What is the Patent Box regime in Andorra?
The Patent Box in Andorra is one of the most attractive tax regimes for companies based on innovation and the management of intangible assets. This incentive allows companies to reduce up to 80% of the Corporate Tax base on net earnings derived from the transfer of certain intangible assets. Its goal is clear: to position Andorra as a hub for research, development, and technological innovation.
This special regime applies to income generated from the transfer of the right to use or exploit:
- Patents
- Utility models
- Legally protected designs and models
- Registered advanced software
For any company considering living in Andorra and operating in technological or creative sectors, understanding the Patent Box is essential. It’s not just about tax savings but also recognizing the value of intellectual property and encouraging reinvestment in business growth. However, as recent data shows, accessing this benefit is not automatic; it requires strict compliance with regulations.
Application overview: A mix of success and strict requirements
According to information provided by Finance Minister Ramon Lladós, since the implementation of the Patent Box in Andorra, a total of 44 companies have attempted to access its benefits. The figures reveal a landscape of rigor on the part of the Andorran authorities:
- 33 applications have been approved, demonstrating that the regime is accessible to those meeting the criteria.
- 11 applications have been denied, accounting for 25% of the total—one in four.
This denial rate is significant and sends a clear message to entrepreneurs and advisors: the Patent Box application must be meticulously prepared. It’s not automatically granted; the Department of Taxes and Borders conducts a thorough review to ensure only companies that truly contribute value through R&D benefit from this important tax reduction.
Reasons for Patent Box denial: Why are applications rejected?
Understanding the reasons behind denials is crucial for any company aiming to benefit from this regime. The government has been transparent in detailing the nature of the 11 rejections, which can be categorized into several groups.
Main causes of unfavorable decisions
Rejections of Patent Box in Andorra applications are not due to a single factor but a set of circumstances indicating non-compliance with formal or substantive requirements. The reasons include:
- Explicit denials (7 cases): Most rejections occurred because, after analyzing the documentation, the administration concluded that the company or the assets presented did not meet the criteria established by law. This could be due to the intangible asset not being eligible or the company’s activity not aligning with the innovation promotion regime.
- Lapse due to applicant’s inaction (2 cases): In these situations, the process was halted due to reasons attributable directly to the applying company. Typically, this occurs when the administration requests additional information or corrections, and the company fails to respond within deadlines. It underscores the importance of being proactive and diligent throughout the process.
- Negative administrative silence (2 cases): This occurs when the administration does not issue an explicit resolution within the legally required period. Under the Patent Box, the lack of response is interpreted as a denial. One particularly notable case involved a company in liquidation, which invalidated its application.
These data highlight that preparing the application is as important as the innovation itself. An incomplete file, lack of response to requests, or not meeting basic tax requirements can jeopardize the opportunity to obtain a significant fiscal benefit.
The government’s perspective amid criticism
The release of these figures responds to questions from general counselor Carine Montaner of the party Andorra Endavant, who raised concerns about a possible “malfunction” of the regime. According to Montaner, the “excess of administrative silence creates distrust and legal insecurity,” forcing professionals to insist for a response.
In response, the Finance Minister defended his department’s actions. He argued that processing these cases requires a “rigorous review” because the fiscal benefit granted is very high (an 80% reduction of the taxable base). The administration aims to ensure that the incentive goes to companies that genuinely contribute to the country’s innovative ecosystem and not to structures solely seeking tax evasion.
This government defense demonstrates that, although the Patent Box in Andorra is a powerful tool, its application is governed by strict prudence and legality.
Key tips for successfully applying for the Patent Box in Andorra
Given the data, it’s clear that success in applying for the Patent Box requires more than just owning a valuable intangible asset. A professional and methodical approach is essential. If you are considering applying for residency in Andorra for your innovative company, keep these tips in mind:
1. Specialized advice
Having experts in Andorran taxation is the first step. A good advisor can evaluate beforehand if your company and assets are eligible, helping to avoid failed applications.
2. Complete and rigorous documentation
Prepare a solid file justifying the innovative nature of the asset, its legal registration, and the income it generates. All documentation should be clear, precise, and compliant with current regulations.
3. Proactive communication
As shown by cases of lapse, communication with authorities is vital. Respond promptly and fully to any requests to prevent the case from being stalled.
4. Full legal compliance
Ensure your company is up to date with all fiscal and commercial obligations in Andorra. Irregular situations, such as being in liquidation, automatically lead to denial.
The process may seem complex, but with proper guidance, your chances of success increase exponentially. At Andorraway, we support you at each step to ensure your application is solid and compliant. Feel free to contact us to evaluate your case.
The future of the Patent Box and Andorra’s commitment to innovation
Far from being a hurdle, the robustness of the Andorran government in applying the Patent Box reinforces its commitment to an economic model based on added value. Finance Minister has announced focus on two main areas to improve and promote this regime:
- Greater dissemination: In collaboration with Andorra Business, the economic promotion agency, efforts will be increased to highlight the advantages and requirements of the Patent Box nationally and internationally.
- Digitization of the process: Development, together with the Digital Transformation department, of the technology needed to allow the submission of the tax declaration online through the Government’s Electronic Office, streamlining the procedure.
In conclusion, the Patent Box in Andorra regime is an excellent opportunity for innovative companies seeking to establish in the Principality and optimize their tax burden. However, the 25% denial rate shows it is not a path free of requirements. A well-founded file, impeccable compliance, and expert advice are key to turning the potential of your intangible assets into real and lasting fiscal benefits.