Andorra or Luxembourg: where should you structure your business and residency?

Andorra and Luxembourg are sometimes presented as two low-tax territories. That comparison is too simplistic.

Luxembourg is an international hub suited to groups, institutional investments, and many European activities. Andorra offers a smaller-scale framework, often sought by entrepreneurs, families, and locally-managed structures.

The choice depends more on the nature of the project than on the nominal rate alone. To understand the Principality's tax system, our dedicated guide covers each Andorran tax in detail.

The Luxembourg personal tax scale reaches 42% for the highest brackets.

Since 2025, the corporate income tax rate has been 14% up to €175,000 of taxable income and 16% above €200,000, with a transitional formula between the two thresholds. In Luxembourg City, the combination of corporate income tax, the surcharge, and the municipal business tax can add up to a nominal burden of 23.87% for a company taxed at the 16% corporate rate.

The standard Luxembourg VAT rate is 17%. To reside in Andorra with no local activity, see the applicable investment conditions.

Luxembourg has an environment suited to businesses with:

• institutional investors;
• several European subsidiaries;
• structured financing needs;
• teams on the ground;
• a regulated activity;
• international governance;
• a need to access specialised financial infrastructure.

Andorra more often suits projects where the director wants to actually live there and run a consulting, services, trading, technology, or family management business.

A Luxembourg company with no real functions, no local management, and no suitable resources risks not matching the economic reality it claims to have.

In Luxembourg, personal tax burden depends, among other things, on income, tax class, household composition, and applicable deductions.

In Andorra, the personal income tax rate is set at 10%, with a personal allowance and a tax credit for certain income brackets.

In both countries, an address or a residence permit is no substitute for analysing actual tax residency.

It's necessary to check:

• length of presence;
• available accommodation;
• where the family lives;
• place of work;
• management of any companies;
• the centre of economic interests.

Luxembourg abolished personal wealth tax in 2006. Companies, however, can still be subject to corporate wealth tax.

For inheritance, Luxembourg's rules depend on the family relationship, the statutory or non-statutory share, and the deceased's residency. The statutory share received in a direct line can benefit from a 0% rate, while other transfers are taxable. Gifts follow separate rules.

A wealth restructuring therefore needs to be considered before the change of residency, not after assets have already been transferred.

A double taxation treaty is in force between Andorra and Luxembourg. It mainly covers the taxation of income and wealth falling within its scope.

It needs to be examined for relevant dividends, interest, remuneration, pensions, rental income, and capital gains.

ProGestió compares your current organisation, subsidiaries, investors, and residency plans to determine whether Andorra genuinely meets your needs. Would you like your structure reviewed?

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