ANDORRA Law and Practice Contributed by: Oriol Giró, Laia Bertran, Yaumara Toledo and José Luis Andrés, Emindset Law Firm
Eligible holding companies may benefit from an exemption on qualifying foreign dividends and capi - tal gains, rather than a general 80% rebate. An 80% reduction applies to certain international intangible, trading and intragroup financial activities, subject to strict substance, activity and authorisation require - ments. Tax-neutral treatment may also be available for quali - fying corporate reorganisations. 5.4 Tax Consolidation Tax consolidation is available on an optional basis for qualifying Andorran corporate groups. All eligible group companies must agree to apply the regime, consolidate their financial statements and satisfy the statutory parent–subsidiary ownership require - ments. The parent company must notify the Ministry of Finance before the beginning of the first tax period concerned and assumes responsibility for the group’s consolidated corporate tax filing. 5.5 Thin Capitalisation Rules and Other Limitations Andorra does not apply a traditional debt-to-equi - ty thin-capitalisation ratio. However, net financial expenses are generally deductible only up to certain percentage of tax-adjusted EBITDA, subject to a mini - mum deduction and statutory exemptions. Related- party financing must also comply with arm’s-length
to reassessment, interest, penalties and, in serious cases, criminal liability. 5.8 Tariffs Banking and financial services are subject to an increased IGI rate of 9.5%. Foreign real estate invest - ment is also taxed at 6% for qualifying limited acqui - sitions and 10% for other investments exceeding the statutory limits. Current developments are influenced by Andorra’s closer economic integration with the EU. Andorra does not currently apply a general merger- control notification regime based on turnover or mar - ket-share thresholds. However, acquisitions, mergers or joint ventures involving foreign investors require prior Government authorisation where they constitute foreign investment, including the acquisition of more than 10% of an Andorran company. Corporate merg - ers and demergers must also be registered with the Companies Registry. Where the tax-neutral restructur - ing regime is applied, the transaction must be notified to the tax authorities before execution of the relevant public deed. 6.2 Merger Control Procedure 6. Competition Law 6.1 Merger Control Notification The process usually begins with due diligence, nego - tiation and preparation of a common merger plan and merger balance sheets. The governing bodies approve the plan, which is then submitted to the sharehold - ers of each participating company for approval. Any required independent expert reports and creditor pro - tection procedures must be completed before imple - mentation. Where the tax-neutral restructuring regime applies, the transaction must be notified to the tax authorities before execution of the public deed and must be sup - ported by valid economic reasons. The merger is then formalised before an Andorran notary and registered with the Companies Registry, producing universal succession of assets and liabilities. Foreign invest - ment authorisation may also be required. Depending on complexity and approvals, the process generally takes three to four months.
transfer-pricing rules. 5.6 Transfer Pricing
Transfer pricing rules apply to transactions between related parties, which must be valued on an arm’s- length basis. The Andorran tax authorities may adjust the taxable base where agreed terms differ from mar - ket conditions, and taxpayers must retain sufficient
supporting documentation. 5.7 Anti-Evasion Rules
Andorra applies anti-evasion rules allowing the tax authorities to disregard simulated, abusive or arti - ficial arrangements lacking economic substance. These measures are supported by transfer-pricing, beneficial-ownership, anti-money laundering and tax-information exchange rules. Breaches may lead
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