Andorra: Investing

FDI in Figures

For many years, Andorra's status as a 'tax haven' has attracted foreign investment. Over the last few years, the Andorran government has been seeking to establish a modern and transparent regulatory framework and to promote diversification and growth. UNCTAD does not release any information on FDI data on Andorra. According to data from the statistics department, in the year 2021, foreign investment contributed to 18.7% of Andorra's GDP. In 2022, out of the 1160 applications submitted, 925 were formalized, amounting to a volume of EUR 388.9 million. The majority were for the service sector. The countries from which the applicants originate are predominantly Spain and France, followed by the United Kingdom and Germany, but in much smaller numbers than the first two countries. Property acquisitions accounted for EUR 181.4 million, which have increased in volume compared to previous years in 2021 and 2022. However, in October 2023, the Andorran Government announced a draft law for the tax on foreign real estate investment, which will be progressive, ranging from 3% to 10%, and which may hamper foreign investment. The law for the new tax was finally approved in early February 2024.

The country's economy has been open to FDI since the approval of a law on foreign investment in 2012. Foreign companies are now allowed to retain 100% ownership of their businesses (although governmental approval must be obtained). However, even before the introduction of the new law, more than 200 economic activities (including cosmetic medicine, manufacturing, broadcasting, e-commerce, research and development, etc.) were already fully open to foreign investment. The Andorran government has committed to normalizing its policies, notably by lifting bank secrecy; and the country's legal framework has adapted to international standards. The most significant laws passed by Parliament to support economic opening 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 Principality was, therefore, removed from the list of tax havens, but its attractiveness to international investors has suffered as a result. While the country's tax burden remains weaker than the European average, the Andorran government introduced an income tax at the behest of the OECD. The tax applies to anyone who lives in the principality for at least 183 days in a calendar year, at a maximum rate of 10%. Andorra’s government also relaxed its residency and investment laws to make the country more attractive to foreign investors. A person now must spend 90 days a year in the principality to qualify for “passive residency”, compared with the previous 180-day requirement. Furthermore, in December 2022, the Andorran Parliament approved Law 42/2022 governing the Digital Economy, Entrepreneurship and Innovation, which promotes entrepreneurship visas and seeks to attract digital nomads. Andorran financial institutions and banks have been using International Financial Reporting Standards (IFRS) for accounting purposes since 2017 and in 2019 the country joined the Single Euro Payments Area (SEPA), which makes bank transfers in and out of Andorra more transparent. Overall, Andorra presents many advantages for international investors: the country's geographical position between France and Spain offers an attractive market for investors; social and employer contributions are relatively small, which leads to competitive operational costs. Additionally, the Principality's labor market is flexible, multilingual and well-adapted to the needs of companies. Andorra is not ranked on the Global Innovation Index 2023 nor on the latest Index of Economic Freedom.

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Latest Update: May 2024