The Andorran corporate income tax law provides for a special regime for entities holding foreign securities called the special holding regime or STVE regime.
This regime is mainly known as the Andorran holding regime or Andorran holding company.
The report “The definitive guide to living in Andorra” is now available, with detailed information on Andorra’s tax framework, residence and society.
Click here to download it for free.
How does the Andorran holding company work?
The main advantage of establishing a holding company in Andorra is the tax exemption for dividends and capital gains received from its subsidiaries or affiliates.
For this exemption no minimum percentage of participation is required, nor the maintenance of the participation during a determined period. This is different from the general exemption regime provided for in the Corporate Income Tax Law.
However, the aforementioned tax exemption is subject to the following requirements:
- The corporate purpose of the company must be exclusively the management and holding of shares in companies resident or non-resident for tax purposes in the Principality of Andorra.
- The investee companies must be subject, without the possibility of exemption, to a minimum taxation of 4% or be resident in a country with which Andorra has signed a DTAA.
Regarding the previous point, if the directly investee company is not subject to that minimum taxation but the indirectly investee company is, the taxation requirement will be understood to be fulfilled.
This implies that Andorran holding companies are generally taxed at 0%.
If in addition the holder of the Andorran holding company is an individual resident in Andorra, the dividends of such Andorran holding company distributed to the resident individual will be taxed at 0%, resulting in zero taxation, as if it were a tax haven.
Who would be interested in a holding company in Andorra?
Thus, the holding or STVE regime is very attractive for the following profiles:
- “Family offices” who want to establish their wealth management company here.
- Venture capital investment companies that want to have a low percentage of participation or investment and still benefit from the exemption.
- Large estates that reside in Andorra and want to channel their investment through a holding company.
How can I apply for the holding regime?
Taxpayers wishing to take advantage of this special regime must apply to the Andorran tax authorities and identify it in the annual accounts. Please contact us using the form at the end of this article if you require assistance in this regard.
How can I set up a holding company in Andorra?
Incorporating a holding company in Andorra from an administrative point of view is not very complex. The following steps should be followed:
- File the foreign investment in Andorra in the case that the incorporator is a non-resident
- Apply for the reservation of the company name.
- Open a bank account to obtain the certificate of payment of the share capital.
- Constitute the company before an Andorran notary.
In case you are resident in Andorra at the moment of incorporating a holding company with these steps you will have your holding company practically operational.
However, in the case that the holding company is constituted as a non-resident, you will have to take into account that in most OECD countries there are rules such as the effective seat of management and the CFC rules or international transparency laws.
Can I have a holding company in Andorra living in another country and not pay taxes?
Many users contact us to set up a holding company living in Spain, France or other countries in order to save taxes.
However, it is important to note that although this is possible from Andorra, it would bring a lot of tax problems in the place of residence of the holders of the holding.
In fact, even if the holding company is Andorran, the local tax authority could claim its income under the criteria of effective residence of the company, CFC rules or international tax transparency.
Thus, we only recommend non-residents to create a holding company in Andorra if they are high net worth individuals who can comply with the following:
- Economic substance: that is, the holding company must have an office and some employees. If possible, the workers should be asset managers or qualified people.
- Effective management: if possible, to have resident administrators in Andorra or that the board of directors or administrators travel to Andorra every time they have a meeting or meeting.
- To have a visible face: to have a telephone number, a website and a real image that shows that you are in Andorra.
How to set up in Andorra
For the reasons given above, more and more large estates are taking advantage of Andorran taxation.
If you are thinking of setting up a holding company in Andorra, we will be pleased to help you, as long as you are committed to comply with the requirements of economic substance and effective management.
And, if you are interested in changing your tax residence to Andorra, we recommend reading the report “The definitive guide to living in Andorra”. For any questions you can contact us without obligation.
You can contact us without obligation in the following ways:
- By sending an email to [email protected]
- By writing to Andreu through Linkedin
- Or by filling out the form below: