international standards. Companies operating internationally should maintain robust compliance frameworks that address both local requirements and global tax initiatives.

Stay current with OECD guidelines, particularly the Base Erosion and Profit Shifting (BEPS) framework and Pillar Two global minimum tax rules. While Andorra has not yet implemented Pillar Two measures, international businesses should monitor developments as the principality continues to align with EU and OECD standards.

Leverage double taxation agreements where available. Andorra has signed tax treaties with several countries, including Spain, France, Portugal, and Luxembourg, which can help prevent double taxation and reduce withholding tax rates on cross-border transactions.

Maintain comprehensive documentation of transfer pricing policies and ensure arm's length pricing for intercompany transactions. This is particularly important for businesses with related entities in different jurisdictions, as tax authorities increasingly focus on profit allocation and substance requirements.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Andorra efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

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• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

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FAQs - Corporate Tax in Andorra

Who is liable for corporate tax in Andorra?

Companies incorporated in Andorra and foreign companies with their place of effective management in Andorra are liable for corporate tax on their worldwide income. Non-resident companies are only taxed on Andorran-source income at the standard 10% rate.

Are there any tax incentives for businesses in Andorra?

Yes, Andorra offers several tax incentives. New companies may qualify for a reduced 2% rate during their first tax period. Companies engaged in international trading activities can benefit from a 2% rate on qualifying income. Additionally, holding companies may benefit from participation exemptions on dividends and capital gains from qualifying shareholdings.

What is the tax treatment of dividends in Andorra?

Dividends paid by Andorran companies to residents are generally subject to a 5% withholding tax. However, dividends paid to non-residents may be subject to different rates depending on applicable tax treaties. Under the participation exemption regime, dividends received by Andorran companies from qualifying shareholdings may be exempt from corporate tax.

What is the process for registering for corporate tax in Andorra?

Companies must register with the Andorran Tax Department before commencing operations. This involves submitting incorporation documents, details of business activities, and appointing a tax representative if required. The registration process typically takes 2-4 weeks and must be completed within 30 days of incorporation.

What are the common pitfalls to avoid regarding corporate tax in Andorra?

Common mistakes include failing to register with tax authorities promptly, inadequate documentation of transfer pricing policies, missing quarterly advance payment deadlines, and not maintaining proper substance requirements for reduced tax rates. Companies should also ensure compliance with economic substance rules and maintain adequate local presence to support their tax position.

Sources used in this article:

1. Tax Foundation: Corporate Tax Rates by Country 2024
2. Andorra Guides: Tax Rates
3. Golden Harbors: Andorra Company Registration
4. Chamber of Commerce and Industry: Taxation in Andorra
5. Govern d'Andorra: Login Page for Procedures
6. e-Tramits: Tax Procedures
7. Remote People: Doing Business in Andorra
8. Andorra Business: Invest in Andorra
9. Global Tenders: Economy of Andorra
10. U.S. Department of State: 2024 Investment Climate Statements - Andorra
11. Healy Consultants: Andorra LLC Setup
12. ICLG: Foreign Direct Investment in Andorra
13. AND Capital: Company Statutes and Laws

Sources last checked 22/09/2025