Holding companies in Andorra: taxation and key advantages

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🏁 Origin and purpose of the holding regime

Holding companies are entities created to own and manage shares in other companies, whether domestic or foreign.

In Andorra, this regime is based on Law 95/2010 on Corporate Tax, later amended by Law 6/2018 to align with the OECD BEPS (Base Erosion and Profit Shifting) standards.

Its goal is to avoid economic double taxation while attracting real foreign investment under principles of transparency and substance.

This structure is widely used in international tax planning because it allows groups to consolidate participations and optimise dividend flows between companies within the same structure.

If you want to understand the broader corporate tax framework, you can read Corporate Tax in Andorra, which explains how business taxation operates in the Principality.

💼 Legal framework and evolution

Originally, Andorra’s holding regime offered specific tax benefits for holding foreign participations.

After the OECD BEPS Action 5 review and the EU Code of Conduct, Andorra removed preferential regimes in 2018 to comply with international standards.

Today, there is no separate “holding company” regime. Instead, all Andorran companies may apply the general exemptions provided in Articles 20 and 43 bis of the Corporate Tax Law, provided they meet certain criteria.

This evolution demonstrates Andorra’s intention to maintain legal certainty and a competitive, transparent environment, without being regarded as a tax haven.

To learn more about the accounting framework that supports this system, see Accounting in Andorra: origin and structure of the General Accounting Plan (PGC).

🧩 Requirements to apply the exemption

For an Andorran company to benefit from dividend and capital gain exemptions, it must meet the following conditions:

• Minimum 5% participation (direct or indirect) in the subsidiary’s capital or equity.
• Effective taxation of at least 50% of the Andorran rate (that is, at least 5%) in the jurisdiction of the subsidiary.
• Continuous one-year ownership of the participation or a formal commitment to maintain it.

These conditions ensure that only substantial and transparent investments can benefit from the exemption.

In practice, this puts Andorra on par with other European jurisdictions with consolidated holding regimes.

For a detailed explanation of how Andorra avoids international double taxation, you can read Double Taxation Agreements (DTA) in Andorra, which lists the countries with active treaties.

📈 Exempt income: dividends and capital gains

Dividend exemptions

Dividends received by an Andorran company may be exempt if both participation and effective taxation requirements are fulfilled.

The exemption also applies to profits repatriated from subsidiaries located in countries that have signed double taxation treaties (DTAs) with Andorra, facilitating efficient group structures.

Capital gains exemptions

Capital gains from the sale of qualifying participations are also tax-exempt, provided the subsidiary meets the minimum effective taxation requirement.

However, this exemption does not apply to intra-group transfers made purely for tax-motivated purposes, consistent with the EU’s substance-over-form principle.

💰 Effective taxation and compliance obligations

Although the nominal corporate tax rate in Andorra is 10%, a holding company’s effective tax burden may approach zero if most of its income qualifies as exempt.

Nevertheless, companies must comply with the following obligations:

• File the annual corporate tax return.
• Keep accounting records according to the Andorran General Accounting Plan (PGC).
• Maintain supporting documentation for shareholdings, taxes paid by subsidiaries, and applicable treaties.
• Ensure real substance in Andorra, with human and material resources demonstrating effective management.

To better understand how this tax fits into Andorra’s overall fiscal system, you can read Taxation in Andorra: structure, tax rates and real advantages.

🧮 Deductions and limitations

Even if most income is exempt, the company may still apply other deductions available under the law:

• Double taxation relief (Article 43 bis), when the exemption does not apply.
• Charitable donation deduction (Article 44 bis), for cultural or social projects.
• Loss carryforward of negative bases (up to 70% of the taxable base, for a period of 10 years).

It is important to note that expenses related to exempt income are not deductible, to prevent double tax advantages.

🌍 Advantages and international comparison

The Andorran holding framework combines legal certainty, moderate taxation and international compatibility.

With over 20 double taxation agreements signed, Andorra offers a solid alternative to Luxembourg, Malta and the Netherlands.

Unlike those jurisdictions:

• Andorra is not on the EU blacklist.
• It maintains a stable 10% corporate tax rate.
• It offers lower administrative and operational costs.

This regime can also be combined with other fiscal mechanisms, such as corporate reorganisations or mergers.

For more information, you can read Tax regime for corporate reorganisation operations in Andorra, which explains their legal and fiscal treatment.

Conclusions

The tax framework for Andorran holding companies is now fully aligned with international standards.

It enables investors to channel capital, protect assets and structure group operations with efficiency and long-term legal security.

This regime is particularly appealing to family groups, family offices and private funds seeking to centralise their investments in a stable and competitive jurisdiction.

👉 If you would like to know whether your structure can benefit from this regime, contact ELYSIUM Consulting or schedule a personalised meeting.
We will help you design a corporate structure tailored to your financial and strategic goals.

Last review: November 2025