Andorra: Investing

FDI in Figures

For many years, Andorra's status as a 'tax haven' has attracted foreign investment. Over the last few years, the Andorran government has been seeking to establish a modern and transparent regulatory framework and to promote diversification and growth. UNCTAD does not release any information on FDI data on Andorra. According to the latest data from the Ministry of the Presidency, Economy and Business, FDI went up by 7,600% between 2012 and 2021, and by 540% between 2017 and 2021, accounting for 18.7% of GDP at the end of 2021. Spain, France and Luxembourg are the largest investors in Andorra, accounting for more than half of inflows. The largest investments are in real estate and construction (37.9% of total FDI), property (30.8%), wholesale and retail (18.3%), as financial services receive more than 10% of inflows (Invest in Andorra – latest data available). According to governmental figures, the number of approved applications for foreign investment in 2021 was double that in the previous year (as many of the applications that had been stalled in 2020 due to the pandemic were approved). The reported total volume of initial investment reached EUR 823 million in 2021, up by 289% year-on-year. Service provision, property and marketing are the sectors that have attracted the largest numbers of applications.

The country's economy has been open to FDI since the approval of a law on foreign investment in 2012. Foreign companies are now allowed to retain 100% ownership of their businesses (although governmental approval must be obtained). However, even before the introduction of the new law, more than 200 economic activities (including cosmetic medicine, manufacturing, broadcasting, e-commerce, research and development, etc.) were already fully open to foreign investment. The Andorran government has committed to normalising its policies, notably by lifting bank secrecy; and the country's legal framework has adapted to international standards. The most significant laws passed by Parliament to support economic opening include the Law of Companies (October 2007), the Law of Business Accounting (December 2007), and the Law of Foreign Investment (April 2008 and June 2012). The Principality was, therefore, removed from the list of tax havens, but its attractiveness to international investors has suffered as a result. While the country's tax burden remains weaker than the European average, the Andorran government introduced an income tax at the behest of the OECD. The tax applies to anyone who lives in the principality for at least 183 days in a calendar year, at a maximum rate of 10%. Andorra’s government also relaxed its residency and investment laws to make the country more attractive to foreign investors. A person now must spend 90 days a year in the principality to qualify for “passive residency”, compared with the previous 180-day requirement. Foreigners now have the same property ownership rights as citizens. Furthermore, in December 2022, the Andorran Parliament approved Law 42/2022 governing the Digital Economy, Entrepreneurship and Innovation, which promotes entrepreneurship visas and seeks to attract digital nomads. Andorran financial institutions and banks have been using International Financial Reporting Standards (IFRS) for accounting purposes since 2017 and in 2019 the country joined the Single Euro Payments Area (SEPA), which makes bank transfers in and out of Andorra more transparent. Overall, Andorra presents many advantages for international investors: the country's geographical position between France and Spain offers an attractive market for investors; social and employer contributions are relatively small, which leads to competitive operational costs. Additionally, the Principality's labour market is flexible, multilingual and well-adapted to the needs of companies.

© eexpand, All Rights Reserved.
Latest Update: September 2023