In France, a company's profits are taxed at 25 % under the standard corporate income tax rate. In the Principality, the maximum rate is 10 %, but it no longer offers any offshore regime: its special regimes were repealed in 2018 and a tax floor equivalent to 3 % of profits has applied since 2023. A local structure therefore reduces the bill only if it is genuinely managed from the Principality. Here is what an offshore company in Andorra involves today, what the tax authorities check, how to set up the structure and what it changes, with figures to support it.
Key points
- Corporate income tax: 10 % maximum, with a floor equivalent to 3 % of the taxable base since 2023, which deductions cannot reduce.
- Minimum contribution: 3,000 euros for a limited liability company (SL), 60,000 euros for a public limited company (SA).
- Foreign shareholder: foreign investment authorisation is required as soon as the foreign holding exceeds 10 % of the capital or the voting rights; below 10 %, it is still required if total foreign ownership in the company reaches 25 %.
- A structure managed from mainland France is taxable there, whatever its registered office.
- The Principality appears neither on the list of non-cooperative states and territories drawn up by the French Treasury nor on the European Union list in 2026.
Offshore company in Andorra: what the term covers in 2026
An offshore company is a business registered in a country where it carries out no real activity, chosen for low or zero taxation and for the discretion it offers its shareholders. The Principality was long associated with this image; its current law contradicts it point by point.
Offshore company: a shell with no local activity and no local tax
Classic offshore jurisdictions share a few features: no local operations, nominee directors, no accounts to keep, sometimes bearer shares and no exchange of information with other countries. None of this exists in the Principality. An entity incorporated in the Principality has an effective registered office and identified directors, keeps accounts and files its corporate income tax return (impost sobre societats) each year. The entry of a foreign shareholder is moreover reviewed by the Govern (the Andorran government) even before incorporation.
Corporate taxation: the end of special regimes in 2018
Corporate income tax, created by Llei 95/2010 of 29 December 2010, has applied since 2012 at 10%. Originally, special regimes reserved for international trading companies and intra-group financial management companies sharply reduced the effective tax burden. Llei 6/2018 of 19 April 2018 repealed them in order to comply with OECD standards against harmful tax competition, with a transitional period. Llei 5/2023 of 19 January 2023 then set limits on deductions and loss carry-forwards: the tax due can no longer fall below 30% of the amount calculated at 10%, that is 3% of the taxable base. In practice, pages that still mention taxation of 2% on profits are describing a regime that no longer exists.
Tax haven: a label Andorra no longer carries
Contrary to a widespread belief, Andorra is no longer a tax haven in the legal sense. Banking secrecy ended with the automatic exchange of financial information (Llei 19/2016), under which the first exchanges took place in 2018. The France-Andorra tax treaty, signed on 2 April 2013, has been in force since 1 July 2015. The Principality does not appear on the French list of non-cooperative states and territories updated by the order of 15 April 2026, nor on the European Union list. One nuance nevertheless matters for a shareholder domiciled in mainland France: with taxation at 10%, less than half the French level, the Principality remains a country with a privileged tax regime within the meaning of the Code général des impôts.
Is it legal to set up a company in Andorra when you live in France?
Yes. A taxpayer living in mainland France may set up or hold an entity in the Principality, provided it is declared and prior authorisation is obtained from the Government. The legality of the incorporation is not, however, the real question: the tax authorities look above all at where the structure is managed from and where it actually operates. Four mechanisms can bring the profits back under French taxation.
Andorran company held from France
Where are profits taxed? three checks
Sources: France-Andorra tax treaty, CGI art. 209 B, 123 bis and 238 A.
Effective management: a company run from France becomes French
A company is tax resident where its place of effective management is located, that is, where strategic and day-to-day management decisions are made. This is also the criterion used by the bilateral treaty to settle the case of an entity that both States regard as resident. If the manager lives in France and makes the decisions there, the company is in principle subject to ordinary French corporate income tax on all of its profits. A registered office in Andorra la Vella does not change this analysis.
Permanent establishment: work carried out in France remains taxable there
Even without a reclassification of the place of effective management, the part of the work carried out on French soil remains taxable there if it constitutes a permanent establishment: an office, a fixed place of business or a person who habitually concludes contracts on behalf of the structure. A consultant based in Lyon who invoices clients through a structure in the Principality creates, in practice, a permanent establishment there. The profits attached to it are then taxed on that basis, with penalties in the event of a reassessment and a risk that sums paid to the manager are taxed as distributed income.
Articles 209 B and 123 bis of the CGI: profits taxed in the shareholder's hands
Under French law, an entity established in the Principality falls within a privileged tax regime within the meaning of article 238 A of the French tax code (CGI): its tax burden is more than half lower than the one it would bear in France. Two mechanisms follow from this.
| Mechanism | Shareholder concerned | Main condition | Effect |
|---|---|---|---|
| Article 209 B of the CGI | Parent company subject to corporate income tax | Holding of more than 50% of the Andorran entity | The entity's profits taxed in France in the parent company's name |
| Article 123 bis of the CGI | Individual domiciled in France | Holding of at least 10% of an entity whose assets are mainly financial | Profits taxed under personal income tax as investment income |
Article 209 B provides a safeguard clause for entities outside the European Union: in principle it does not apply where the profits come from a genuine industrial or commercial activity carried out on site. Article 123 bis mainly targets wealth-holding or investment structures; an operating commercial business does not fall within its scope.
Substance: what a credible structure requires
Substance refers to the real resources the structure has in the Principality: premises, a director who resides there, employees where possible, local accounting and a local bank account, decisions made and documented on site.
Warning
A domiciliation with a service provider and a nominee director do not constitute substance.
In most cases, the coherent solution is for the director to move to the country themselves under active resident status, which transfers both the effective management of the structure and their own tax residence.
Andorra compared with other offshore jurisdictions
Comparing the Principality with the jurisdictions presented as offshore requires looking beyond the corporate tax rate. For a partner domiciled in France, three criteria carry just as much weight: the existence of a double taxation treaty, the automatic exchange of banking information and the country's treatment under article 209 B of the French tax code (CGI).
| Country | Corporate tax rate in 2026 | Bilateral tax treaty | Automatic exchange (CRS) | Privileged tax regime within the meaning of the CGI |
|---|---|---|---|---|
| Andorra | 10%, floor of 3% | Yes | Yes | Yes |
| Cyprus | 15% | Yes | Yes | No |
| Hong Kong | 8.25% then 16.5%, foreign-source profits not taxed | Yes | Yes | Depending on the origin of the profits |
| United Arab Emirates | 9% above 375,000 dirhams, 0% under certain conditions in free zones | Yes | Yes | Yes |
| France (benchmark) | 25% | Yes |
Cyprus: corporate tax raised to 15% on 1 January 2026
Cyprus has increased its corporate tax rate from 12.5% to 15% as from 2026. As a member of the European Union, the island is not covered by article 209 B, except in cases of artificial arrangements. The gap with the Principality is five points; setting up a business in Cyprus requires, as in the Principality, genuine resources on the ground.
Hong Kong: a territorial tax
Hong Kong taxes locally sourced profits at 8.25% on the first 2 million local dollars, then at 16.5%, and does not in principle tax foreign-source profits. It is this mechanism, rather than the level of taxation, that gives it its reputation as an offshore jurisdiction. For the French tax authorities, a Hong Kong entity whose profits escape local taxation falls under a privileged tax regime.
United Arab Emirates: 9% since 2023
The Emirates have applied a corporate tax of 9% above 375,000 dirhams of profit for financial years beginning on or after June 2023, with zero taxation possible for certain free zone companies.
Corporate tax in 2026
Andorra and its neighbours: a comparison of rates
Bars proportional to the main rate.
In all these countries, the same rule applies: a structure managed from France remains taxable there. Choosing a jurisdiction therefore never removes the central question, that of where the director lives and makes decisions.
Setting up a company in Andorra: requirements, steps and cost
Setting up a company in the Principality follows a regulated procedure, which begins with the choice of legal form and, for a foreign shareholder, involves prior authorisation from the Government. The details of each formality are set out in our guide to setting up a company in Andorra; here are the essentials to know before getting started.
Company types: the SL for most projects
Two types of commercial structures are governed by Llei 20/2007 of 18 October 2007 on public limited companies and limited liability companies. The limited liability company (societat limitada, SL) requires a minimum capital of 3,000 euros and is suitable for the vast majority of businesses. The public limited company (societat anònima, SA) requires 60,000 euros in contributions and is reserved for larger projects. Both forms accept a sole shareholder. The form chosen makes no difference in terms of corporate income tax.
Steps: from the company name to the start of trading
The incorporation procedure comprises six main steps:
- Reservation of the company name with the Companies Register (Registre de Societats).
- Application for foreign investment authorisation, required as soon as foreign ownership exceeds 10% of the capital or voting rights (Llei 5/2025 and Decret 137/2025), filed with the ministry responsible for foreign investment.
- Opening of a bank account in the name of the company being formed and deposit of the contributions.
- Signature of the deed of incorporation and the articles of association before an Andorran notary.
- Registration with the Companies Register and allocation of the tax identification number (NRT).
- Authorisation to carry on the activity, registration with the Andorran social security fund (CASS) and, where applicable, registration for the general indirect tax (IGI), the local equivalent of VAT, at the standard rate of 4.5%.
Setting up a company in Andorra
From company name to trading: six steps
Key step: foreign investment authorisation is obtained before the visit to the notary.
Sources: Llei 5/2025 and Decret 137/2025 on foreign investment.
Opening the bank account is often the longest step: local banks apply strict checks on the origin of funds and on the business project. This is also the stage at which our Engage teams are most useful, by preparing a consistent file across the authorisation application, the business plan and the shareholder's future residence. The specific process for shareholders who do not live locally is described in our guide to setting up a business in Andorra without being a resident.
Cost: incorporation and annual expenses
The cost of such a structure is not limited to its incorporation. The main items to budget for in 2026:
| Item | Amount | Nature |
|---|---|---|
| Share capital | €3,000 (SL) or €60,000 (SA) | Contribution, remains within the company |
| Foreign investment authorisation | Set by the regulations in force | Application fee |
| Registration with the Companies Register | Set by the regulations in force | Incorporation tax |
| Notary | Depending on the deed | Regulated fees |
| Annual register tax | Set by the budget law in force | Each year |
| Accounting and corporate income tax return | Depending on the provider | Each year |
| Social security contributions for a salaried director | 6.5% (employee share) and 15.5% (employer share) | On the remuneration |
| Communal taxes | Depending on the parish | Each year |
Should the director settle in the country, the conditions attached to his or her own active residence must be added to these amounts.
What the structure really changes: two costed scenarios
The value of such a structure depends almost entirely on where the person running it lives. By way of illustration, consider a consulting company generating 200,000 euros of taxable profit in 2026, wholly owned by a sole shareholder who distributes all of it. Remuneration and withholding taxes are set aside in order to isolate the effect of corporate income tax and distributions.
Annual profit of €200,000
Two scenarios, two tax systems
Assumptions used in this article: profit fully distributed, 2026 rates. Illustrative example.
Manager remaining in France: taxation under French rules
The manager lives in Bordeaux and takes all decisions from his office there. Effective management is located in France: the company is subject to standard corporate income tax, and its distributions to the single flat-rate levy (PFU) of 31.4%.
- Corporate income tax: 42,500 × 15% + 157,500 × 25% = 45,750 euros, applying the reduced rate for small and medium-sized companies.
- Distributable dividends: 200,000 − 45,750 = 154,250 euros.
- Flat tax: 154,250 × 31.4% = 48,434.50 euros.
- Total tax burden: 94,184.50 euros, i.e. 47.1% of profit.
Registration in Andorra la Vella has produced no saving; on the contrary, it adds costs and a risk of penalties.
Manager established on site: 10% tax and exempt dividends
The manager settles in the Principality under the active resident status and genuinely directs the structure on site. This status requires a holding of more than 34% in the company and the exercise of an effective management role, in addition to a refundable deposit of 50,000 euros. Profit is then subject to local corporate income tax, and dividends paid by a resident company are in principle exempt from personal income tax (IRPF), under article 5 of Llei 5/2014.
- Corporate income tax: 200,000 × 10% = 20,000 euros.
- Dividends: 180,000 euros, exempt from IRPF.
- Total tax burden: 20,000 euros, i.e. 10% of profit.
| Scenario | Corporate income tax | Taxation of dividends | Total | Overall rate |
|---|---|---|---|---|
| Manager in France | 45 750 € | 48 434,50 € | 94 184,50 € | 47.1% |
| Manager established on site | 20 000 € | 0 € | 20 000 € | 10% |
The difference amounts to 74,184.50 euros per year. It comes at a price, however: the manager's actual departure, exit tax on any unrealised capital gains, CASS social security contributions on his remuneration and, for this status, the deposit of 50,000 euros, non-interest-bearing but refundable (less AFA fees in the event of departure, cancellation or non-renewal of the authorisation), payable to the Andorran Financial Authority (AFA), required by article 38 ter of Llei 9/2012 on immigration as amended by Llei 5/2025, except for digital economy, entrepreneurship or innovation projects. Timing also matters: residence and management must be in place before distributions, failing which the amounts distributed remain taxable where the shareholder lived at the time of payment.
FAQ
Can an offshore company be set up without living in the Principality?
Yes. A foreign shareholder may own a company there, subject to investment authorisation as soon as the foreign stake exceeds the thresholds set by Llei 5/2025 (10 % of the company, or 25 % in total). However, if the structure is run from another country or carries out its activities there through a permanent establishment, its profits remain taxable where its manager lives.
Is Andorra still a tax haven?
No. The Principality applies the automatic exchange of banking information, repealed its special regimes in 2018 and does not appear on any list of non-cooperative jurisdictions in 2026. Its taxation remains moderate, with corporate income tax capped at 10 %, which makes it a country with a privileged tax regime within the meaning of the French CGI.
Does a company established in the Principality charge VAT?
No: it applies the general indirect tax (IGI), the local equivalent of VAT, whose standard rate is 4.5 %. The place-of-supply rules determine whether IGI applies to services provided to clients located outside the country.
How much does it cost to set up an SL?
Apart from the 3,000 euro capital contribution, incorporation entails official fees for the investment authorisation application and registration with the Companies Register, the amount of which is set by the regulations in force, in addition to the notary's fees. An annual registry tax then applies, set by the budget act.
What social security contributions does the manager pay?
If he is employed by his own company, his remuneration is subject to a CASS contribution of 6.5 % payable by him and 15.5 % payable by the employer. This level of contributions is among the main advantages of the structure for a company that employs staff.
