The enforcement of the new startup law represents a boost to the entrepreneurial and investment ecosystem in Spain, which has been growing in recent years.
Emerging companies offer high growth and prosperity potential, promoting research, development, and innovation that facilitate the creation of new products and services. However, they needed an appropriate regulatory framework to ensure equitable access to digital tools and to attract talent and investment.
Want to know what this new law entails and the requirements to benefit from it? Keep reading because in this article we’ll tell you everything.
What does the new Startup Law entail?
The Law for the promotion of the emerging companies’ ecosystem, which came into force at the end of 2022, aims to make Spain an attractive country for all entrepreneurs and investors.
This is key to increasing our country’s competitiveness from a global perspective, but we must not forget how beneficial it can be for entrepreneurs themselves. But, what kind of entrepreneur can benefit from this law?
Which emerging companies can apply under this regulation?
This rule incorporates new tax benefits to attract investment, favorable regulation for stock options, and a visa for digital nomads, among other measures intended to position the country as an entrepreneurial destination.
All legal entities (capital companies/cooperatives) based on technology can access these benefits and:
- Be newly created (5-7 years since registration in the RM). Maximum 3 founders.
- Not have emerged from a merger, split, segregation, or transformation, unless it’s between emerging companies.
- Not distribute or have distributed dividends.
- Not be listed on a regulated market.
- Have their registered office in Spain.
- At least 60% of the staff must have an employment contract in Spain.
- It must be an innovative entrepreneurial project with a scalable business model.
In any case, to determine compliance with all the requirements, it is advisable to seek advice from professionals who assess the company’s situation and ensure proper compliance with applicable rules and regulations.
What tax advantages does the new Startup Law offer in Spain?
1. Corporate Tax and Income Tax for Non-residents
A reduction of this tax rate to 15%, instead of the generally established 25%, will be applied for a maximum period of four years from when the taxable base becomes positive.
2. Stock options
The exemption amount will increase from 12 thousand euros per year to 50 thousand for workers of a company with shares or social participation. This will extend until these are sold, the startup goes public, or 10 years have passed since they were granted.
3. Deduction in the Personal Income Tax
The law offers an improvement in the Personal Income Tax when subscribing shares or their participation in newly created companies. The deduction increase goes from 30% to 50%, while the investment base increases to 100 thousand euros per year.
4. Carried interest
Administrators, employees, or managers of entities and investment funds will only tax 50% to promote the development and attraction of venture capital entities.
5. Obtaining NIF/NIE
Individuals will no longer need to obtain NIE, NIF is enough. For this, an electronic process has been implemented to facilitate its acquisition, possibly within 10 days.
6. New obligation to report
Dominant companies in consolidation with a turnover greater than 750 million euros for two consecutive years will be required to submit a report.
Labor benefits of the Spanish Startup Law
1. Regime for expatriates
Allows workers transferred to Spanish territory to be taxed as non-residents, meaning the amount will be less than that established in the general regime.
2. Autonomous quota bonus in pluriactivity
Autonomous individuals with effective control in startups and, simultaneously, employees for another employer can benefit from a 100% bonus of the minimum autonomous quota for the first 3 years from the registration date as an autonomous worker.
3. Entry and stay facilities in Spain
Foreigners may extend the duration of their initial residence permit for economic interest reasons.
Special corporate measures
1. Acquisition of treasury stock in SL to execute a compensation plan
The new regime states that it is allowed to acquire up to 20% of the share capital in treasury stock to deliver it to administrators, employees, and collaborators of the company within the framework of the compensation plan, within a maximum of 5 years after the authorization agreement of the General Assembly.
2. Losses that reduce net worth
Startups that previously had an obligation to dissolve if their net worth is less than half of their share capital no longer have this obligation for the first 3 years since its constitution.
3. Registration of acts and agreements in the Registry
Finally, emerging companies have a period of 5 days from the presentation entry or 6 working hours if it is Type Statutes. In addition, this latter is exempt from fees.
In conclusion, the development of emerging companies in Spain is favored within the framework of this new startup law. Therefore, it is important to have the support of professionals like those at The Startup CFO to make the most of these opportunities. The experience and knowledge of the CFOs can guide startups in making accurate financial decisions, thereby contributing to their growth, profitability, and success in the market.