The new Startups Law introduces tax benefits for investors and entrepreneurs and other measures to attract and retain digital talent. The Government expects to raise the investment by a minimum of 20% after three years in force.
The Spanish Congress approved the Startups Law on November 3rd 2022, with which the Government seeks to turn Spain into a pole of entrepreneurship and attract investment. The norm, which incorporates changes agreed with the actors of the sector and the rest of the parties, went ahead with 177 votes in favor, 75 abstentions and the votes against the PP. Now it will be sent to the Senate to continue its processing and it is expected to enter into force on January 1, 2023.
In a meeting with journalists, the Secretary of State for Digitization and Artificial Intelligence, Carme Artigas, assured that “the business case that the Government is considering is that in three years after the new law comes into force we can achieve a minimum increase in 20% on the current investment” in the entrepreneurship sector.
The support of the Chamber comes 11 months after the Government approved the bill, and more than 80 amendments were incorporated. The law includes important tax measures, eliminates bureaucratic obstacles and makes procedures more flexible to encourage the creation and investment in emerging technology-based companies. It also incorporates key measures to attract and recover international and national talent, favoring the establishment in Spain of teleworkers and digital nomads.
Impact on taxation
Thus, in addition to reducing the tax rate on corporate tax and non-resident income tax, from the general rate of 25% to 15% in the first four years from which the tax base is positive, the rule facilitates the use of the stock options as a form of remuneration, since it raises its tax exemption from 12,000 to 50,000 euros per year and its taxation is delayed when they become liquid, either through the sale of the shares or through an IPO. Likewise, the conditions for generating treasury stock in limited liability companies are made more flexible.
The Law also raises the maximum deduction base for investment in newly or recently created companies from 60,000 to 100,000 euros per year. A tax incentive that investors and entrepreneurs can take advantage of. In addition, the type of deduction goes from 30% to 50%, and the period in which a recently created startup is considered to be five years (seven in certain sectors).
Regarding the taxation of the carried interest (successful commission of the venture capital managers), the exemption will be up to 50%, although its taxation is maintained as income from work and not as income from movable capital in personal income tax, as had been the case. The double contribution to Social Security is also eliminated for entrepreneurs who simultaneously maintain a job as an employee during the first three years.
With the latest changes introduced, the billing is increased from 5 to 10 million in the definition of startups, entrepreneurs will be able to benefit up to four consecutive times from the benefits of the law, and the positive administrative silence by Enisa is included to qualify if a company can benefit from the law. In addition, this entity will be able to close agreements with other autonomous entities (both private and public) to be more efficient in the identification and classification of startups.
The Digital Nomad Visa
To attract and retain talent, the changes introduced have served to create a new category of visa for digital nomads, called the visa for international teleworkers or Digital Nomad Visa, to carry out a work or professional activity remotely for companies located outside the national territory. The duration of the visa will be one year. In addition, the special tax regime is extended by which it is now taxed by IRNR (tax on the income of non-residents) and not by IRPF (tax on the income of natural persons) to, among others, digital nomads. The law makes it easier to obtain a visa and residency for highly-qualified startup workers as well as non-resident Spanish workers for at least five years.
The text also extends one more year, up to two, the permit provided for foreign higher education students to find employment or start a professional project in Spain once they complete their studies. (Check The Job Search Visa: A new door for recent graduates to work in Spain)”. Likewise, the creation and strengthening of entrepreneurial ecosystems in the rural world is encouraged, and the creation of sandboxes is favored so that Spain is a place of testing and innovation.
The rule recognizes the capacity of the Tax Agency to verify whether the necessary requirements to benefit from tax incentives are met and remain in force and raises the threshold of the penalty provided to reverse these benefits when there is a conviction of one of the partners, but will only be applicable if the convicted person has at least 5% of the capital.
Check also our article: The new Spanish Digital Nomad Visa: a new visa to work remotely from Spain
