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Legal framework
On September 12, 2018, the Legislative Decree of September 5, 2018, publishing the revised text of Law 10/2012, of June 21, on foreign investment in the Principality of Andorra, was published in the Official Decree of the Principality of Andorra. Principate of Andorra.
Foreign investment advice
Our law firm in Andorra advises clients on the various forms of foreign investment. We provide the legal assistance needed to obtain prior foreign investment authorisation before starting a business in Andorra or acquiring property.
What counts as foreign investment ?
Foreign investment in Andorra means the acquisition of assets located in the country, or the acquisition or creation of rights in rem over those assets, by:
- non-resident individuals;
- resident individuals making a real estate investment who cannot show 3 years or more of effective and permanent residence in the 10 years before the application (periods of absence for study count as residence);
- foreign legal entities, including foreign sovereign public entities, whether investing directly or through a branch or permanent establishment;
- Andorran companies with foreign participation, direct or indirect, of 50% or more of the capital or voting rights, calculated jointly.
For real estate investments, participation held by residents with less than 3 years of residence in the previous 10 years also counts as foreign participation.
The Law does not apply, among other things, to the creation of security interests or to subscriptions to regulated investment funds, except vehicles whose assets are mainly real estate.
An investment may lose or acquire foreign status after the event, for example when the investor acquires or loses residence. These changes must be declared to the Foreign Investment Register but do not require authorisation.
Prohibited and non-authorisable investments
Investments are prohibited if made by persons resident or domiciled in countries considered high-risk for money laundering or terrorist financing, or by persons with criminal records for intentional offences that pose a threat to public order.
In addition, the Government will not authorise investments that could harm, among other interests, national security, public and economic order, the environment, public health, the labour market, the housing market or the general interest of the country.
Direct foreign investment
Direct investment means holding a stake in Andorran companies, through the acquisition of shares or voting rights, or setting up or extending branches and permanent establishments. It also includes creating rights in rem over such shares.
Prior authorisation.
Direct investment requires prior authorisation from the competent ministry. The only exemption is where the investor ends up holding 10% or less of the capital or voting rights and total foreign participation in the company is below 25% at the time of acquisition. Once the 10% threshold is exceeded, any change in the shareholding requires a new authorisation.
Prior authorisation is also required for:
- changes to the company’s corporate purpose, unless merely a clarification or ancillary development;
- capital increases, unless charged to voluntary reserves.
Acquisitions on death do not require authorisation but must be declared.
Declaration.
Direct investment and the transfer of the rights acquired must be declared to the Foreign Investment Register.
Effective economic activity.
A company with direct foreign investment must carry on genuine business activity within 18 months. It then has 3 months to evidence this through:
- registration of the business or industrial activity, except for companies managing their own assets or holding shares;
- filing of the annual accounts;
- accounts showing at least 75% of the turnover, expenditure, investment or assets stated in the application;
- the identity of the beneficial owners;
- an open and active bank account in Andorra.
Direct investment does not in itself give any right to residence in Andorra.
Foreign real estate investment
Real estate investment means acquiring ownership or other rights in rem over property, property development, and administrative concessions involving private use of property. Investment in companies or investment vehicles with 50% or more foreign participation and assets made up of more than 50% Andorran real estate is also subject to this regime.
Prior authorisation.
Real estate investment always requires prior authorisation. The only exceptions are acquisitions on death and on the liquidation of a matrimonial property regime, which must still be declared to the Foreign Investment Register.
Limits for individuals.
An individual investor can only obtain authorisation if, after the new acquisition, they do not hold more than:
- one plot with a single detached house, built or to be built; or
- one detached house, two flats or two studios, with a maximum of three parking spaces and three storage rooms per flat; or
- six parking spaces.
The limit applies for 10 years from the investment by which it is reached. Property received by inheritance or on the liquidation of a matrimonial regime is not counted, nor are homes let as primary residences at an affordable rent for at least ten years.
Companies and establishments.
Foreign companies, branches and Andorran companies with foreign participation may acquire property for their own business activity. Andorran companies wholly owned by one individual or by close family members may also invest within the same limits as individuals.
Prohibitions.
Foreign investment is prohibited in:
- property development for sale, except developments let entirely as primary residences with at least 50% at an affordable rent for ten years, and those located in parishes that have adapted their urban plan to the carrying-capacity study;
- tourist apartments and properties licensed as tourist-use dwellings (HUT);
- investment intended for rent-to-own leases, leases between a company and related persons, and other arrangements that may amount to circumvention of the law.
Tax.
Foreign real estate investment is subject to the tax on foreign real estate investment (Law 3/2024).
Procedure, formalisation and follow-up
Application.
Authorisation applications are filed electronically using the official form and the documents required by the Foreign Investment Regulation.
Decision deadline.
The ministry must decide within a maximum of two months, extendable by up to one month. The deadline is suspended until the requested documents are provided. If no express decision is issued within the deadline, the authorisation is deemed refused.
Completion.
The authorised investment must be completed within the period set in the authorisation or, failing that, within six months. After that period, the authorisation lapses unless a single express extension is granted.
Formalisation.
All foreign investments must be executed by public deed before an Andorran notary, who must attach the prior authorisation to the deed where required. The notary reports the investment to the Foreign Investment Register within fifteen days.
Payments.
Receipts and payments must be made through banks authorised in Andorra or domiciled in countries not considered high-risk.
Follow-up.
Every two years, or whenever the ministry requests it, the investor must provide documents showing continued compliance with the Law and the conditions of the authorisation.
Consequences of non-compliance
Acts contrary to the Law are null and void, and a company with direct foreign investment that breaches it may be declared void. The Law also provides for fines including:
- €10,000 to €20,000 per offender, in addition to nullity, for an investment made in breach of the Law;
- 25% of the value of the investment, with a minimum of €50,000, where the act is upheld in favour of a third party acting in good faith;
- €5,000 for failing to declare to the Register, within 30 days, an investment not subject to authorisation or its liquidation;
- €15,000 to €30,000 for providing incorrect or incomplete information to the ministry.
How we can help
Aleix Advocats supports you at every stage of your foreign investment:
- A preliminary analysis to determine whether the transaction is a foreign investment and whether it is subject to authorisation, limits or prohibitions.
- Preparing and filing the prior authorisation application and following up the file.
- Incorporating the Andorran company and registering the business activity.
- Drafting and reviewing contracts for the sale of property or business goodwill.
- Execution before a notary and declarations to the Foreign Investment Register.
- Evidencing effective economic activity and complying with follow-up obligations.
Areas of competence:
Our lawyers and advisers offer their services in different areas of expertise: Andorran law (see branches of law), economics in general and, in particular, in the field of tax advice.
Contact with us
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