2013 Investment Climate Statement - Andorra

2013 Investment Climate Statement
Bureau of Economic and Business Affairs
April 2013

Openness to, and Restrictions Upon, Foreign Investment

To provide incentives for growth and diversification in the economy, the Andorran government (GOA), started in 2006 a sweeping economic reform. The Parliament approved three main regulations to complement the first phase of economic openness: the Law of Companies (October 2007), the Law of Business Accounting (December 2007) and the Law of Foreign Investment (April 2008). These regulations aim at establishing a transparent, modern and internationally comparable regulatory framework.

In July 2012, Andorra’s Parliament adopted the new Foreign Investment Law, which completely opened the economy to foreign investors. Foreigners, whether resident or not, may now own 100% of any company. (Prior to 2008 non-citizens were allowed to own no more than 33 percent of a company; only after residing in the country for a minimum of 20 years, were foreigners entitled to own 100 percent of a commercial entity.) The law also liberalizes restrictions on foreign professionals seeking to work in Andorra. Previously, a foreigner could only begin to practice in Andorra after 20 years of residency. Under the new regulations, any legal resident from a country that has a reciprocal standard can practice in Andorra.


Andorra has a developed economy, with a free market that boasts a per capita income above the European average and that exceeds the level of its neighbors, Spain and France. The country has developed sophisticated infrastructure including a one-of-a-kind micro fiber optic network for the entire country. Andorra’s trading tradition is well known around Europe, thanks to more than 1,400 shops and businesses, the quality of their products, and competitive prices. Products taken out of the Principality are tax-free up to certain limits, after which the purchaser has to declare those that exceed the allowance.


Andorra’s tax system has a more advantageous direct tax on business profits compared to the ones established in the neighboring countries for its scope as well as for tax rates. Direct tax includes a tax on corporations, a tax on economic activities and a tax on the income of non-residents. This equates to approximately 19%, well below the European average. Andorra was removed from the OECD “tax haven list” in 2009 after signing the Paris Declaration formally committing to provide information of certain fiscal matters in the future when the requests are justified, well founded, and comply with OECD principles.

Currency Conversion and Capital Transfer Policies

Andorra adopted the use of the Euro in 2002. In June 2011, Andorra signed a monetary agreement with the European Union (EU) making the Euro the official currency and allowing the country to coin Euros after July 1, 2013. Since the country has no currency of its own, no exchange or capital controls exist. There are no limits or restrictions on remittances provided that they correspond to a company’s official earning records.

Expropriation and Compensation

Private property may be expropriated for public purposes, in a non-discriminatory manner, and in accordance with established principles of international law. As far as can be determined, no incidents of expropriation involving the United States have occurred in Andorra. Private investors are entitled to compensation by law.

Dispute Settlement

Andorran legislation has established mechanisms to resolve disputes if they arise. The judicial system is open and transparent. The Constitution guarantees an independent judiciary branch, which is overseen by a Superior Council of Justice. The judicial process is fair and efficient.

Andorra is neither party to the International Center for the Settlement of Investment Disputes (ICID) nor the New York Convention of 1958.

Contractual disputes between American individuals or companies and Andorran entities are generally rare, but when they arise, these disputes are handled appropriately. There have been no reported cases of U.S. investment disputes.

Performance Requirements and Incentives

GOA created the Office of Andorran Development and Investment (ADI) in order to give services to both Andorran companies seeking to grow and foreign investors wanting to start new businesses in Andorra (www.adi.ad). ADI created a program in 2009 called Andorra Angels, which provides meeting points between private investors (business angels) and entrepreneurs of small or medium enterprises (SMEs) who need capital to develop their business projects in the Principality. Andorra Angels is a member of the European Business Angels Network (EBAN).

ADI also supports a program called Innovadors (Innovators), which provides direct support for the creation and growth of both foreign and domestic companies in Andorra. A Committee of Experts from the business schools HEC Paris and Barcelona ESADE select submitted projects with the greatest potential. This business plan competition offers 50,000 euro direct funding (www.innovadors.ad).

Andorra has long been known for its favorable tax regime, which has been used to promote sales of products such as tobacco, alcohol, and dairy. In recent years, Andorra has reached agreements with neighboring countries to limit and regulate duty-free sales with a view towards promoting economic integration, though smuggling continues to be an issue. Andorra is a member of the European Customs Union and therefore has no tariffs on EU-manufactured goods.

Right to Private Ownership and Establishment

The Constitution guarantees the right to private ownership for citizens and residents. Both domestic and foreign private entities have the right to establish and own business enterprises. The new investment law encourages foreign investment and ownership in Andorra. Foreigners may now own 100% of a trading enterprise or a non-trading holding company in Andorra. The establishment of any new company must first be approved by the government. For a foreign resident, the process for obtaining permissions takes up to one month and is automatically approved if there are no objections. An application can be rejected if the proposal is found to threaten the environment, the public order, or the general interests of the principality.


The Andorran Companies Law establishes two types of companies: 1) Private Limited Liability Company (Societat de Responsabilitat Limitada - SL), which is the norm for small family business enterprises with a limited number of shareholders and have a minimum capital requirement of 3,000 euros, and 2) Public Liability Company (Societat Anonima -SA), which is normally required for multiple shareholders and has a minimum capital requirement of 60,000 euros.

Protection of Property Rights

Andorran law protects property rights with enforcement carried out at the administrative and judicial levels. Andorra has been a member of the World Intellectual Property Organization (WIPO) since 1994. In 2004, Andorra accepted the terms dictated by the Paris Convention, the Bern Convention, as well as the Rome Convention. Although GOA took some steps to become a member of the World Trade Organization (WTO) in 2003, the country is not a full member. Andorra holds an observer status in the WTO and has yet to ensure compliance with the Agreement on Trade Related Aspect of Intellectual Property Rights (TRIPS)

The protection of intellectual property in Andorra is weak. In 2012, the Society for the Administration of Authors’ Rights (SDADV) was created for the protection of intellectual property. The main function of the SDADV is to manage the economic rights of holders of copyright and neighboring rights and the interests of account holders by a contract of mandated management. Right holders have the opportunity to choose whether or not to participate in this voluntary collective arrangement.

Real Estate

Secured property loans are available through the Andorran banking sector. The oversight of any mortgage is conducted by the Andorran National Institute of Finance (INAF).

Transparency of the Regulatory System

GOA has set out transparent policies and effective laws. Information about policies is readily available to the public. The recently enacted foreign investment laws introduced by the government have significantly liberalized all economic sectors in Andorra. New, foreign owned businesses must be approved by the government and the process can take up to a month. These standards remain untested and are sufficiently broad to allow for arbitrary rejection. Nevertheless, the government is committed to a transparent process.

Andorra has begun to relax labor and immigration standards. Previously, foreign professionals had to have 20 years of residency before being eligible to practice. This restriction has been lifted for nationals coming from countries that have reciprocal standards for Andorran citizens.

Financial Reporting

In accordance with the Law on Accounting Law (20/2007), every individual carrying out business or professional activities, trading companies, legal person or entity with a profit purpose has the obligation to file financial statements with the Administration. Andorran companies are obliged to keep and retain accounting records, prepare and sign their annual accounts and the proposed distribution of profit within six months from year-end. Companies also must submit these annual accounts to audit when two of the following circumstances prevail during two consecutive years: a) total assets exceed 3,600,000 Euros, b) net sales exceed 6,000,000 Euros; and/or c) the company has more than 25 employees.

Efficient Capital Markets and Portfolio Investment

Andorra’s financial sector is modern and efficient, comprising one of the main pillars of the Andorran economy and contributing 16% of the country’s GDP. Created in 2003, the Andorran National Institute of Finance (INAF) (www.inaf.ad) regulates all aspects of the integrated financial system promoting and endorsing the correct functioning and stability of the financial system. It is a public entity with its own legal status functionally independent from the government. The INAF has the power to carry out all necessary actions to ensure the correct development of its supervision and control functions, disciplinary and sanctioning powers, treasury and public debt management services, financial agency, international relations, advice, and studies.

The Andorran Financial Intelligence Unit (UIF) was created in 2000 an independent organ, which deals with the tasks of promoting and coordinating measures of prevention of money laundering and the financing of terrorism (www.uif.ad).

The Andorra banking system is sound and considered to be the most important part of the financial sector. The Andorran banks offer a variety of services, all at market rates. No exchange or capital controls exist since the country has no currency of its own. The country also has a sizeable and growing market for portfolio investments. Andorra legislation does not allow the creation of opaque structures that could promote offshore investment structures, preventing identification of the true beneficiaries.

The banking system of the Principality is endorsed by the Council of Europe and the International Monetary Fund (IMF). IMF noted in its report for 2007 that “the supervision of the financial system, centered on the banking sector, is very solid.” The U.S. Internal Revenue Service (IRS) has certified all Andorran banks as qualified intermediaries.

Founded in 1960, the Association of Andorran Banks (ABA), comprised of five banking groups, represents all banks operating in the Andorran financial sector. Among its tasks and responsibilities are representing and defending interests of its members, watching over the development and competitiveness of Andorran banking at national and international levels, improving technical standards of the banking sector, co-operation with public administrations, and promoting professional training particularly for dealing with the prevention of money laundering (www.aba.ad).

According to ABA 2011 financial reports, estimated total assets of the five combined banking groups was euro 14 billion divided as follow (Billions Euros):

Crèdit Andorra






Banc Privada d’Andorra


Banc Sabadell d’Andorra


Competition from State-Owned Enterprises

The Andorran public sector consists of the central Administration and seven local administrations, one for each of the seven parishes that divide the country. Overall, 17.7% of all employed persons work for the public sector. The public sector is comprised of 42 companies associated with health, social services, and energy and telecommunication supplying entities and 4,487 employees.

Few State-Owned Enterprises (SOEs) compete with private enterprises without restriction. The only exception is the telecommunications industry: Andorra Telecom handles telephone and internet services as well as maintains the television and radio broadcast infrastructure.

Andorra has no Sovereign Wealth Fund.

Corporate Social Responsibility

Over the years, the Andorran banking sector has been consolidating its voluntary corporate social responsibility (CSR) policies based on responsible growth and societal commitments. Each of the five Andorran entities presents its own CSR policies, mainly through their foundations. The entities demonstrate their CSR commitments through projects that include a variety of areas such as culture, sports, labor, education, and the environment. There is an increasing general interest in adopting CSR; local enterprises follow generally accepted CSR principles and GOA has taken some measures to promote CSR as well.

Political Violence

Andorra has not experienced any politically motivated damage to projects or installations, or destruction of property. There are no nascent insurrections, belligerent neighbors, or other politically motivated activities. The likelihood and widespread civil disturbances is very low; civil unrest is generally not a problem in Andorra. No anti-American sentiment is evident in the country.


Andorran legal and financial systems are highly transparent. The laws penalize corruption, money laundering, drug trafficking, hostage taking, sales of illegal arms, prostitution, terrorism, and the financing of terrorism. In 2008 additional amendments were added to the Criminal Code and the Criminal Procedure Code that modify and introduce provisions to money laundering and financing of terrorism offences.

GOA created in 2008 the Unit for the Prevention and the Fight against Corruption (UPLC) within the Ministry of Finance to centralize and coordinate actions that might concern local administrations, national bodies, and entities with an international scope.

There are explicitly defined rules for the ethical behavior of all participating bodies within the Andorran financial system. The Andorran National Institute of Finance (INAF) (as mentioned in ‘capital markets’) has also established rules regarding ethical behavior in the financial system.

GOA has modified and implemented new laws in order to comply with international standards on corruption. The Andorran Financial Intelligence Unit (UIF) was created in 2000 under the Law for International Cooperation on Criminal Matter and the Combat against the Laundering of Money or Securities arising from International Crime, as an independent body established to foster and coordinate measures to prevent money laundering and terrorist funding (www.uif.ad).

Bilateral Investment and Tax Agreements

Andorra has bilateral investment treaties (BITs) with France (2003), Spain (2003), and Portugal (2007). No BIT exists between Andorra and the United States. Since 2009, Andorra has signed bilateral agreements for the exchange of fiscal information upon prior request with 20 countries. Thirteen of those agreements have been ratified and are already in use. Andorra has signed a Non Double Taxation agreement with France and is working towards signing other Non Double Taxation agreements.

OPIC and other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) does not operate in Andorra, and Andorra is not a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA).


For many years, unemployment was non-existent in Andorra; rather, there was a shortage of workers especially during the high tourist seasons. The recent economic crises, however, has increased Andorra’s unemployment rate. All employees wishing to work in Andorra must have work permits. Annual quotas are established for new issues of renewable work permits. The tourism sector is the largest labor sector. There were 35,930 employed workers in Andorra in 2012. The unemployment rate for 2012 was 2.9%. From 2011 to 2012, the number of persons receiving unemployment benefits grew from 80 to 128 persons. Unemployment for men is higher than it is for women, representing 68.75 % of people receiving unemployment benefits as compared to 31.25% who are women. Spanish workers suffer most in regards to unemployment followed by Portuguese, Andorran nationals, other nationalities, and lastly French workers. Unemployment of people between 40 to 59 years of age represents 57.8% of the total. The minimum monthly wage in 2012 was 951.60 euros in Andorra.

The Constitution and the law recognize workers’ rights to form trade unions to defend their economic and social interests. Despite these rights, workers are reluctant to admit union membership fearing retaliation from their employers. The law does not provide for collective bargaining or the right to strike. Alternative dispute mechanisms such as mediation and arbitration do exist.

Andorra is not a member of the International Labor Organization (ILO).

Foreign Trade Zones

Although not a full member of the European Union (EU), Andorra, as a member of the European Customs Union is subject to all EU free trade zone regulations and arrangements with regard to industrial products. Concerning agriculture, the EU allows duty-free importation of products originating in Andorra. No free trade zones exist in the country.