Spain vs Andorra: corporate tax, substance and the real cost.
Andorra taxes company profits at 10% against Spain's 25%. That gap is real, and it is also the least important part of the decision for most businesses.
The numbers, side by side.
Start with the figures, because that is what most people come for.
| Andorra | Spain | |
|---|---|---|
| Corporate income tax | 10% flat | 25% standard |
| Minimum effective rate | 3% since 2024 | Varies with reliefs |
| Smaller companies | Same 10% | 23% in 2026 below EUR 10m turnover, stepping to 20% by 2029 |
| New companies | Same 10% | 15% for the first profitable period and the following one |
| VAT equivalent | IGI at 4.5% | VAT at 21% standard |
| Personal income tax | Capped at 10% | Progressive, substantially higher at the top |
| Dividends to resident shareholders | Generally exempt | Taxed under the savings scale |
| EU member | No | Yes |
| EU VAT territory | No | Yes |
| Treaty network | Limited and recent | Extensive, including Latin America |
Andorra is a legitimate, low-tax European jurisdiction. Not a secrecy jurisdiction.
It has exchanged tax information for years, signed up to international transparency standards, and negotiated treaties. The 10% rate is a genuine policy choice by a small state, not a loophole. Anyone comparing the two should do so on the merits rather than on outdated assumptions.
Where Andorra genuinely wins.
There is a fourth advantage worth naming honestly: for people whose income is largely passive or personal rather than operational — investors, some consultants, individuals with portfolio income — Andorran residence combined with an Andorran company can be a coherent and lawful arrangement, provided the residence is real.
Where Spain wins, and why it usually decides.
Spain is in the EU. Andorra is not.
A Spanish SL sells across twenty-seven member states without customs formalities, is an EU counterparty for contracting and data protection purposes, and is eligible for procurement that excludes third countries. An Andorran company is a third-country supplier in Europe.
Andorra is outside the EU VAT territory and the customs union.
Goods moving between Andorra and the EU cross a customs border. For any business shipping physical products into Europe, this is an operational cost and complication that no corporate tax rate compensates for.
- Treaty network — Spain's is broad and long-established; Andorra's is limited and recent, which affects withholding on inbound and outbound flows
- Banking — a Spanish company banks as an EU entity; Andorran banking is functional but the entity is treated as third-country by EU counterparties
- Talent pool — Andorra has roughly eighty thousand residents. Hiring specialists means importing them
- Physical presence — residence requirements are real, and so are the practicalities of living there
- Domestic market — Andorra's own market is very small; Spain's is one of the largest in Europe
- Perception — a Spanish entity raises no questions with European buyers; a third-country entity sometimes does
The question that actually decides it.
Where is the business genuinely run from?
An Andorran company managed from Barcelona is, on the facts, potentially Spanish tax resident — because effective management, not registration, determines corporate residence. Spanish authorities examine this, and a structure that exists only on paper produces a retrospective assessment rather than a saving. The 15-point rate gap is only available to a company that is really there.
This is the point where most Spain-Andorra comparisons stop being useful. The rate difference is a headline; the question is whether the arrangement it describes is one you can actually live. Genuine Andorran substance means directors resident and deciding in Andorra, staff and premises proportionate to the activity, and for an owner-manager, personal residence with the day counts and the life that implies.
| Your situation | Likely better | Why |
|---|---|---|
| Selling goods or services into the EU market | Spain | Single market access, no customs border, EU counterparty status |
| Owner-manager willing to actually relocate to Andorra | Andorra | Combined corporate and personal outcome is materially lighter |
| Hiring a team in Europe | Spain | Talent availability and scale |
| Physical products shipped to EU customers | Spain | Customs border makes Andorra operationally costly |
| Passive or portfolio income, real relocation | Andorra | Rate and personal treatment, if residence is genuine |
| Management staying in Spain | Spain, by default | An Andorran company run from Spain risks Spanish tax residence anyway |
| Public sector or large corporate buyers in the EU | Spain | Third-country entities are frequently excluded at onboarding |
A Spanish SL, established remotely, at a fixed price.
Incorporation, NIF, tax activation, VAT and intra-community registration and a bank-ready file — carried by one team from EUR 2,700.
One alternative worth putting on the table before choosing Andorra: Spain's impatriate regime offers a flat 24% on employment income up to EUR 600,000 for up to six years, with foreign income largely outside the Spanish net. For a founder relocating to Europe it is not as light as Andorra, but it comes with EU membership attached — and it is frequently the better answer for someone who wants a European base rather than a low-tax residence.
What is the corporate tax rate in Andorra?
Is Andorra in the EU?
Can I run an Andorran company from Spain?
Is Andorra a tax haven?
Which is better for an online business?
Other comparisons.
Fifteen points of tax. Payable only if you actually move.
Book a free call ↗Alexander Baranov
Seventeen years designing and delivering cross-border corporate structures — incorporation, tax, holding, banking and market entry — for founders and companies expanding into Spain and the EU. Author of professional books on entering the Spanish market.
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