Andorra is an independent principality with a population of about 76,100 and area of 181 square miles situated between France and Spain in the Pyrenees mountains. Although not a member of the European Union (EU), Andorra is part of the EU Customs Union and, due to a monetary agreement with the EU, uses the euro as its national currency. Andorra has become a popular tourist destination; tourism accounts for about 80 percent of GDP. Over 8 million people visit the Principality each year, drawn by its winter sports, summer climate, and duty-free shopping. Andorra has also become a wealthy international commercial center because of its integrated banking sector and low taxes. As part of its effort to modernize its economy, Andorra has opened to foreign investment, and engaged in other reforms, such as advancing tax initiatives aimed at supporting a broader infrastructure.
Andorra is actively seeking to attract foreign investment, and to become a center for entrepreneurs, talent, innovation, and knowledge. In doing so, Andorra has fostered a large project with the Massachusetts Institute of Technology (MIT) on innovation and big data, employing Andorra’s unique economy as a test market.
The Andorran economy is undergoing a process of diversification centered largely on tourism, trade, property, and finance. To provide incentives for growth and diversification in the economy, the Government began sweeping economic reforms in 2006. 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 and June 2012). From 2011 to 2017, the Parliament approved direct taxes in the form of a corporate tax, tax on economic activities, tax on income of non-residents, tax on capital gains, savings taxation, and personal income tax. These regulations aim to establish a transparent, modern, and internationally comparable regulatory framework.
These reforms also target investment from international businesses that have the potential to boost Andorra’s economic development and diversification. Prior to 2008, Andorra limited foreign investment, worried that large foreign firms would have an oversized impact on its small economy. For example, previous regulations restricted non-citizens with less than 20 years residence in Andorra to own no more than 33 percent of a company. While foreigners may now own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. The approval can take up to one month, which can be rejected if the proposal is found to threaten the environment, the public order, or the general interests of the Principality.
Andorra has a per capita income above the European average and higher than the level of its neighbors, Spain and France. The country has developed a sophisticated infrastructure including a one-of-a-kind micro-fiber-optic network for the entire country that provides universal access to all households and companies. Andorra’s retail services are well known around Europe, thanks to more than 2,900 shops, the quality of their products, and competitive prices. Products taken out of the Principality are tax-free up to certain limits; the purchaser has to declare those that exceed the allowance.
|TI Corruption Perceptions Index||2018||N/A||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report “Ease of Doing Business”||2018||N/A||http://www.doingbusiness.org/rankings|
|Global Innovation Index||2018||N/A||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country (M USD, stock positions)||2018||N/A||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2018||N/A||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Andorra has established an open framework for foreign investments, allowing non-residents to create companies in the country, open businesses, and invest in all kinds of assets. The Foreign Investment Law came into force in July 2012, completely opening the economy to foreign investors. Since then, foreigners, whether resident or not, may own up to 100 percent of any Andorra-based company. The law also liberalizes restrictions on foreign professionals seeking to work in Andorra. Previously, a foreigner could only begin to work in Andorra after twenty years of residency. Under the new regulations, any Andorran legal resident from a country that has a reciprocal standard can work in Andorra.
Limits on Foreign Control and Right to Private Ownership and Establishment
The Andorran legal framework has also adapted to international standards. The most relevant laws passed by Parliament include the law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012).
The Organization for Economic Cooperation and Development (OECD) removed Andorra from its “tax haven list” in 2009 after the country signed the Paris Declaration, formally committing to sharing fiscal information outlined by the agreement. From 2011 to 2017, the Parliament also approved direct corporate, non-resident, capital gains, savings, and personal income taxes. These regulations aim at establishing a transparent, modern, and internationally comparable regulatory framework. At ten percent, well below the European average, Andorra’s corporate tax is more competitive than rates in neighboring Spain or France.
Other Investment Policy Reviews
In the past three years neither the Government nor any international organization has conducted an investment policy review, be it the OECD; World Trade Organization (WTO); or, the United Nations Conference on Trade and Development.
Andorra created the Office of Andorran Development and Investment (ADI) to provide counseling services, through its “Invest in Andorra” (ACTUA) program, to Andorran companies and potential foreign investors. The ACTUA Program complements other private-public efforts to facilitate investment and diversification.
The ACTUA Program is based on three key pillars:
- Economic diversification through the development of clusters oriented towards the fields of innovation; health and wellness; education and sport.
- Attracting direct foreign investors and supporting national companies throughout their internationalization process.
- Supporting entrepreneurs: promoting collaboration between the public and private sectors and giving support to the development of new business initiatives.
Andorran regulations allow for two types of companies: Private Limited Liability Company (Societat de Responsabilitat Limitada – SL), which have a minimum capital requirement of 3,000 euros; and, Public Liability Company (Societat Anonima – SA), which is normally required for multiple shareholders with a minimum capital requirement of 60,000 euros.
The business establishment procedures and for share acquisitions or transfers are quite similar to those of other European countries, requiring a simple application, with the additional unique condition of the presentation of any prior investment authorization received in the country. This same procedure is applicable for incorporation, establishment, extension, branching, or other form of business expansion. Once the company name is registered, the foreign investment is established, and the investor is required to deposit the share capital with an Andorran banking entity and proceed to public deed of incorporation before a Notary. The company registration before the Company Registry is automatic.
The Government’s ACTUA program and the Andorran Chamber of Commerce ( ) help companies search for business opportunities abroad. ACTUA provides grants for small and medium size companies to foster competitiveness and facilitate internationalization.
2. Bilateral Investment Agreements and Taxation Treaties
- Andorra has bilateral agreements with France (2003), Spain (2003), and Portugal (2007). No bilateral investment treaty exists between Andorra and the United States.
- Since 2009, Andorra has signed bilateral agreements for the exchange of fiscal information with 24 countries. All those agreements are ratified and in force.
- In 2014, Andorra became the 48th signatory to the OECD , which commits countries to end bank secrecy for tax evasion purposes.
- Andorra signed a Non-Double Taxation agreement with France, Spain, Portugal, Luxembourg, Liechtenstein, Malta, Cyprus, and United Arab Emirates, and is currently negotiating other such agreements.
3. Legal Regime
Transparency of the Regulatory System
The Government set out transparent policies and laws, which have significantly liberalized all economic sectors in Andorra. New, foreign-owned businesses have to be approved by the Government, and the process can take up to a month. Andorra has begun to liberalize labor and immigration standards; previously, foreign professionals had to establish 20 years of residency before being eligible to own 100 percent of their business in Andorra. This restriction has been lifted for nationals coming from countries that have reciprocal standards for Andorran citizens.
Following approval of the new Accounting Law in 2007, individuals carrying out business or professional activities, trading companies, and legal persons or entities with a profit purpose must file financial statements with the administration.
International Regulatory Considerations
Although not a member of the European Union, Andorra, as a member of the European Customs Union, is subject to all EU free trade regulations and arrangements with regard to industrial products. Concerning agriculture, the EU allows duty free importation of products originating in Andorra.
Andorra is negotiating a new association agreement with the European Union that will allow Andorrans to establish themselves in Europe and Andorran companies will be able to trade in the EU market.
Andorra currently holds observer status in the WTO and is not yet a full member of the organization.
Legal System and Judicial Independence
Andorra has a mixed legal system comprised of civil and customary law, with some influence of canon law. The judiciary is independent from the executive branch. The Supreme Court consists of a court president and eight judges, organized into civil, criminal, and administrative chambers; four magistrates make up the Constitutional Court. The Tribunal of Judges and the Tribunal of the Courts make up Andorra’s lower courts. Regulations and enforcement actions can be appealed in the national court system.
Laws and Regulations on Foreign Direct Investment
The Law on Foreign Investment (10/2012) entered into force in 2012, opening the country’s economy by removing the sectorial restrictions stipulated in the prior legislation. In this way, Andorra has positioned itself on equal terms with neighboring economies, enabling it to become more competitive for new sectors and enterprises.
ACTUA is responsible for economic promotion and provides relevant laws, rules, procedures, and reporting requirements to investors.
Competition and Anti-Trust Laws
The Law on Effective Competence and Consumer Protection (13/2013) protects investors against unfair practices. The Ministry of Economy is responsible for administering anti-trust laws and reviews transactions for competition-related concerns (whether domestic or international in nature).
Expropriation and Compensation
The Law of Expropriation (1993) allows the Government to expropriate private property for public purposes in accordance with international norms, including appropriate compensation. We know of no incidents of expropriation involving the U.S. entities in Andorra.
Andorran legislation establishes mechanisms to resolve disputes if they arise and its judicial system is transparent. The Constitution guarantees an independent judiciary branch, overseen by a High Council of Justice. The prosecution system allows for successive appeals to higher courts. The European Court of Justice is the ultimate arbiter of unsettled appeals.
Andorra became a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards in September 2015, requiring Andorran courts to enforce financial awards. Andorra is not a member of the International Center for the Settlement of Investment Disputes (ICSID).
Parties can also resolve disputes contractually through international arbitration. Contractual disputes between U.S. individuals or companies and Andorran entities are rare, but when they arise, they are handled appropriately. There have been no reported cases of U.S. investment disputes.
Andorra’s Bankruptcy decree dates back to 1969. Other laws from 2008 and 2014 complement the initial text and further protect workers’ rights to fair salaries as well set up mechanisms to monitor the implementation of judicial resolutions. Additionally, Law 8/2015 outlines urgent measures allowing Government intervention of the banking sector in a crisis.
4. Industrial Policies
Andorra is known for its favorable tax regime, which investors exploit to promote tobacco, alcohol, jewelry, cosmetic, and dairy products, among others. In recent years, Andorra 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.
ACTUA provides grants for small and medium size companies to foster competitiveness and facilitate their internationalization. The ACTUA Tech Foundation was created in 2015, in collaboration with MIT’s Media Lab, with the aim of employing Andorra’s economy as a “living lab” to promote innovation. Andorra, thanks to its size, recent liberalizing legislation, relative affluence, and its 8 million visitors per year, offers ideal conditions to test this technology.
The Andorran Chamber of Commerce, Industry, and Services of Andorra ( ) is a public body that aims to promote and strengthen Andorra’s financial and business activity as well as supply services to foreign companies. The Chamber’s activities include the creation of a census of commercial, industrial, and service activities; the protection of the general interests of commerce, industry, and services; promoting fair competition; and, issuing certificates of origin and other commercial documents.
Foreign Trade Zones/Free Ports/Trade Facilitation
Although not a full member of the EU, Andorra, as a member of the European Customs Union, is subject to all EU free trade regulations and arrangements with regard to industrial products. Moreover, the EU allows duty free importations of products acquired by visitors in Andorra in the framework of the franchises covered in the Customs Union Agreement (1990). Concerning agriculture, the EU allows duty free importation of products originating in Andorra. No free trade zones exist in the country.
Performance and Data Localization Requirements
All employees wishing to work in Andorra must have work permits, issued by annual quotas established by the Government.
Both domestic and foreign private entities have the right to establish and own business enterprises. While foreigners may now own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. 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. As soon as the foreign investor receives authorization to invest in the country, national laws are applicable just like any other national investor.
The Government does not follow a “forced localization” policy.
5. Protection of Property Rights
The Constitution guarantees the right to private ownership for citizens and residents. Both domestic and foreign private entities now have the right to establish and own business enterprises.
Andorran law protects property rights with enforcement carried out at the administrative and judicial levels. Foreign investments for the purchase of property are possible in Andorra, subject to prior authorization. There is a four percent asset-transfer tax. Secured property loans are available through the Andorran banking sector. The Andorran Financial Authority (AFA) oversees mortgages.
Intellectual Property Rights
Andorra joined the World Intellectual Property Organization (WIPO) in 1994 and became party to the Paris Convention, the Bern Convention, as well as the Rome Convention in 2004. Although the Government took some steps to become a member of the World Trade Organization (WTO) in 2003, the country will continue to hold WTO-observer status until it complies with the Agreement on Trade Related Aspect of Intellectual Property Rights (TRIPS).
Protection of intellectual property in Andorra is weak. The legal framework includes the Law on Trademarks of May 1, 1995 and the Law on Patents 26/2014 of October 30, 2014. For copyrights, the legal framework includes the Law on Authors’ Rights of June 9, 1999 and Law 23/2011 of December 29, 2011, on the Creation of the Society of Collective Management of Copyright and Neighboring Rights.
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 copyright holders, neighboring rights, and the interests of account holders. Rights holders have the opportunity to choose whether to participate in this voluntary collective arrangement.
Businesses may seek a trademark at the Andorran Trademarks Office, which was established in 1996:
USTR does not list Andorra in its Special 301 or notorious market reports.
6. Financial Sector
Capital Markets and Portfolio Investment
The Andorran financial sector is efficient and is a main pillar of the Andorran economy, representing 21 percent of the country’s GDP and over 5 percent of the workforce. Created in 1989, and redefined with more responsibilities in 2003, the Andorran Financial Authority (AFA; ) regulates all aspects of the integrated financial system and safeguards its stability. The AFA is a public entity with its own legal status, functionally independent from the Government. AFA has the power to carry out all necessary actions to ensure the correct development of its supervision and control functions, disciplinary and punitive powers, treasury and public debt management services, financial agency, international relations, advice, and research.
The Andorran Financial Intelligence Unit (UIFAND) was created in 2000 as an independent organ to deal with promoting and coordinating the prevention of money laundering and the financing of terrorism ( ).
The State Agency for the Resolution of Banking Institutions (AREB); is a public-legal institution created by Law 8/2015 to take urgent measures to introduce mechanisms for the recovery and resolution of banking institutions ( ).
Money and Banking System
Andorra adopted the Euro in 2002 and in 2011 signed a new Monetary Agreement with the European Union (EU) making the Euro the official currency. Since July 1, 2013, Andorra has had the right to coin Euros. No exchange or capital controls exist.
The Andorra banking system is sound and considered the most important part of the financial sector. The Andorran banks offer a variety of services at market rates. The country also has a sizeable and growing market for portfolio investments.
The U.S. Internal Revenue Service certified all Andorran banks as qualified intermediaries.
Founded in 1960, the Association of Andorran Banks (ABA; ) represents all Andorran banks. Among its tasks are representing and defending interests of its members, watching over the development and competitiveness of Andorran banking at national and international levels, improving sector technical standards, co-operation with public administrations, and promoting professional training, particularly dealing with money laundering prevention. At present, all five Andorran banking groups are ABA members, totaling an estimated 46 billion Euros in combined assets for 2017.
Foreign Exchange and Remittances
Andorra adopted the Euro in 2002 and in 2011 it signed a new Monetary Agreement with the EU making the Euro the official currency. There are no limits or restrictions on remittances provided that they correspond to a company’s official earning records.
Sovereign Wealth Funds
Andorra has no Sovereign Wealth Fund (SWF).
7. State-Owned Enterprises
Andorra has 35 state-owned enterprises (SOEs) associated with health, social services, and energy and telecommunication, which are generally allowed to compete with private enterprises without restriction. The only exception is the government-owned Andorra Telecom, which has enjoyed a monopoly on the telecommunications industry since 2015.
The Andorran public sector is made up of the central Administration and seven local administrations, one for each of the country’s seven parishes. The public sector employs 11.6 percent of Andorra’s workforce, or approximately 4,377 employees.
Andorra has no current plans to privatize any of its SOEs.
8. Responsible Business Conduct
Local enterprises follow generally accepted accounting principles and the Government has taken some measures to promote responsible business conduct, including Law 35/2008, which establishes a protocol for acknowledging companies that excel in their human resource policies, especially regarding non-discrimination and equal opportunities for men and women.
Over the years, the Andorran banking sector has been consolidating its voluntary responsible business conduct practices, mainly through their foundations. Rather than focus on a due diligence approach to lower risks, as promoted by international guidelines such as the OECD Guidelines for Multinational Enterprises or UN Guidance on Business and Human Rights, the banking sector initiatives reaffirm their commitment to the country through ad hoc projects in a variety of areas like culture, sports, solidarity, education, and the environment.
Andorra’s laws penalize corruption, money laundering, drug trafficking, hostage taking, sale of illegal arms, prostitution, terrorism, as well as the financing of terrorism. Additional amendments were added in 2008, 2014, 2015, and 2016 to the Criminal Code and the Criminal Procedure Code that modify and introduce money laundering and terrorism financing provisions.
In 1994, Andorra joined the Council of Europe, an institution that oversees the defense of democracy, the rule of law, and human rights. That same year, the Justice Ministers of the Member States decided to fight corruption at the European level after considering that the phenomenon posed a serious threat to the stability of democratic institutions.
In early 2005, Andorra joined the Council of Europe’s Group of States against Corruption (GRECO) and, consequently, the fight against corruption. The Government has gradually built its internal regulations and relevant legal instruments, and has undertaken numerous initiatives to improve the State’s response to reprehensible acts and conduct committed internally and internationally.
The Government created the Unit for the Prevention and the Fight against Corruption (UPLC) in 2008 to centralize and coordinate actions that might concern local administrations, national bodies, and entities with an international scope. UPLC is in charge of implementing the recommendations made by GRECO in the framework of periodic evaluation reports.
Andorra has not signed the UN Anticorruption Convention or the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.
There are explicitly defined rules for the ethical behavior of all participating bodies within the Andorran financial system. The Andorran Financial Authority (AFA) has also established rules regarding ethical behavior in the financial system.
The Andorran Government modified and implemented new laws in order to comply with international corruption standards. The Andorran Financial Intelligence Unit (UIFAND) was created in 2000 as an independent body charged with mitigating money laundering and terrorist funding ( ).
Resources to Report Corruption:
Unitat de Prevencio i Lluita contra la Corrupcio
Ministeri d’Afers Socials, Justicia i Interior
Ctra.de l’Obac s/n
Phone: +376 875 700
10. Political and Security Environment
Andorra has not experienced any politically motivated damage to projects or installations, or destruction of private property. There are no nascent insurrections, belligerent neighbors, or other politically motivated activities. The likelihood of widespread civil disturbances is very low. Civil unrest is generally not a problem in Andorra. No anti-American sentiment is evident in the country.
11. Labor Policies and Practices
All employees wishing to work in Andorra must have work permits, issued by annual quotas established by the Government. The tourism sector is the largest labor sector.
The Constitution recognizes workers’ rights to form trade unions to defend their economic and social interests. However, the law does not provide for collective bargaining or the right to strike. Alternative dispute mechanisms such as mediation and arbitration do exist. Despite these rights, union membership is relatively low.
Andorra is not a member of the International Labor Organization (ILO).
There were a total of 42,066 employed workers in Andorra in January 2019.
Andorra has lowered its unemployment rates since the global financial crisis to 1.5 percent for the last trimester of 2018. As of January 2019, the national minimum wage was 6 euros (roughly USD 7) per hour and 1,050 euros (roughly USD 1,197) per month.
12. OPIC and Other Investment Insurance Programs
Andorra does not participate in government risk insurance programs such as those offered by the U.S. Overseas Private Investment Corporation (OPIC) or the World Bank’s Multilateral Investment Guarantee Agency (MIGA).
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Data not available.
Table 3: Sources and Destination of FDI
Data not available.
Table 4: Sources of Portfolio Investment
Data not available.
Due to foreign investment limitations up until 2012, FDI statistics are too negligible to be available through the U.S. Bureau of Economic Analysis. However, ACTUA publishes foreign direct investment information at: