In Andorra, starting a business can be done in several ways, with the main ones being: as a freelance professional or through the incorporation of a limited company (SL). Choosing between these options is not just a matter of simplicity or initial cost — it also has important tax, legal, and strategic implications.
Below, we outline the key differences to help you make an informed decision:
1. Fiscalidad
- Freelance: taxed under personal income tax (IRPF) on net profit. The general rate is 10%, with no progressive brackets, although there are certain reductions for income under €40,000, which lowers the effective average rate.
- Limited Company (SL): taxed under Corporate Income Tax (IS), also at 10% on profit. If dividends are distributed, they are generally exempt from IRPF.
Tax rates may appear similar, but an SL allows for greater planning and income deferral.
2. Liability
- Freelance: personally liable with all personal assets.
- SL: liability is limited to the capital contributed (minimum €3,000).
An SL protects personal assets, which is crucial for higher-risk activities.
3. Professional Image and Scalability
- Freelance: simpler option for individual services or limited invoicing.
- SL: offers a more professional image, facilitates partnerships, the entry of partners and investors, and enables structured growth.
An SL is more suitable if you plan to scale or attract investment.
4. Costes y trámites
- Freelance:
- Simpler formalities.
- No minimum capital required.
- Lower accounting costs, although bookkeeping is still required.
- Limited Company:
- Requires notarial and registry procedures.
- Business plan must be approved by the Government.
- Mandatory bookkeeping and submission of annual accounts.
Becoming a freelance professional has a lower entry barrier but fewer mid-term advantages.
5. Consideraciones de inmigración y residencia
Freelance (Individual Entrepreneur)One of the most decisive factors when starting a business in Andorra is the applicant’s immigration status. Having a project is not enough: to legally operate as a freelance, you must have active residency in the country or be able to practice a regulated profession.
For regulated professions, even a non-resident can apply for self-employment residency, as long as the following requirements are met:
- University degree recognized by the Andorran Ministry of Education.
- Profession recognized as regulated by the Government (e.g., lawyers, doctors, engineers).
- Registration with the relevant professional association.
- Proof of B2 level proficiency in Catalan.
Important: individuals entering via this route are not required to make the €50,000 deposit to the Andorran Financial Authority (AFA), unlike other self-employment residency permits.
SL (Sociedad Limitada): la vía habitual para no residentes
For those who do not meet the above requirements (non-qualified, unrecognized degrees, or non-residents), the most common route is to create an Andorran company (SL) and apply for residency as a shareholder-director.
Requisitos principales:
- Hold at least 34% of the share capital.
- Act as the company’s administrator.
- Obtain foreign investment authorization.
- Make a mandatory €50,000 deposit with the AFA (refundable upon ending residency).
- Reside in Andorra for at least 183 days per year.
This option is the most flexible for non-resident entrepreneurs or those without a recognized university degree. It allows for broad activities such as e-commerce, investment, or non-regulated service provision.
If you’re testing a business idea, have limited income, or want to operate temporarily, starting as a freelance professional might be appropriate — as long as you meet the residency and degree recognition requirements.
However, if your project involves growth, risk, or the need to separate assets, the limited company structure is clearly recommended — especially for non-residents seeking to establish a long-term presence in Andorra.
Do you have questions about your specific situation?
Contact our tax team for a personalized analysis and make the right decision from day one.
