On December 1, the Andorran Parliament (Consell General) approved Law 42/2022 on the digital economy, entrepreneurship, and innovation to establish the regulatory framework for all economic activities that enable the development of new business opportunities based on technology. Furthermore, it facilitates the development of entrepreneurial initiatives to add value to the Andorran economy as a whole.
The legislation includes a series of measures and regulations in the field of the digital economy, with the aim of making the Principality of Andorra an attractive country for investors, both local and foreign. Some of the novelties and concepts of this Law were developed in the Regulation approved by Decree 212/2023 on May 10, which came into effect on June 17, 2023.
However, this Law does not only regulate aspects of the digital economy. Among other things, it introduces changes to the immigration legislation, increasing the requirements for obtaining passive residence and active residence for self-employment or through the establishment of a company.
One of the main novelties is the adaptation of the criteria for non-profit residence, where applicants for this type of residence must invest an amount of 600,000 euros in any of the assets listed below:
a) Real estate located in the territory of the Principality of Andorra
b) Participations in the share capital or in equity of companies resident in the Principality of Andorra.
c) Debt or financial instruments issued by entities resident in the Principality of Andorra.
d) Debt instruments issued by any public administration of the Principality of Andorra.
e) Life insurance products contracted with entities resident in the Principality of Andorra.
f) Unremunerated deposits in the Andorran Financial Authority (AFA).
However, these amounts are reduced to 400,000 euros if the investment is made directly or indirectly and in a permanent or effective manner in the so-called “Fons d’Habitatge,” a financial instrument regulated through the Law on Andorran Collective Investment Entities. Its objective is to invest in real estate projects for the promotion of affordable rental housing in the Principality of Andorra.
In case the investment in Andorran assets is made partially or entirely in real estate, i.e., in more than one property, a minimum amount of 400,000 euros must be allocated for each real estate unit acquired.
Additionally, it is mandatory for the titleholder to make a deposit of 47,500 euros to the Andorran Financial Authority (AFA), as well as 9,500 euros (both unremunerated) for each dependent person acquiring non-profit residence. It is important to highlight that these amounts are deducted from the previously mentioned sum of 600,000 euros.
Another significant modification worth mentioning refers to the fulfillment of certain requirements to be eligible for the granting of an immigration authorization for self-employment residence and work. In the case of liberal professionals who wish to carry out self-employed activities, they require the authorization of the Andorran Government for the exercise of the intended activity and the corresponding accreditation from a professional association (in addition to complying with the rest of the requirements established by the Law).
On the other hand, foreign investors opting for the establishment of an Andorran company (of which they hold a stake of more than 34% and hold a position in the Board of Administration and effective management of the activity) must (in addition to meeting other requirements of the Law) deposit the amount of 50,000 euros (unremunerated) with the Andorran Financial Authority (AFA).
However, there is an exception to the above. Andorran companies established to promote the digital economy, entrepreneurship, and innovation according to the definitions in Law 42/2022 are exempt from depositing the amount of 50,000 euros with the Andorran Financial Authority (AFA). With this exception, the Government of Andorra aims to flexibilize the criteria for granting residence and work permits to individuals who, through a company, engage in economic activities within the digital and innovation space.
In summary, Law 42/2022 not only establishes the regulatory framework for a digital economy, entrepreneurship, and innovation, but it also facilitates entry for foreign investors interested in developing technology-based activities through the establishment of an Andorran company.