Tax Advisory Services in Andorra for Businesses

Setting up a company in Andorra is a first step. Running it with coherent taxation, usable accounting, and properly documented international cash flows is another.

Tax advisory services in Andorra for businesses need to give the director answers to very concrete questions: which expenses are deductible? How should the director be paid? When does IGI apply? How do you invoice a foreign client? Can a subsidiary pay a dividend without excessive withholding? What records need to be kept to justify intragroup transactions?

The tax adviser’s role isn’t to promise no tax at all. It’s to build a clear, compliant organisation suited to the company’s actual activity.

The main tax topics for an Andorran company

Topic	Question to resolve
Corporate tax	What is the taxable profit after accounting adjustments?
IGI	Where is the transaction located, and which rate applies?
Director’s pay	Salary, director’s remuneration, or dividend?
International transactions	Does a withholding tax, a treaty, or a permanent establishment come into play?
Intragroup flows	Is the service genuine, useful, documented, and invoiced at market price?
Cash and distributions	Can the profit be distributed, or does it need to stay invested?
Filings	Which tax, social security, and accounting deadlines need to be met?

The general corporate tax rate is 10%. This rate applies to taxable profit, not turnover. The accounting result is the starting point, then it’s adjusted under the tax rules applicable to expenses, depreciation, provisions, related-party transactions, and income benefiting from a specific regime.

1. Securing the deductibility of expenses

An expense doesn’t become deductible just because it was paid from the company’s bank account. It needs to be linked to the activity, justified, recorded, and incurred in the company’s interest.

Points to watch include, in particular:

• the director’s travel expenses;
• vehicles and mixed-use expenses;
• rent paid to a related party;
• meals and entertainment expenses;
• fees invoiced by another group company;
• loan interest;
• personal expenses paid by the company;
• depreciation of equipment and fixed assets.

A solid tax file doesn’t rest on invoices alone. It also needs to make the business purpose of the expense understandable.

2. Choosing coherent pay for the director

Salary, director’s remuneration, and dividends follow different logic.

Salary pays for work and comes with social security obligations. Director’s remuneration corresponds to management or governance functions and needs to be planned and documented. A dividend pays for holding capital; it isn’t a deductible expense for the company and requires a distributable profit to exist.

A combination can be considered, but needs to take into account:

• the work actually carried out;
• the director’s immigration status;
• CASS contributions;
• personal cash needs;
• the legal reserve;
• other shareholders;
• the company’s future investments.

A policy of artificially replacing all professional pay with dividends can weaken the file.

3. Getting IGI and international invoicing right

The general IGI rate is 4.5%, but not every invoice automatically carries this rate.

It’s first necessary to determine:

1. the nature of the goods or service;

2. whether the client is a business or an individual;

3. their country of establishment;

4. the tax location of the transaction;

5. whether an exemption, a reverse charge, or a foreign obligation applies. An Andorran company can invoice a French, Spanish, Swiss, or other business. Treatment, however, depends on the service provided. Digital services, training, real estate, transport, events, and services linked to a specific premises don’t necessarily follow the same rule.

Correct invoice wording, tax numbers, evidence of the client’s status, and contracts all need to be kept.

4. Identifying permanent establishment risks

An Andorran company can become taxable in another country where it has a fixed place of business, a team, a representative with certain authority, or a sufficiently stable activity there.

The risk needs examining, in particular, where:

• the director works regularly from France or Spain;
• employees are based abroad;
• contracts are negotiated and signed outside Andorra;
• an office or premises is used in another country;
• the business depends on a single foreign client;
• services are physically carried out in the client’s territory.

The company needs to be managed and operated in line with the stated organisation. Andorran registration alone isn’t enough to relocate an activity that in practice remains carried out elsewhere.

5. Documenting transactions between related companies

Management fees, loans, royalties, rent, and other intragroup transactions need to reflect normal market conditions.

For a management service, it needs to be possible to demonstrate:

• the exact nature of the service;
• who carried it out;
• the time spent;
• its usefulness to the receiving company;
• the pricing method used;
• consistency with the invoicing company’s functions and resources.

A generic invoice labelled “consulting” or “management” with no supporting file is insufficient. Documentation needs to be prepared throughout the year, not only in the event of an audit.

6. Planning for dividends and withholding taxes

When an Andorran company receives a dividend from a foreign subsidiary, three levels need examining:

• the tax paid by the subsidiary;
• the withholding applied in the country of departure;
• eligibility for an exemption or a tax credit in Andorra.

Tax treaties can reduce certain withholding taxes, but the benefit often requires a residency certificate, sufficient shareholding, beneficial ownership status, and compliance with anti-abuse rules.

Before a significant distribution, it’s wise to check the documents and applicable rate rather than requesting a refund afterwards.

7. Setting up an annual tax calendar

Effective management rests on a calendar shared between the director, the accounting team, and the tax adviser.

It needs to include, in particular:

• IGI returns;
• corporate tax instalments and the annual return;
• withholding tax obligations;
• social security filings;
• approving and filing the accounts;
• updating beneficial ownership information;
• renewing authorisations;
• residency certificates needed for international cash flows.

Monthly or quarterly monitoring makes it possible to identify discrepancies before the year-end close, rather than only making decisions after the financial year has ended.

What does a tax advisory engagement look like?

An engagement can include:

1. a diagnostic review of the structure and cash flows;

2. a review of accounting and contracts;

3. mapping out the taxes and countries involved;

4. recommendations on pay and distributions;

5. an invoicing and documentation process;

6. an annual calendar;

7. a pre-close review;

8. support during an acquisition, a disposal, or an audit. The goal is to give the director a predictable view of their obligations and reduce risk without creating a disproportionate structure.

Frequently asked questions

Does an Andorran company always pay 10%? The general rate is 10%, but the amount depends on the tax base, non-deductible expenses, exemptions, and applicable credits.

Is a foreign invoice automatically free of IGI? No. Where it’s located depends on the service, the client, and the applicable rules.

Can management fees be invoiced to a subsidiary? Yes, where the services are genuine, useful, documented, and valued at market price. Certain holding companies under a special regime, however, can’t carry out this activity.

When should you consult a tax adviser? Ideally before signing a significant contract, a distribution, a restructuring, or an international transaction — not after it’s carried out.

To go further: Taxation in Andorra, Accounting in Andorra, Holding company in Andorra, Company formation, Andorra · France, Andorra · Spain, Andorra · Switzerland.