Andorra is not just another Offshore centre. In the first place, Andorrs is landlocked and in the second place, Andorra does not have an “offshore jurisdiction”. It does not have special tax regulations for banking or investment funds, it does not offer classical offshore products such as trusts. The reason it doesn’t offer these services, is becaues Andorra does not levy any taxes at all. No individual taxes, no company taxes, just some custom duties and local property taxes.

Because the Andorra jurisdiction states that all business and trading activities should be majority-owned by an Andorran citizen, the foreign investment is very low.

Investors can take advantage of the low tax climate in Andorra in two ways:

Although, in 2004, Andorra had to accept the EU’s Savings Tax Directive, the Andorran banks are still characterized by a very high level of secrecy. Banking business details are highly protected in Andorra. Numbered accounts are said to be known only to “the customer, the banker and God”. A withholding tax of 15% is imposed on returns on savings of EU citizens as of July 2005, of which 75% is channelled to the EU citizen’s country of domicile.

The Andorran jurisdiction, prescribing a majority of Andorran ownership in any business, does not make Andorra a good place for international trading. However, because of the absence of taxation, the liberal business environment and the high level of secrecy make it a perfect place to collect the proceeds of international business, especially if the entity that ultimately benefits is living in Andorra. A common structure is the triangular:

When operating from the basis of a high-tax country: the trading, licensing and investment operations are being carried out in a typical beneficial tax-climate of an offshore center such as Malta. The proceeds are then transferred to an Andorran company, which does not pay any tax at all. Thousands of Andorran companies have been formed in this way and with the purpose of benefiting maximally from offshore possibilities.

Read more about the Andorran jurisdiction at Offshore Legal and Tax Regime.

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