Last Friday 10th of December of 2021, the Spanish Council of Ministers has agreed to hand down to the Spanish Parliament the draft version of “The Startup Law”. Through this draft law, the Government adapts the applicable framework to the specific nature of startups in the administrative, fiscal, civil and commercial fields. The aim is to promote the creation and growth of innovative emerging companies based on digital technology and rapid growth, and boost measures for attracting international talent and investors.
Startups must have an innovative nature. The term Startup is defined as: New companies or companies less than 5 years old (7 years for biotechnology, energy, industrial and other strategic companies, or that have developed their own technology designed entirely in Spain). They cannot be listed on a stock market, distribute profits, or have annual revenues that exceeds 5 million euros.
Administrative agility is a priority. In the establishment of limited companies or for publication in the Official Companies Registry (BORME, Spanish acronym), it is expected that notary and registry fees will not be charged. The draft law also stipulates that companies can be created using online resources, and that non-resident investors don´t need to apply for a foreigner identification number (NIE in Spanish), but only a tax identification number (NIF in Spanish) shall be required for them and their representatives. “Startups” will be able to register digitally within six hours.
There are important fiscal measures to attract investments, attract national and international talent and promote the creation of digital hubs in Spain. These include the following:
- The tax rate for corporate tax and non-resident income tax is reduced from the general rate of 25% to 15% for the first four fiscal years as soon as the tax base is positive.
- The tax exemption on stock options is raised from 12,000 to 50,000 euros per year for startups that distribute shares or share units deriving from the exercise of call options.
- The maximum deductible amount for investments in new or recently created companies is also raised (from 60,000 to 100,000 euros per year), as well as the deduction rate (from 30% to 50%).
- Corporate Tax and Non-Resident Income Tax payments for the first two years in which taxable income is recorded may be deferred, without requiring any deposits or late payment interest, for a period of 12 and 6 months, respectively.
- The obligation to make payment instalments on Corporate Tax and Non-Resident Income Tax is eliminated for the first 2 years as soon as the tax base is positive.
- Digital nomads: Those entrepreneurs and remote workers that settle in Spain, will have the option of residing and working in Spain for 5 years, and will be eligible for a special tax regime, paying Non-Resident Income Tax.
- Entrepreneurs with multiple jobs will not be required to contribute twice to the Social Security system for a period of 3 years.
The draft law also allows startups to test their innovations for one year in a controlled environment to assess the utility, feasibility and impact of technological innovations in different production sectors.
The draft law intends to respond to the present and future needs of emerging companies. Therefore, it contains an ongoing review mechanism and the creation of the National Forum of Emerging Companies, as a meeting point between this sector and the public authorities. Collaboration between public authorities, universities, public research organisations and technology centres is encouraged.
The Spanish Ministry of Economic Affairs and Digital Transformation is confident that the ¨Startups¨ law will be passed by mid-2022, as this is one of the reforms promised to the European Union and has a deadline for approval by the last quarter of 2022.
Please note that this information is for general use only. For accurate advice and guidance, we highly recommend you book an appointment with an independent lawyer.
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