The SICAV (Societat d’Inversió de Capital Variable), a very common collective investment vehicle in Europe, has its Andorran equivalent in the Collective Investment Scheme or OIC (Organisme d’Inversió Col·lectiva). These are collective investment entities widely used to manage personal capital and benefit from significant tax advantages.

The purpose of the Andorran SICAV (hereafter referred to as SICAV for simplicity) is to invest investors’ assets and manage them in securities, rights, negotiable instruments or other financial and non-financial assets, as established by Llei 10/2008, del 12 de juny, the law that regulates collective investment schemes under Andorran law.

It is an investment instrument halfway between an investment fund and a public limited company (societat anònima), used mainly by high-net-worth individuals and large fortunes. One of its main advantages is that the SICAV itself is subject to corporate income tax at a rate of 0%, as provided by Llei 95/2010 (the Andorran Corporate Tax Law).

The Andorran SICAV must be managed by a licensed management company (Societat Gestora d’OIC, or SGOIC), which is supervised by the Andorran Financial Authority (AFA). A depositari institution (typically an Andorran bank) is also required to safeguard the SICAV’s assets. Like most European SICAVs, there are reporting, auditing and transparency obligations to the regulator.

What types of SICAVs exist in Andorra?

Under Andorran law, there are three classes of collective investment schemes, depending on their investment policy:

• OICVM (Organismes d’Inversió Col·lectiva en Valors Mobiliaris): These invest in transferable securities such as stocks, bonds and other listed financial instruments. They follow rules compatible with European UCITS directives.
• OIC Immobiliaris (Real estate OICs): These invest primarily in real estate and real property rights. At least 90% of the annual average of monthly balance of their assets must be invested in real estate.
• Other OICs / Free investment (Inversió lliure): These offer greater flexibility and can invest in a wide range of assets, including alternative investments. They are sometimes compared to hedge funds.

What capital is needed for a SICAV in Andorra?

According to Article 10 of the Llei 10/2008, the minimum patrimony (net assets) for an OIC in Andorra is:

• €1,250,000 as the general minimum for all OICs (including SICAVs investing in securities or free investment).
• €6,000,000 for OICs that invest primarily in real estate (OIC immobiliaris), as established in Article 30 of the same law. For real estate OICs structured with compartments, each compartment must have a minimum patrimony of €2,000,000, without the total ever falling below €6,000,000.

Andorra does not require a minimum number of shareholders to set up a SICAV, unlike other European jurisdictions such as Spain (which historically required 100 shareholders).

The cost of creation and maintenance of a SICAV in Andorra is among the lowest in Europe, making it a practical option for investors with assets starting from approximately €3,000,000.

You can have your own standalone SICAV or invest through a compartment (subfund) of an existing SICAV. The compartment option is typically the most cost-effective and is the most common structure in practice.

Non-resident participation: the 50% rule

It is important to understand that a non-resident of Andorra should generally not hold more than 50% of the shares in an Andorran SICAV. This limitation exists for two reasons:

First, most EU countries apply Controlled Foreign Company (CFC) rules to their tax residents. If a taxpayer resident in an EU country holds more than 50% of a collective investment vehicle in a non-EU jurisdiction like Andorra, the EU country may “look through” the SICAV and tax the income as if it had been earned directly by the individual. This effectively cancels out the tax benefits.

Second, since January 2023, Andorra itself introduced its own fiscal transparency rules through Llei 5/2023 (reform of direct taxation). Under the new Article 17 bis of the Corporate Tax Law, if an Andorran tax resident (individual or company) holds effective control (generally more than 50%) over an OIC that benefits from the 0% rate, the income of the SICAV must be attributed to that taxpayer and included in their personal or corporate tax base.

For this reason, it is common and advisable for investors to become tax residents in Andorra before setting up or investing in a SICAV, and to carefully structure their participation to comply with these transparency rules.

How are SICAVs taxed in Andorra?

SICAVs are subject to corporate income tax (Impost sobre Societats) at a special rate of 0%, meaning the general 10% rate does not apply. This is confirmed by the Andorran Government’s own tax portal and by Article 25 of the Llei 95/2010 (Corporate Tax Law).

This means the SICAV itself does not pay any tax on its investment income, capital gains, dividends received or interest earned within the vehicle.

For resident shareholders (individuals): The distribution of dividends from an Andorran company to an individual resident in Andorra is generally exempt from personal income tax (IRPF), as provided by the Llei 5/2014 (Personal Income Tax Law). Capital gains obtained from the transfer of shares in Andorran companies can also benefit from exemptions, particularly when the taxpayer has held the shares for a significant period.

Important note on fiscal transparency (since 2023): As mentioned above, the Llei 5/2023 introduced transparency rules. If a resident shareholder controls more than 50% of the SICAV, they may be required to integrate the SICAV’s income into their own IRPF or IS declaration, regardless of whether dividends have been distributed. This is a critical change that investors should discuss with their tax advisor.

How are SICAVs taxed in Andorra if you are a non-resident?

Under Andorran tax law (Llei 94/2010, the Non-Resident Income Tax Law), Andorra does not apply withholding taxes on:

• The distribution of dividends to non-resident shareholders (whether individuals or legal entities).
• Capital gains obtained by non-residents on the sale of shares in Andorran companies.

However, non-resident investors should always consider the tax treatment in their country of residence. Most countries will tax their residents on worldwide income, including gains and dividends from Andorran SICAVs. Andorra has signed a growing number of Double Taxation Agreements (CDIs) which may provide relief from double taxation in certain cases.

Who is an Andorran SICAV recommended for?

SICAVs remain one of the most attractive vehicles for investing in regulated markets, equities, bonds and funds while benefiting from Andorra’s competitive tax framework. The 0% corporate tax rate on the vehicle itself, combined with Andorra’s favorable personal tax regime, makes it a compelling option.

The typical profile for setting up or investing in a SICAV in Andorra includes:

• High-net-worth individuals who want to diversify their investments, reduce country risk or EU regulatory risk, and benefit from Andorra’s well-regulated banking system.
• Large investors planning succession or relocation who want to structure their wealth through SICAVs or Unit Linked products while planning a change of tax residence to Andorra.
• Investors looking for alternatives to Luxembourg: Many European residents who previously invested through SICAVs in Luxembourg or other jurisdictions may not have considered Andorra, which offers comparable regulatory standards with lower costs and a highly competitive tax environment.

Key legislation governing SICAVs in Andorra

For transparency and reference, these are the main laws that regulate the creation and taxation of SICAVs in Andorra:

• Llei 10/2008, del 12 de juny, de regulació dels organismes d’inversió col·lectiva de dret andorrà (the main OIC/SICAV law).
• Llei 95/2010, del 29 de desembre, de l’impost sobre societats (Corporate Tax Law, establishing the 0% rate for OICs).
• Llei 5/2014, del 24 d’abril, de l’impost sobre la renda de les persones físiques (Personal Income Tax Law).
• Llei 5/2023, del 19 de gener, de mesures per a la reforma de la imposició directa (introducing fiscal transparency rules for controlled OICs).
• Llei 94/2010, del 29 de desembre, de l’impost sobre la renda dels no-residents fiscals (Non-Resident Income Tax Law).

Do you want to open a SICAV in Andorra?

At Andorra Inc we collaborate with the best tax advisors, legal experts and private banking managers in the country. If you have questions about Andorran SICAVs, want to understand how to structure your investment, or need guidance on the fiscal implications, do not hesitate to contact us.

We will introduce you to our network of private banking managers and licensed advisors to discuss the possibilities that Andorra can offer you.