Andorra open to foreign takeovers
Article published by Mark Mulligan in Financial Times (www.ft.com) on November 7 2008
Andorra, the tiny Pyrenees principality, will on Friday open its borders to foreign takeovers as part of efforts to modernise the economy and shake off its image as a shady financial centre.
Under legislation passed in April, foreign investors will be allowed to control 100 per cent of companies in 200 designated sectors, while controls will be eased in core activities such as construction, tourism and retailing. Foreigners will be allowed to own 49 per cent of the capital in companies in these sectors, compared with 33 per cent at the moment.
Friday’s reforms follow the creation this year of companies’ register, to which local businesses will have to file regular accounts using international standards. There are also plans to introduce corporate tax of between 5 and 10 per cent, and value-added tax of 4 per cent.
At present, there are no direct taxes on companies and individuals in Andorra, making it a popular base for the wealthy from countries such as Spain, Portugal, France and the UK.
The changes are part of an effort to restructure the tiny economy, which relies on tourists – mainly skiers – for about 60 per cent of its E2.5bn gross domestic product. Global turbulence is expected to hit tourism hard, and Andorra has also seen a sharp downturn in construction activity, which accounts for about 10 per cent of GDP.
Juli Minoves, economic development minister, on Thursday described them as “important reforms, introduced at moment when they are most needed”.
However, the changes are also aimed at improving relations with Spain – which slaps a punitive 25 per cent tax on services provided by Andorran companies – and with the Organisation for Economic Co-operation and Development, which has Andorra on its list of un-co-operative tax havens.
This classification has taken on sinister connotations since the 2001 terrorist attacks in the US, as the hunt for al-Qaeda put secretive tax havens under the spotlight as possible sanctuaries for financiers of terrorist groups.
This, added to a series of financial scandals, has increased the pressure from the US and European Union on micro-countries such as Andorra and Liechtenstein for more transparent banking and taxation.
Copyright The Financial Times Limited 2008
PD: in fact is 24% currently, not 25%
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