ProGestió
Andorra
Annual filings, keeping your tax regime, dividends and intra-group flows: what actually occupies an Andorran holding company once it exists.
Content reviewed by the legal and tax team of ProGestió Andorra — Last updated:
Setting up an Andorran holding company takes a few weeks. Running it takes every year that follows. Yet almost everything written on the subject stops at the day of registration, as though the structure then piloted itself.
It rarely does. A parent company carrying out two or three transactions a year remains subject to the same accounting and corporate obligations as a trading company. It must also demonstrate, year after year, that the conditions justifying its tax regime are still met — and those conditions are precisely the ones that erode most quietly.
This article is about the life of the structure, not its start-up budget. Incorporation amounts and annual quotas are set out in the budget for an Andorran holding company; they are not repeated here.
Three obligations come round every year, whatever the company actually does.
Accounts must be kept and annual financial statements drawn up, even for a holding company that received no dividend during the year. A company with no movements produces statements with no movements: it is not excused from producing them.
The corporate income tax return must be filed on time, including where there is no taxable base. A late or missed filing is always more expensive to repair than to prepare.
The statutory registers — register of members, register of decisions — must reflect the real position. This is the most commonly neglected point, because no authority asks for it while nothing is happening. It becomes blocking the day a bank, a buyer or a notary asks for the ownership chain to be reconstructed.
Choosing a tax regime is not a permanent entitlement. It rests on conditions the company must go on meeting.
A holding company under a special participation-holding regime is required to keep its stated corporate purpose consistent with what it actually does. Invoicing an advisory service, receiving interest on a loan made to a third party, letting a property: each of these, taken alone, may look harmless. Together they end up describing a company that is no longer only a holding entity.
Good practice is to treat every new transaction as a regime question before treating it as an accounting question. The reverse order — book it first, ask afterwards — leaves a written trail that is hard to undo.
A simple test allows this to be checked without calling an adviser for every entry: if the planned transaction had to be described in one sentence within the corporate purpose, is that sentence already there? A negative answer does not forbid the transaction, but it signals that the matter deserves review before being committed to.
It is also worth remembering that the assessment does not bear on an isolated transaction but on a whole financial year, and sometimes on several. A company invoicing a service once every five years is not in the same position as one doing so every quarter for rising amounts. The question is therefore not only “am I allowed to?”, but “what picture do all my financial years together give of this company?”.
An Andorran holding company must be managed from Andorra. This requirement is not satisfied by an address: it is demonstrated through dated, retained facts.
What counts as a useful record:
What is not enough: a domiciliation, a local bank account, and decisions prepared and settled elsewhere then simply signed on site.
This documentation costs almost nothing when built as you go. It becomes impossible to reconstruct retroactively, because the date is precisely what cannot be manufactured after the fact.
A holding company runs to a predictable rhythm, which means it can be organised once and for all.
| Point in the year | What must be done |
|---|---|
| Financial year end | Statements drawn up, participations inventoried |
| In the following months | General meeting approving the accounts, minutes signed |
| After the meeting | Accounts filed, registers updated |
| Tax deadline | Corporate income tax return |
| Ongoing | Ad hoc decisions, subsidiary file kept current |
The minutes of the general meeting deserve particular care. They are the document establishing that the members approved the accounts, decided how the result would be applied and, where relevant, voted a distribution. A dividend distribution with no prior written decision is a transaction missing its justification, whatever the amount.
This is the transaction most holding companies were formed for, and the one that suffers most from late preparation.
A dividend flowing upward is prepared on both sides. On the subsidiary’s side: the distribution must be validly resolved, the accounts must show a distributable result, and any withholding tax must be identified before payment rather than after. On the holding company’s side: the participation must meet the conditions of the applicable regime as at the date of distribution.
The usual mistake is to pay first and document afterwards. Where withholding tax has been wrongly applied, recovering it depends on a procedure in the subsidiary’s country, with its own deadlines and its own supporting documents — among them a tax residence certificate the holding company must have requested in good time.
Andorra has a network of tax treaties that has widened over the years. Treaty benefit is never automatic: it is claimed, and it is evidenced.
The tax residence certificate is the central document. It attests that the company is an Andorran tax resident for a given period. Three practical points follow.
It is dated: a certificate covering the previous year will not serve for a distribution in the current one. It is requested, with a lead time that must be anticipated. And it is sometimes required in a specific form by the tax authority of the subsidiary’s country, with translation or apostille.
Keeping a list of the treaties applicable to each subsidiary, with the date of the last certificate obtained, avoids last-minute discoveries.
Loans between group companies, expense recharges, management services: these flows are normal and legitimate. They simply need to be handled as real transactions.
An intra-group loan implies a written agreement, a rate, a maturity and interest actually booked. A management service implies an agreement describing what is supplied, and invoicing matching a service genuinely delivered. A recharge implies that the original cost exists and can be identified.
What draws attention is not the existence of these flows but their lack of formality: a regular transfer between two companies in the same group, with no contract and no invoice, cannot be attached to any transaction. It will be characterised by default, and rarely in the most favourable direction.
A holding company owning several participations gains from keeping, for each one, a stable file that does not have to be rebuilt every time.
Its useful contents: the current articles, the ownership chain with percentages and acquisition dates, the latest annual accounts, distribution resolutions for the last three years, the tax regime applying in the subsidiary’s country, the residence certificates obtained, and the local adviser’s details.
This file has no visible use while nothing is happening. It has a considerable one on the day of a sale, an investor’s entry or a bank request — three moments when the information is asked for at short notice and when its absence is paid for in emergency fees.
Updating it is best tied to an event rather than to a date: each time a subsidiary approves its accounts, pays a dividend, changes director or amends its articles, the corresponding document joins the file. An annual review, aligned with the holding company’s year end, is then enough to confirm that no participation has been overlooked and that the ownership percentages still match reality.
A holding company that looks static on paper does move: a member joins, another transfers their shares, a subsidiary is sold, a new activity appears.
Each of these changes touches three levels at once. The corporate level: do the articles and the shareholders’ agreement provide for the transaction, or must they be amended first? The tax level: does the transaction affect the conditions of the regime in place, in one country or several? The banking level: must the bank be informed, and does the change of beneficial owner trigger an update of the customer due diligence file?
The order of the steps matters more than their content. A sale signed before the tax review can no longer be restructured; the same sale prepared and then signed can sometimes qualify for a favourable regime.
Some changes go unnoticed because they do not take the form of a decision. Those are the ones to watch.
None of these events calls for an immediate reaction. All of them justify a check, because they alter the assumptions on which the structure was built.
The genuinely large costs of a holding company never appear in the opening budget. They arrive when a situation has to be put right.
Rebuilding several years of accounts, having an undocumented flow recharacterised, recovering withholding tax applied for want of a certificate, reconstructing an ownership chain for a buyer in a hurry, or amending articles urgently before a notary: each of these costs a multiple of what the equivalent preventive step would have cost.
Day-to-day management of a holding company is not a cost line to be squeezed. It is what stops the genuinely expensive lines from appearing.
Must a holding company with no transactions still hold a general meeting? Yes. Approving the accounts is a corporate obligation, independent of activity levels. A year with no movements makes for a short meeting, not an optional one.
How long should minutes and registers be kept? They are the company’s legal memory and are not meant to be destroyed. A complete chain of decisions since incorporation is what a buyer or a bank will ask for.
Can the tax regime be changed during the company’s life? It can, but this is not a simple filing formality: the change must be consistent with the corporate purpose, the actual activity and transactions already booked. It is planned a year ahead, not decided in December.
Can effective management be exercised by a non-resident director? The question is not where the person lives but where decisions are genuinely taken and documented. A director who never travels to Andorra makes that demonstration difficult.
What happens if a residence certificate is requested too late? The distribution is not blocked, but the subsidiary country’s withholding tax generally applies at the standard rate. Recovering it then depends on a local procedure, longer and more costly than requesting the certificate in advance.
Is a statutory auditor required? The obligation depends on thresholds and on the corporate form. It should be checked at each year end rather than assumed settled: a growing company can cross into it with nothing to signal the change.
Further reading: Holding company in Andorra, Budget for a holding company, When is a holding company genuinely useful?, Accounting in Andorra, Asset holding company.
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