Corporate restructurings in Andorra: mergers, demergers and contributions under tax neutrality

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The legal foundation of tax neutrality

Corporate restructurings are a natural part of a company’s life cycle. Acquiring new companies, separating business lines, creating subsidiaries, setting up holding companies, professionalising the structure, reducing the number of entities or preparing the entry or exit of shareholders often requires modifying the existing structure.

But these operations can involve a clear risk: the emergence of capital gains generating a significant tax cost, which may substantially increase the overall expense. In other words, there is a risk that additional tax burdens appear, discouraging — or even preventing — restructuring operations that would otherwise be necessary.

➤ If you want to understand the taxation of financial income when the special regime does not apply, you can consult How financial income is taxed in Andorra.

The Law 17/2017 on corporate restructurings addresses this problem by establishing a tax neutrality regime based on two core principles:

• no necessary restructuring should incur an additional tax cost,
• taxation must not become an obstacle to genuine economic activity.

This philosophy is directly inspired by EU Directive 2009/133/EC, which harmonises the tax treatment of mergers and divisions across most European jurisdictions — a link explicitly recognised in the Andorran law itself.

This alignment with European standards strengthens, among other aspects:

• the legal certainty of the system,
• the interest of non-Andorran investors in establishing themselves or investing in the Principality,
• its credibility with investors and family-owned businesses,
• its coherence with other regimes such as holding companies,
• the possibility of presenting more robust structures that facilitate financing or cash pooling.

➤ To understand how international groups are typically structured in Andorra, you can consult Holding companies in Andorra: taxation and main advantages.

Which operations qualify for the regime? (Law 17/2017, art. 2)

Tax neutrality is not universal: it only applies to operations expressly listed in the law, under a numerus clausus approach.

The eligible operations are:

• Mergers
• Divisions (proportional and non-proportional)
• Non-cash contributions of a business branch
• Non-cash contributions of other assets
• Share exchanges
• Asset transfers (returns of assets)

This closed list prevents broad or ambiguous interpretations.
If a corporate operation does not fit into one of these categories, the special tax regime cannot be applied.

Real objective of the regime: deferral, not exemption

Tax neutrality does not mean that the gain does not exist. The principle is simple: whenever ownership changes, a gain may arise. The regime merely allows that gain not to be taxed at the time of the operation, but later, when the assets or shares are sold to a third party.

These operations are therefore characterised by:

• No immediate taxation of gains,
• Subrogation in the fiscal value of the assets (no revaluation),
• Preservation of the original acquisition date,
• Protection of Andorra’s future taxing rights.

In legal terms, neutrality is achieved through deferral of taxation.
This is the same principle applied in France, Spain and across the EU, although each country applies its own nuances.

➤ To explore Andorra’s tax system in depth, you can consult Taxation in Andorra: structure, tax rates and real advantages.

Practical use cases: application in Andorra and internationally

At ELYSIUM, we regularly apply this regime in different types of operations. The most common are:

🔹 Contributing operating companies to a holding company

This is probably the most frequent case among international entrepreneurs considering Andorra for establishment or investment.

Typical objectives include:

• centralising economic interests,
• simplifying management,
• optimising dividends and capital gains,
• establishing a clear and centralised decision-making level,
• facilitating investor entry,
• simplifying succession,
• protecting assets and segmenting risks.

This type of structure is well aligned with the Andorran reality, where many companies hold participations in subsidiaries located in different countries.
However, in cases where the process consists simply of forming new subsidiaries, the special regime is generally unnecessary.

➤ To understand when it makes sense to create a company, see Setting up a company in Andorra: steps, requirements and advantages.

🔹 Divisions to separate business lines, assets or risks

Divisions are useful in many situations. Common examples include:

• separating a specific activity from the rest of the business,
• separating assets from day-to-day operations,
• splitting business lines whose growth warrants separate management,
• separating activities for family, commercial or operational reasons,
• isolating operational risks,
• preparing a future partial sale,
• organising real-estate holdings or development projects,
• enabling a more rigorous analysis of each division.

Law 17/2017 explicitly recognises non-proportional divisions, a key tool in family restructurings.

These operations often require well-designed bylaws or shareholders’ agreements, aligned with potential future restructurings.

➤ For further reading, you may consult
Bylaws of an Andorran company: mandatory content and best practices,
as well as Shareholders’ agreements in Andorra: what they are, why they matter and when they are essential.

🔹 Family asset reorganisations

Many family groups or sizeable structures eventually face situations they did not plan for, such as:

• business succession,
• orderly distribution of assets or shares,
• asset protection against future changes,
• preparing a modern and flexible structure for the next generation.

The law allows:

• non-proportional divisions,
• asset returns,
• selective contributions.

In all these situations, the neutrality regime can be applied: optimising the future without altering the present situation.

Technical operation of the regime: key points

🔹 Accounting recognition at fair value

Transferred elements must be recorded at their fair value, in accordance with the Andorran General Accounting Plan.

➤ For more detail, see Accounting in Andorra: origin and structure of the General Accounting Plan (PGC).

⚠️ Recording assets requires an objective valuation.
➤ To understand valuation methods or the applicable procedure, consult
How to value a business or shareholding: key principles for fair pricing in transactions and restructurings.

🔹 Tax recognition at historical value

From a tax perspective:

• the original value of the assets is preserved,
• the original acquisition date is maintained.

This prevents immediate gains while safeguarding Andorra’s future taxing rights.

🔹 Full subrogation

In operations such as mergers, the acquiring entity assumes:

• tax loss carry-forwards,
• tax benefits,
• rights and obligations in force,
• tax values of assets,
• fiscal vintage.

This prevents any form of artificial “clean-up” of balance sheets.

🔹 Deferred taxation

The fundamental purpose of the regime is to ensure that no gain arises now: taxation occurs only when the contributed, merged or divided assets are sold.

When does the regime NOT apply?

Beyond the type of operation, several elements may prevent its application:

• lack of valid economic reasons,
• artificial or non-substantive operations,
• operations whose main purpose is tax-driven,
• absence of prior notification to the tax authorities.

In such cases, the Administration may enforce standard taxation, apply interest and impose penalties.

Prior notification: a requirement many forget

Law 17/2017 requires a prior notification that:

• identifies the parties,
• describes the operation,
• confirms the application of the special regime,
• sets out the valid economic reasons.

Without this notice, the notary cannot execute the transaction.

A restructuring is not only tax: it is corporate strategy

A common mistake is to see restructuring purely as a tax operation, when its real impact is far broader.

A sound restructuring integrates:

• governance,
• tax planning,
• asset protection,
• corporate architecture,
• risk optimisation,
• preparation for succession,
• cost reduction,
• long-term vision.

➤ To understand how to avoid internal conflicts in more complex structures, see Shareholders’ agreements: why they matter and when they are essential.

Conclusion: an essential tool for growth and orderly corporate planning

Law 17/2017 is one of the essential corporate tools of the Andorran system.
It allows companies to restructure coherently, without additional costs and with full international alignment.

Its applications are very diverse, but what is evident is that it encourages investment and growth, facilitates the entry or exit of shareholders, allows diversification, international expansion and the consolidation of interests, and, finally, makes possible corporate reorganisation with a succession-related or business-oriented purpose.

📞 Do you need assistance with a business restructuring? Would you like to benefit from the holding regime or protect your assets?

If you believe you need a corporate restructuring, or if you would like us to help you analyse and assess the viability of an operation of this scale, you can contact us through our form.

Alternatively, if you prefer personalised and fully confidential assistance, you may book a meeting using the link just below this article, or directly here.

We have extensive experience in this type of operation, and we are driven by the commitment to ensure that the entire process is carried out with guarantees, diligence and the most beneficial result possible for all parties involved.

Last updated: January 2026