Andorra attracts with its light taxation and Europe's lowest VAT. But the micro-principality isn't an EU member, and its formation procedure involves a foreign-investment authorisation that seriously extends timelines. Before choosing between Andorra and a Latvian SIA, here are the facts, backed by numbers.
Taxation: 10% CIT, with conditional reduced regimes
Andorra applies a standard corporate tax (CIT) of 10%, one of the lowest in Western Europe. Reduced regimes exist: 2% for international trading companies whose activity is validated as such, and 5% for recently formed innovative startups, under strict, time-limited conditions. Partial exemptions also exist for young companies.
Watch the complexity of accessing reduced regimes
The 2% and 5% rates aren't automatic: they require administrative validation of the activity and compliance with precise criteria (nature of activity, shareholder residency, thresholds). The standard 10% remains the reference for most companies. Latvia, by contrast, offers an unconditional 0% on reinvested profits.
The numbers-based comparison, point by point
| Criteria | Latvia (SIA) | Andorra (SL) |
|---|---|---|
| Standard CIT | 0% reinvested / 20% distributed | 10% |
| Reduced regimes | Not applicable (0% already unconditional) | 2% (international trading) / 5% (startup) |
| VAT | 21% | 4.5% (IGI, lowest in Europe) |
| Minimum capital | €1 / €2,800 | ~€3,000 |
| Formation time | 2 to 5 days | 2 to 3 months (authorisation required) |
| EU member | Yes | No |
| Eurozone | Yes | Uses the euro (monetary agreement, non-EU) |
| Non-resident access | Free | Foreign-investment authorisation required |
Verdict
Andorra appeals with its very low VAT and 10% CIT, but its non-EU status and prior authorisation procedure significantly extend formation time. Latvia remains faster, more accessible, and offers an unconditional 0% on reinvested profits.
Advantages of Latvia and Andorra
Advantages of Latvia
- EU and eurozone member, simple intra-community invoicing
- Formation in 2 to 5 days, no prior authorisation
- Unconditional 0% on reinvested profits
- Facilitated European banking access
Advantages of Andorra
- VAT (IGI) at 4.5%, the lowest in Europe
- 10% CIT, with possible reduced regimes at 2-5%
- Very attractive lifestyle and personal taxation
- Geographic and cultural proximity for a Spanish-speaking or French-speaking clientele
Who Latvia is the best choice for
If you want to form a company quickly, invoice within the eurozone and EU without customs or administrative complications, or if you don't meet Andorra's strict reduced-regime criteria, Latvia offers a simpler, faster framework.
Who Andorra may suit better
Andorra suits a high-margin activity with local or Spanish-speaking clientele, able to absorb a formation timeline of several months and to demonstrate an activity eligible for the reduced regimes, with genuine local roots (residency, physical presence).
"Andorra has real tax advantages, but it isn't an EU jurisdiction, and the formation procedure takes several months. Weigh that seriously against the cost of lost time."
Frequently asked questions
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