A small European country is increasingly positioning itself as a preferred location for international investment. It is the Principality of Andorra, a modern country with a high per capita income, a stable political framework and a thriving economy that revolves around its tourist attraction and the financial sector.
It is a small European country located in the Pyrenees, on the border between Spain and France, with an area of 468 km2 and a population of approximately 77,500 inhabitants.
It is part of the European Union Customs Union and uses the Euro as its national currency. The official language is Catalan, but Spanish, French and Portuguese are widely used.
But what is making large, medium and small investors from all over the world look to this principality to invest their capital and even to change their residence?
The reasons abound, because it is already an open secret that Andorra offers one of the best business environments in the world.
Let’s see the reasons.
Why invest in Andorra?
Andorra is one of the most stable countries in its region. It is a democratic co-principality with a government and a parliament, the Consell General d’Andorra, in which most of the national decisions are approved.
It is a country with exceptional social peace, where no politically motivated damage to individuals, projects or private facilities has ever been recorded and where the likelihood of civil unrest is practically non-existent.
Andorra has a very rich culture due to its proximity to countries such as Spain, France and Portugal. It is a cosmopolitan society, with a good portion of the population coming from the rest of the world. According to UN figures, more than 58% of the Andorran population is immigrant, coming mainly from Spain, Portugal and France, and their integration into the tranquil Andorran lifestyle has been exceptional.
In fact, there is virtually no crime in the Principality, which is why more and more individuals are choosing to relocate from neighboring countries where insecurity is considerably higher.
Andorra’s economy is centered on tourism and the banking system. The tourism sector contributes approximately 80% of GDP, with around 8 million visitors annually, an overwhelming figure considering that just 77,500 people reside in the country.
GDP per capita is among the highest in the world, reaching 32,079 euros in 2020, which placed the country 28th out of a ranking of 196 countries. The Andorran economy grew at an average annual rate of 1.92% between 2015-2019 and there is virtually full employment as the unemployment rate was just 1.9% the first quarter of 2020.
Education and healthcare system
Three public education systems coexist in Andorra. Families can choose between the Spanish, French or Andorran system for schooling from basic to secondary school.
Regarding the health system, Andorra has a very solid public health system that is complemented by international agreements with the health systems of neighboring countries such as Spain and France.
Rankings elaborated by prestigious journals such as The Lancet place Andorran healthcare as one of the best in the world.
The financial sector of the Principality of Andorra is, together with tourism, the main pillar of the economy. Andorra adopted the Euro in 2002, since 2011 it has been the official currency and since 2013 this country has the right to mint Euros.
The Andorran Financial Authority (AFA) is in charge of regulating the system and safeguarding its stability; and the Andorran Financial Intelligence Unit (UIFAND) deals with money laundering prevention tasks.
As in any democracy, the judiciary in the Principality of Andorra is independent of the executive branch. Transparent policies and laws aimed at modernizing the country have been established, and more and more economic sectors are being liberalized.
It has also begun to relax labor and immigration rules, mainly those that required a foreign professional to accumulate 20 years of residence in order to own 100% of his or her business.
Friendly climate for foreign investment
The Foreign Investment Law came into force in 2012 and was a key instrument for the opening of the economy and the elimination of sectoral restrictions that existed in the previous legislation.
Under this legal framework, with prior authorization from the Government, 100% foreign capital companies can be incorporated, which has placed Andorra in a better position with respect to neighboring countries.
The public agency Andorra Business (formerly called Actua) is responsible for the promotion of foreign investment and for generating a favorable business climate, providing relevant information for investors.
Andorra is known for its favorable tax regime for foreign investment. For direct taxes there is a maximum rate of 10% which can reach 0% if a minimum income is not reached.
As for indirect taxes, the Value Added Tax, known here as IGI, is the lowest in Europe with a general rate of 4.5% which is reduced to 1% for goods and services related to health, education, culture, food and rents.
There is no inheritance and gift tax in Andorra and there are ten double taxation agreements signed with the following countries: Spain, France, Portugal, Luxembourg, Liechtenstein, United Arab Emirates, Cyprus, San Marino and Hungary.
Corporate income tax is only 10% and no withholdings are made on dividends distributed by companies.
All this legal tax framework makes Andorra a very attractive destination for private investment.
Protection of property rights
The right to private property of citizens and residents of Andorra is firmly protected by the Constitution. Commercial companies can be incorporated and owned by both domestic and foreign entities.
All the above-mentioned characteristics place the Principality of Andorra at the top of the list of countries with the greatest attractiveness for foreign capital.
To this we should add other details such as geographical location, energy costs and digital infrastructure, aspects that complement and reinforce the thesis that the Principality of Andorra has one of the best environments in the world in terms of investment.
Do you want to invest or reside in Andorra?
If you are considering moving to Andorra, we recommend reading the report “The definitive guide to living in Andorra”, with the most complete information on Andorran taxation, residence and society.
You can also contact us: from Andorra Inc. we can help you to obtain residency in Andorra or to manage your investments in the country.