Do you want to become self-employed in Andorra? We explain the key steps before you start

Becoming self-employed is one of the bravest decisions a person can make. It is the moment a project stops being just an idea and starts to become reality. But it is also a time full of questions: Where do I start? What do I have to do? What costs will there be? What obligations do I take on?

At this key juncture, clarity is almost as important as a solid business idea.

That’s why, beyond bureaucracy, understanding the numbers and how the system works is key, so you can focus on what really matters: growing your project.

This is a short guide to help you through the first steps.

The first step: define your activity

When you decide to go self-employed, the first thing you need to be clear about is the type of activity you are going to carry out.

In general, professional activities tend to be grouped into two main profiles:

Depending on the nature of the activity, there may be certain permits or administrative authorisations, especially if it involves opening a physical establishment or carrying out a regulated activity.

The key is to understand that each project comes with its own administrative journey, and getting good advice from the beginning can avoid headaches.

Understanding the real cost of starting a business

One of the aspects that raises the most questions when someone considers becoming self-employed is the monthly cost involved.

The main fixed cost is the contribution to the CASS, Andorra’s social security system. This contribution helps finance benefits such as healthcare, pensions or other social coverage. It is important to understand this cost not only as an expense, but as a contribution to your social protection system.

Every year, you will also have to pay the municipal tax on the establishment of commercial, business and professional activities. This tax, managed by the local authorities, is usually much lower than the CASS contribution, but it is also part of the obligations associated with the activity.

And finally, there are also certain administrative fees associated with the registration and authorisation of the economic activity, the reservation of the denomination or trade name, the registration of trade with the Government and, if applicable, the fee for opening the establishment.

When preparing your project, it is advisable to incorporate these concepts into your cost calculations, along with other possible costs such as renting premises, purchasing supplies or engaging professional services.

Good financial planning from the outset will allow you to make more relaxed and more sustainable decisions.

Basic taxation: What taxes affect your day-to-day activity?

When you go from being employed to being self-employed, you also change the way you pay taxes. Without going into extensive detail, freelancers tend to mainly manage two types of taxes in their day-to-day life:

This income from economic activity is included in the general IRPF tax base along with any other income.

What’s more, there is the objective estimation regime, which allows you to simplify the calculation by applying fixed percentages of expenditure, without the need to justify each individual expense. Taxpayers with an annual turnover of less than €300,000, or €150,000 in professional activities, can apply. This option is designed to facilitate administrative management, although it may be less advantageous if your business runs with high operating costs.

Personal income tax in Andorra is a progressive tax with three brackets. The first €24,000 of total income are exempt, the bracket between €24,000 and €40,000 is taxed at 5%, and only the part that exceeds this amount is subject to the maximum general rate of 10%.

With IGI, the self-employed person acts as an intermediary: The tax is included on their invoices issued and they deduct the IGI incurred on the expenses of the activity. In each taxation period, the difference between the IGI charged and the IGI incurred is settled.

IGI is not a cost for the business, since in each settlement the IGI charged to customers is offset against what has been paid to suppliers.

It should be noted that if you invoice less than €40,000 annually, there is no obligation to include IGI on the invoices. That being said, issuing an invoice is still mandatory. However, you can voluntarily opt out of this regime if you are interested in deducting the IGI from your expenses.

👉 Beyond taxes, the most important thing is to understand how they affect your business’s cash flow: what you should set aside, when settlements must be made and how to organise cash flows so that tax payments do not come as a surprise. Freelancers often discover too late that good tax management is not just about paying taxes, but above all about anticipating them correctly.

The most common mistake: mixing personal and business finances

People starting their own business often make the same mistake: using the same bank account for everything.

When personal income and expenses are mixed with those of the business, managing your finances quickly becomes a complicated affair. It is difficult to know if the business is truly profitable, to control costs or how to prepare your accounts correctly.

Therefore, one of the first healthy habits for any freelancer is to clearly separate personal finances from professional ones.

Ultimately, it gives you a much more realistic picture of your business.

Starting a business needs courage, but also planning

Becoming self-employed is an exciting adventure. It’s about committing to your own ideas, building something of your own and shaping a project that can grow with you. But it is also a path that requires information, planning and a good structure from day one.

And along this path, having the right support can turn a complex process into a much simpler journey. If you are thinking about making the leap towards self-employment, getting the right information from the start can make a big difference.

At Creand, we offer you information and financial solutions designed to make the day-to-day lives of freelancers and professionals easier. Among our services is the Innovation Hub, a space designed to support companies looking to innovate, grow, and lead in their sectors.

You can check out all the content and resources available at Creand.ad or contact an advisor who can help you analyse the needs of your project and find the most appropriate financial tools to get off to a good start.

Because entrepreneurship is not just about starting a business. It is the beginning of a new stage in your career. And great stages always begin with good decisions.

🔎 Discover the Self-Employed Pack and give your project a boost from day one!