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Foundation of Companies in Andorra

Herbert Eder, majority owner of Consulting Group SLC

Although the small principality does not dispose of a lot of natural sources, in any case water may be mentioned (for country use) and granite rag. In spite of its mountain locality Andorra used to be an agrarian country, however, over the years agriculture has limited to growing of potatoes. Only 2% of Andorra is intended for agrarian uses. The principality was a shop window of Europe for Spain, but when Spain entered European Union in 1986, economical policy had to be changed.

Ski area Grau Roig
Ski area Grau Roig

Today this country lives in particular on tourism; more than 12 million tourists come yearly because of winter sports. There are disposable about 500 hotels, sports and holiday centers. Apart from that an important source of income is an electricity power sold to Spanish region of Catalonia, made by usage of water energy. The license for utilization of this source from 1929 for purposes of power supply resulted in building of major highways as well as of the power distribution network. There is also well developed banking. The other source of income is concessionary fees of local radio stations. Andorra provides its inhabitants with a total tax freedom.

Today this country lives in particular on tourism; more than 12 million tourists come yearly because of winter sports. There are disposable about 500 hotels, sports and holiday centers. Apart from that an important source of income is an electricity power sold to Spanish region of Catalonia, made by usage of water energy. There is also well developed banking. The other source of income is concessionary fees of local radio stations. Andorra provides its inhabitants with a total tax freedom.

Thanks to the law income tax this country is attractive for the trade with luxurious goods (gold, jewelries, leather goods, clothes, cosmetics). Andorra is a country that lives on services and tourism. Only little of industry may be found here, however, a new strategy of diversification of economy should lead to foundation of subsidiaries of specialized enterprises, such as pharmacy or optical area (glass eyes) in the following years.

Relationships towards European Union follow treaty of commerce signed on 28 June 1990, which deals with tariff union of industrial goods and special arrangements for agricultural products. This time-unlimited frame treaty became effective from 28 May 1991.The treaty was extended in 1995, when Andorra filed a proposal on unlimited privilege in consideration of direct reverse replacement foreign custom duty. In particular consumer items of all sort, as well as electrical energy, livestock, sheep wool, ceramics and wood are being imported. The main business partner of this country is France and Spain, to which 92% of all export is directed and from which comes 83% of all import.

Andorra is not a member of European Union, in spite of this it uses special care from EU. By 2002 French franc and Spanish peseta have been replaced with Euro, as well as in France and so in Spain, however Andorra does not have its own Euro coins. There is currency Dinar in Andorra, but mainly because of collectors purpose (Catalan expression for “money”). This has been issued since 1997. Exchange rate is 100 ESP (0.60 EUR) or 5 FRF (~125 ESP or 0.75 EUR) for one Dinar. Salaries, financial penalties etc. are embodied twice in Andorra, in Dinars and Euros. In terms of its non-involvement to European Union Andorra is known as tax oasis, because there is no income tax, inheritance tax or capital tax and until 2005 there was no value added tax. Since 1 January there has been issued value added tax on four per cent for the majority of goods and services. That means for numerous fictional companies paradise conditions for enterprise taxation, but also an ordinary tourist enjoys low prices of alcohol, tobacco and cosmetics, as goods in Andorra is not yield to custom duty. Everything that is not of immediate use has to be declared, otherwise one might face difficulties when taking out some products.

Gross domestic product makes 1,7 bill. EUR (Status from February 2005).

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