Andorra: Proposed Reform Foreign Investment legislation.
Under the provisions of the current legislation all foreign investment in Andorra, whether business investment or personal investment eg purchase of residential accommodation, must be approved by the Andorran authorities. Full details must be provided of the investment before authorisation is granted.
The current legislation was introduced in 2012 as part of a wider process of opening Andorra to foreign investment and the development of the economy. The system was subject to a review earlier this year that concluded the 2012 law is misaligned with the needs and challenges of the Principality's economy.
The proposed changes aim to liberalise and streamline the process while maintaining an effective evaluation of the proposed foreign investment considering the national cost and benefits.
It is proposed that certain investments will be liberalised, while the existing systems of control, evaluation of potential risk and safeguards will be reinforced. The process as a whole will be aligned with international standards and will include a sanctioning regime.
The report proposes that foreign investments that meet certain criteria should be subject to reduced regulation as part of the liberalisation of the law. No prior authorisation is required when the investor is a national or resident of a country that has a double taxation agreement with Andorra, (states with a DTA are listed below) or where a country has a collaboration agreement on foreign investment with Andorra.
(DTA’s currently in force: France, Spain, Portugal, Luxemburg, Liechtenstein, UAE, Malta, Cyprus, San Marino and Hungary)
Andorra: Strong Economic Recovery - IMF
In common with many European and Global economies the Andorran economy suffered considerable difficulties as a result of restrictions imposed during the Covid pandemic. However in 2021 the economy bounced back with strong growth of almost 9% after a fall of slightly over 11% in 2020.
Following a number of meetings between the IMF and the Andorran government the IMF’s annual report concluded ‘Andorra’s economy is recovering strongly after a deep recession cause by the pandemic’ and highlighted that there has been ‘a better economic recovery than expected.’
The IMF considered that the government’s action was successful in mitigating the effect of the health crisis through good management and economic support. As a result of prudent budgetary policy the level of indebtedness is expected to decrease to pre-pandemic levels in the near future. The report recommended that the government continues to strike a balance between reducing the debt burden while also increasing investment in both public and private sectors to boost growth in the short and medium term.
The Minister of Finance, Mr Eric Jover, stated that current projections indicate that growth is forecast to be 4.5% in the course of 2022.
Andorra: Deposit and Investment Guarantee System
Membership of the Andorran Deposit and Investment Guarantee (SAGI) is compulsory for all financial services companies, including investment companies, agencies, wealth and corporate management entities, and authorized collective investment schemes. The regulatory framework of the Management Committee has recently been strengthened with the approval of the Council of Ministers. It is the role of the Committee to ensure the proper functioning of the System and the guarantee fund.
The Regulations improve the effectiveness of SAGI, the protection of investors and everyday users of financial services in Andorra, with the overall aim of strengthening confidence in operation of the Andorran financial system.
August 2022
5th EU AML Directive:
The government has passed into law amendments to the existing legislation on the Prevention of Money Laundering and terrorist Financing to incorporate the EU 5th AML Directive, the recommendations of FATF and Moneyval following recent evaluation of Andorra. Additional measures have been introduced regulating access to information on the beneficial ownership of companies at the Companies Registry and allowing applications without the requirement to prove a legitimate interest.
A Register of Financial and Assimilated Accounts has been created which requires financial institutions operating in Andorra to declare to the Registrar the identity of holders and beneficial owners of accounts, deposit boxes etc. Access to the information is limited to UIFAND.
Banking Solvency and Supervision:
A Government Decree was approved to develop existing legislation to bring it inline with the EU Directive on banking solvency, liquidity and the prudential supervision of banks and investment firms.
Credit Card Transactions:
To bring Andorra into line with EU Regulation on exchange rates applied to credit and debit cards transactions in Andorra the government has approved legislation to limit charges paid by business. The maximum charge is now limited to 0.2% to 0.3%. The Minister of Finance noted that in recent year charges stood at 1% though he considered ‘there are no significant differences between Andorra and neighbouring countries to justify the higher charge.’ Businesses welcomed the change which would help support business post Covid.
The Law comes into effect on 1st November 2021 to allow sufficient time for banking systems to be updated.
August 2021
If you have any queries about Andorra please contact Simon Huxford at s.huxford@rosemont-mc.com
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