The foreign investment in Andorra is undergoing a significant transformation. For years, the Principality was known for its open-door policy, but the paradigm has shifted. The Andorran government has decided to apply a much more selective filter, prioritizing quality over quantity and ensuring that each new project provides real and tangible value to the local economy. If you’re considering living in Andorra and investing, it is crucial to understand these new rules of the game.
Why is Andorra changing its foreign investment policy?
The change in regulations is not an arbitrary decision but a well-considered strategy to protect and strengthen the country’s economic fabric. The almost total openness in recent years attracted a large volume of capital, but not all projects contributed equally to the sustainable development of the Principality. Some investments, although legal, did not generate employment, did not integrate into the local economy, and essentially did not add significant value.
The current goal is clear: attract projects that not only seek personal benefit but also boost Andorra’s growth. The focus is on active participation in the economy, avoiding business models that could distort the market or not contribute to the national interest. This new vision safeguards economic sovereignty and national security, ensuring balanced and beneficial growth for the entire society.
From quantity to quality: the new approach
Andorra remains an attractive destination for investment, thanks to its favorable tax framework and high quality of life. However, the government has made it clear that merely establishing a company without real activity and positive impact is no longer enough. The new foreign investment law in Andorra focuses on attracting companies and investors who want to actively and committedly participate in the Andorran ecosystem.
The new criteria for foreign investment in Andorra
For a foreign investment application to be approved, it must now demonstrably contribute to the national economy. It is no longer sufficient to present a business plan; it is necessary to detail how the project will benefit the Principality. The factors that the Andorran government values positively are diverse and focus on the creation of real value.
Although each project is analyzed individually, there are some general criteria that distinguish approval from rejection:
- Generation of added value: The project must bring something new and beneficial. This can be through innovation, technology, economic diversification, or the creation of qualified employment.
- Active participation in the local economy: The company is expected to integrate into the market, hire local staff, collaborate with local suppliers, and actively involve itself in Andorra’s economic life.
- Significant and tangible investment: The investment cannot be merely nominal. There must be a real financial commitment in the Principality, whether in assets, infrastructure, or human capital.
- Sustainability and diversification: Projects that contribute to diversifying Andorra’s economy beyond traditional sectors, as well as those that are sustainable and respectful of Andorra’s unique environment, are particularly valued.
A real case: Rejection that raises alarms
The theory has been materialized in practice. Recently, an official document was made public denying a foreign investment request. The resolution is a clear example of the new rigor applied. The government rejected the project, explicitly stating the “absence of significant investment in the Principat d’Andorra without active participation in the local economy, thus distorting the economic fabric of the country”.
The document added that accepting such an investment could “harm the exercise of public authority, sovereignty, and national security, public and economic order, or the general interest of the Principality of Andorra.” This case sets a precedent and sends a strong message to all future investors: projects must be well-founded and demonstrate their commitment to Andorra from day one.
What does this mean for future investors?
This tightening of requirements for foreign investment in Andorra should not be seen as a border closure to foreign capital. On the contrary, it is an invitation to present more solid, ambitious projects aligned with the country’s future vision. For entrepreneurs and investors with a well-structured business plan, Andorra continues to offer a highly competitive environment.
The key to success now lies in preparation and transparency. Your investment proposal should not only highlight the fiscal advantages offered by the country, such as the low taxes in Andorra, but also emphasize how your activity will enrich the local economy.
How to prepare a successful investment project in Andorra
- Develop a detailed business plan: Your business plan must be impeccable. Describe your activity, business model, financial projections, and especially your strategy for market integration in Andorra.
- Highlight your value contribution: Will you create jobs? Introduce new technology? Collaborate with local companies? Clearly state what your positive impact will be.
- Be transparent about your investment: Detail the capital you will invest in the country and how it will be distributed. A tangible and justified investment is one of the most valued points.
- Seek professional advice: Having experts familiar with Andorran legislation and the new administrative criteria is more important than ever. Good advice can make a difference.
The importance of advice for your residency in Andorra
The process of establishing and investing in Andorra has always required a deep understanding of local regulations, but with these changes, it has become even more complex. Trying to manage a foreign investment in Andorra application without proper guidance can lead to errors, delays, and even project rejection, as we have seen.
At Andorraway, we specialize in helping entrepreneurs and investors settle in the Principality. We understand the nuances of the new legislation and know what the Andorran administration seeks. We help you prepare a strong and convincing application, ensuring your project meets all the requirements to obtain residency in Andorra and investment authorization.
If you are thinking of taking the step, don’t leave your future to chance. Contact us and we will guide you through every step of the process to make your investment in Andorra a resounding success.