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Family succession, international shareholdings: cases where an Andorran holding makes sense, and cases where it's superfluous.
Content reviewed by the legal and tax team of ProGestió Andorra — Last updated:
The Andorran holding company comes up often in discussions among entrepreneurs and families structuring their international wealth. The term circulates widely, sometimes indiscriminately, as though it were a universal solution to any shareholding issue. In reality, a holding company in Andorra is only useful in specific configurations: organized family succession, centralization of shareholdings across several countries, or protection of business assets meant to endure across generations. In many other cases, it simply adds a layer of complexity and cost without any real benefit. This article details the cases where a holding makes sense, those where it is superfluous, and the legal conditions that must be met for the structure to actually work.
A holding company is an entity whose purpose is to hold shareholdings in other companies, rather than directly carrying out a commercial activity. In Andorra, there is no longer a specific legal or tax status called a “holding company.” Today, no distinct “holding company” regime exists: all Andorran companies can apply the general exemptions provided for under the corporate tax law, provided they meet certain criteria. In practical terms, an Andorran holding is simply an ordinary limited liability company (SL) or public limited company (SA), whose activity consists of holding shares in other companies and collecting the resulting dividends or capital gains.
This distinction matters: contrary to a common belief, setting up a holding company in Andorra does not mean opting into a “special regime,” but rather incorporating an ordinary company and demonstrating, year after year, that it meets the exemption conditions set out by law. It is this exemption mechanism, and the conditions surrounding it, that determine whether the holding is genuinely useful.
The reference text is Llei 95/2010, of 29 December, on corporate income tax, which sets the general corporate tax rate at 10%. Its Article 20 provides for an exemption to avoid economic double taxation on dividends and capital gains from the disposal of shareholdings. This article has been amended twice: by Llei 6/2018, of 19 April 2018, and then by Llei 5/2023, of 19 January 2023, as part of the direct taxation reform.
In practice, dividends received by an Andorran company on its shareholdings, as well as capital gains realized on the disposal of those shareholdings, may be exempt from corporate tax if two cumulative conditions are met: the direct or indirect shareholding must be at least 5% and must be held continuously for at least one year, and the investee company must be subject to a tax comparable to Andorran corporate tax in its country of residence. It is this exemption that, in practice, avoids economic double taxation: the profit has already been taxed at the subsidiary level, so it is not taxed a second time at the level of the Andorran holding.
One point is too often downplayed in commercial pitches for Andorran holding companies: the exemption is never automatic. Andorran tax authorities require genuine economic substance. An Andorran holding cannot simply be a mailing address and a bank account. It must have an actual registered office in Andorra, a local director or representative, and must be able to show that significant management decisions are genuinely made from within the Principality. Without this substance, the tax authorities can requalify the structure and deny the exemption, with all the tax consequences and penalties that entails.
This is precisely what separates cases where the holding is useful from those where it becomes an unnecessarily costly empty shell: a holding that manages nothing, makes no decisions, and exists only on paper provides no real benefit and exposes its founder to the risk of requalification.
The first genuinely relevant use case is wealth transfer between generations. A family that holds several operating companies, in one or several countries, can house these shareholdings within a single Andorran holding company. The advantages are numerous:
In this case, the Andorran family holding acts as a single, lasting point of centralization, designed to outlive the founder and organize governance across several generations.
The second typical case concerns the entrepreneur or investor who holds shareholdings in several operating companies spread across different countries — for example, a trading company in Spain, a services company in France, and a minority stake in a third-party business. Housing these shareholdings under a single Andorran holding allows for:
This is the most common use case among investors who want to structure a portfolio of active shareholdings, rather than simple passive financial securities.
A holding can also serve a purely defensive purpose: separating capital ownership from operational activity. If an operating company runs into trouble (commercial dispute, insolvency proceedings), the holding, as a distinct shareholder, in principle protects the group’s other shareholdings and the director’s personal wealth, since the latter is only liable up to the amount of their contributions to the structure. This case is especially justified once the group includes several subsidiaries with disparate risk profiles: trading, real estate, services, and so on.
Conversely, a holding is clearly superfluous for the individual entrepreneur who operates a single operating company in Andorra, with no subsidiary or cross-shareholding. Adding a holding on top of a single SL generates:
In this case, the operating company alone — SL or SA depending on the size of the project — is more than sufficient. A holding only makes sense once there are several shareholdings to consolidate, or a succession issue to anticipate.
Another common case of a superfluous holding: the investor who holds a single financial or real estate asset, with no intention of growing it through additional subsidiaries. Inserting an Andorran holding between this single asset and its owner brings, in this specific case, neither management simplification nor real optimization, since the exemption mechanism under Article 20 only applies to dividend flows or capital gains from the disposal of shares — not to the direct ownership of real estate, for instance, which falls under the logic of an asset holding company rather than a holding company in the strict sense.
| Profile / situation | Is an Andorran holding relevant? | Main reason |
|---|---|---|
| Family with several companies to pass on | Yes | Centralizes governance and succession |
| Entrepreneur with shareholdings in several countries | Yes | Consolidates dividends, exemption under conditions |
| Group with subsidiaries carrying disparate risks | Yes, to be assessed | Separates capital from operations |
| Entrepreneur with a single operating company | No | Duplicates costs with no tax benefit |
| Investor holding a single asset | No | The exemption mechanism does not apply to an isolated asset |
| Ownership of a single property | No (an asset holding company is more suitable) | Different logic from a shareholding-based holding |
Since Llei 5/2023, of 19 January 2023, a new Article 17 bis has been introduced into Llei 95/2010. It establishes a tax transparency regime targeting low-taxed controlled foreign entities. This mechanism requires the Andorran taxpayer to include, in their own tax base, the passive income (dividends, interest, royalties, capital gains on shareholdings) generated by a foreign subsidiary that is insufficiently taxed in its country of origin. In other words, an Andorran holding controlling a “letterbox” subsidiary set up in a zero-tax jurisdiction, without real substance, would see that subsidiary’s income taxed directly in Andorra, with no possibility of deferral. This safeguard aligns the Andorran regime with international standards for combating base erosion.
Another point of attention for holdings that finance their acquisitions of shareholdings through borrowing: Llei 5/2023 introduced a new Article 14 into Llei 95/2010, limiting the deduction of net financial expenses to 30% of the corrected accounting result for the year. This cap directly concerns structures that use leverage to finance the acquisition of shareholdings, and must be factored into the financial planning of any holding relying on debt.
Legally, an Andorran holding is incorporated like any ordinary company, in the form of an SL or an SA, governed by Llei 20/2007, of 18 October, on public limited companies and limited liability companies. The minimum share capital is 3,000 euros for an SL, compared with 60,000 euros for an SA. The choice between the two forms mainly depends on the size of the group, the expected number of shareholders, and the institutional image sought — an SA is often preferred for holding structures intended to bring together several investors or a broader shareholder base.
Before setting up a holding company in Andorra, a few questions should be settled with an advisor:
Is an Andorran holding useful for an entrepreneur starting out on their own? No, in most cases. As long as there is only a single operating company, with no subsidiary or cross-shareholding, the holding adds an extra set of accounts and an extra tax return without providing any real tax benefit.
What is the difference between a holding company and an asset holding company in Andorra? The holding company holds shareholdings in other companies and benefits, under certain conditions, from the exemption mechanism for dividends and capital gains provided for under Article 20 of Llei 95/2010. The asset holding company instead holds direct assets, particularly real estate, and follows a different logic, without the same exemption mechanism on shareholding flows.
What percentage of shareholding is required to benefit from the exemption on dividends? The direct or indirect shareholding must be at least 5% of the subsidiary’s capital, and must be held continuously for at least one year, before the dividend distribution or the disposal of the shares.
Must an Andorran holding have employees in Andorra? The law does not impose a minimum number of employees, but it does require genuine economic substance: an actual registered office, a local director or representative, and effective decision-making in Andorra. A lack of substance exposes the company to a denial of the tax exemption.
Does an Andorran holding allow you to avoid all tax on dividends received from abroad? Not automatically. The exemption depends on cumulatively meeting the conditions on shareholding percentage, holding period, and the level of taxation of the subsidiary in its country of residence. A subsidiary based in a very low-tax jurisdiction may also fall under the tax transparency regime introduced by Llei 5/2023, which would neutralize the intended benefit.
Is a specific minimum capital required to set up a holding in Andorra? No, the minimum capital is that of the chosen legal form: 3,000 euros for an SL, 60,000 euros for an SA. There is no separate minimum capital specific to “holding” use.
Figures and thresholds based on the regulations in force at the date of publication (1 September 2026), subject to legal changes. Please check with your advisor before making any decision.
To go further: Holding company in Andorra, Asset holding company in Andorra, Cost of a holding company in Andorra, Wealth holding companies in Andorra, Investing in Andorra, Moving to Andorra with your family.
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