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ANDORRA EXECUTIVE
SUMMARY
Andorra
Executive Summary
Charlemagne
Made Andorra Independent in 748 . . .
.
. . but in practical terms Andorra became independent
in 1278. Its co-princes are the French president
and the Spanish Bishop of Urguel, but they don't
interfere! Andorra is a parliamentary democracy.
Squeezed between France and Spain in the Pyrenees,
with 467 sq km and a population of almost 83,900,
Andorra has an amazing 11.6 million visitors
annually. The skiing is excellent, but the valleys
are warm enough in summer to grow tobacco, the
dominant agricultural activity. There's no airport
but the roads to France and Spain are good.
The language is Catalan.
Economy Based on Tourism
Tourism
accounts for 80% of the economy one way or another.
There is some local manufacturing (including
tobacco processing) but Andorra is structurally
import-dependent. There is no unemployment and
growth is around 5%; inflation tends to mirror
that in France and Spain. Andorra has no currency
- most important currencies are acceptable;
but the Government works in Euros. There is
a budget surplus; national debt is very low.
GDP per head at $38,800 is the eleventh highest
in the world. Andorra protects its domestic
business sector with ownership restrictions.
Andorra's Lowtax Specialisations
There
are no taxes in Andorra for companies or individuals
other than modest annual registration fees,
municipal rates, property transaction taxes,
and a sliding scale capital gains tax introduced
in 2007. There are no special regimes for 'offshore'
entities and no trusts (Andorra is a civil law
jurisdiction). The problem for offshore enterprises
is that Andorra insists on two-thirds majority
ownership of all types of business entity by
Andorran nationals or long-stay residents. Although
nominee arrangements can bypass this problem
in day-to-day terms, the legal reality remains.
This has tended to limit Andorra's offshore
business to wealthy individuals.
Andorra's Bank Accounts Are Very Secret
As
a home for money, Andorra is hard to beat. Banks
are solid, and there are no capital or exchange
controls. Numbered accounts are said to be known
about only to you, your banker and God. Strict
anti-money laundering legislation stops criminal
activity, but excludes tax avoidance which is
no crime in Andorra. In June, 2004, however,
Andorra was obliged to accept the EU's Savings
Tax Directive, and as from July, 2005, is imposing
a withholding tax of 15% on returns on savings
paid to citizens of Member States of the EU,
of which 75% is remitted onwards to the States
concerned.
Immigration
Controlled by Residence and Work Permits
To
encourage immigration by high-net-worth individuals
(often retired) the Government offers Passive
Residence Permits, which are not cheap,
and are subject to a quota which is determined
periodically
according to the “economic and social
needs of the Principality of Andorra”.
Otherwise,
long term residence is only possible to those
with work permits, which are controlled by quotas.
It is possible to get around this system by
owning a nominee company, which is relatively
expensive, but the Government watches closely,
and any kind of doubtful activity (or competition
against locals) will bring rapid expulsion.
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