Business in Andorra Between France and Spain

Setting up a business in Andorra can be relevant for an activity aimed at France and Spain. Geographical proximity makes travel easier, but it also increases the risk of confusion between the registered office, where work is actually carried out, and the country where profits should be taxed.

An Andorran company needs to be genuinely managed from the Principality. It can sell to French and Spanish clients, employ staff, organise international services, and enter into partnerships. It shouldn’t be used to artificially relocate the invoicing of an activity that continues to be carried out in another country.

Questions to resolve before incorporation

Topic	Question
Management	Where are strategic decisions made?
Services	In which country is the work physically carried out?
Clients	Businesses or individuals, and in which territory?
Team	Where do employees or subcontractors live and work?
Office	Is there premises or a stable presence outside Andorra?
Indirect taxes	IGI, French VAT, or Spanish VAT?
Treaty	How is the taxing right allocated?
Director’s residency	Where are their home and economic interests?

This analysis determines the structure and contracts.

Can an Andorran company invoice clients in France and Spain?

Yes. An Andorran business can have an international client base.

The invoice still needs to comply with:

• the nature of the service or goods;
• the client’s status;
• the place of supply;
• IGI rules;
• any VAT rules in the client’s country;
• withholding taxes;
• mandatory wording;
• contracts and evidence the work was carried out.

For many B2B services, indirect tax can be treated as due where the client is based, under the reverse charge. Services linked to property, an event, a construction site, transport, or consumers follow specific rules.

The risk of a permanent establishment

A company can become taxable in France or Spain where it has a fixed place of business there, or carries out a stable activity through people or resources.

Risk indicators include:

• a permanent office;
• an employee working regularly in the country;
• a representative negotiating or signing contracts;
• a construction site or an ongoing service;
• a local operating team;
• management carried out from the director’s home;
• stock or commercial infrastructure;
• dependence on a related foreign company.

“Permanent establishment” doesn’t necessarily mean a subsidiary has been set up. It can result from the facts on the ground.

Where is effective management located?

The Andorran company needs to be able to demonstrate that key decisions are made in Andorra.

Useful evidence includes:

• a director actually present;
• management meetings;
• budgets and strategy;
• signing contracts;
• bank control;
• accounting;
• an office;
• tools and staff;
• monitoring clients and suppliers.

A director spending most of their time in France or Spain and negotiating every contract there can weaken the company’s tax residency.

Employees and cross-border remote work

An employee living in France or Spain and working for an Andorran company raises questions of employment law, social security, payroll withholding, and permanent establishment.

It’s necessary to determine:

• the usual place of work;
• the applicable employment contract;
• days spent in each country;
• social security registration;
• employer obligations;
• immigration law;
• resources provided;
• the employee’s authority.

Regular remote work from a foreign country shouldn’t be treated as a one-off trip.

France: specific points

Business with France needs to factor in, in particular:

• the Franco-Andorran treaty;
• French permanent establishment rules;
• VAT;
• withholding taxes;
• employees;
• rental income;
• the director’s tax residency;
• any exit tax on leaving.

A French company kept within the group can continue its local activity, while the Andorran company carries out separate, documented functions.

Spain: specific points

Spain examines presence, activity, and the centre of economic interests. The proximity of Catalonia makes travel easier but makes a clear separation essential.

It’s necessary to check, in particular:

• the Andorra-Spain treaty;
• Spanish offices or staff;
• where contracts are signed;
• services carried out at clients’ premises;
• VAT;
• withholding taxes;
• family residency;
• regional wealth taxes where the person remains a Spanish resident.

Importing, selling goods, and logistics

A business selling goods needs to organise:

• customs origin;
• goods entering and leaving;
• inventory;
• import IGI;
• VAT within the EU;
• transport;
• Incoterms;
• returns;
• representation obligations.

Andorra has a customs union with the EU for industrial goods, but isn’t part of the EU’s VAT territory. The two shouldn’t be confused.

Transactions between group companies

Where the group includes a French, Spanish, and Andorran company, cash flows need to reflect the actual functions carried out.

Examples:

• the French company employs the French sales team;
• the Spanish company runs local premises or a local client base;
• the Andorran company manages a separate international activity;
• a holding company holds the shareholdings;
• a management company provides demonstrable services.

Transfer prices need to be consistent with functions, assets, and risks. A margin can’t be shifted through an invoice with no genuine service behind it.

Example of a coherent structure

A consultant lives in Andorra and manages a consulting company there. They work from their Andorran offices for European clients. Assignments in France and Spain are occasional and documented. No employee or permanent office is based in either country.

This set-up can be coherent, subject to the specific rules governing the services and the treaty.

Conversely, if the team, contracts, family home, and delivery of work all remain in Barcelona, Andorran registration alone isn’t enough to relocate the activity.

Frequently asked questions

Can an Andorran company have a 100% French client base? Yes, but dependence, where the work is carried out, and permanent establishment all need examining.

Can you hire an employee living in Spain? It’s possible in certain arrangements, with an analysis of employment law, social security, and local obligations.

Does IGI replace French or Spanish VAT? No. Each transaction needs to be located and may fall under IGI, foreign VAT, or the reverse charge.

Do you need to set up three companies? Not necessarily. The number of entities needs to match the actual functions and locations.

To go further: Company formation, IGI, Taxation, France comparison, Spain comparison.