The new Startups law 2023 comes into force. On January 23, 2023, the new Law 28/2022, of December 21, 2023, on the promotion of the startup ecosystem, came into force. This law, known as “Startups Law”, offers tax incentives to those entities which fall within its scope of application. On this occasion, at Arrabe Integra, our experts from the Tax Consultancy Department tell us what they consider to be the most interesting points of this law, which affects those considered as emerging companies or startups.
New Startups Law 2023
These are the characteristics of this new startups law that modifies some aspects among others the tax benefits of the previous startups law.
Objectives of the new Startups Law 2023
The intentions of the Government with the implementation of the new “Startups Law”, are in its own words, mainly the following two.
On the one hand, to intensify both the incorporation and relocation of startups in Spain.
On the other hand, to promote the development of the startup ecosystem by attracting talent and international capital.
Requirements
In order for a company to benefit from the advantages offered by this new Startups Law 2023, it must meet a series of general requirements.
Firstly, it must have its registered office or a permanent establishment in Spain.
In addition, in general, it must have been in existence for a maximum of 5 years. This is extended to 7 years for biotechnology, energy and industry companies. In addition to other sectors established by ministerial order.
Also, to have an innovative and scalable business project, concepts that are still to be defined. But in any case it must be certified by ENISA.
Another important requirement is that at least 60% of the workers must have an employment contract in Spain.
Under no circumstances may it be a company listed on a regulated market.
Nor may it distribute or have distributed dividends since its incorporation.
In the event of having arisen from a business restructuring operation, they must come from an emerging company.
For the groups of art.42 CC, these general requirements must be met by all the entities that comprise it.
Additional requirements
In addition, the following conditions must also be met:
- The turnover of the entity may not exceed 10 million euros.
- Whoever directs or incorporates the entity must be up to date with its obligations with the Social Security and the AEAT. Nor may he/she have been convicted of certain crimes.
- None of the partners with a shareholding of 5% or more must have been convicted of certain crimes.
- The activity carried out must not be significantly harmful to the environment.
- They must comply with the definition of an innovative company. Technology-based entities are expressly included.
ENISA certification emerging company or “Startup”
In order for an entity to be considered an “emerging company”, ENISA must certify this condition. If the application has been processed and no response has been received within 3 months, it will be deemed to have been accepted.
The following is a list of some of the points to be analyzed when issuing the certification:
- Degree of innovation
- Market attractiveness
- Life stage of the company
- Business model
- Competence
- Team
- Customers
Once the status of start-up company has been obtained, it must be registered in the Commercial Registry. However, the AEAT may carry out checks to verify compliance over time with the requirements listed above. If these requirements are not met, the entity will no longer benefit from the tax incentives.
Tax advantages for emerging companies in the new “Startups” Law 2023
The certification as an emerging company will give access to important tax advantages both in Corporate Income Tax and Personal Income Tax.
Corporate Income Tax
Firstly, access to a reduced rate of 15% in the first year that negative taxable income is obtained and in the following three years.
It will be possible to defer free of interest and guarantees the IS of the first year with a positive taxable base, and the following one. The maximum terms of this deferral are as follows:
- First fiscal year: Up to 12 months.
- Second year: Up to 6 months.
- Payment period: One month from the end of the deferral period.
- In any case, the self-assessment must have been submitted within the legally established period.
- Deferral of complementary self-assessments will not be granted.
In addition, there will be no obligation to make installment payments in the fiscal year following the deferred one.
Both permanent establishments and branches of foreign companies will be able to enjoy these benefits.
Finally, it is important to mention that, in order to be able to apply these incentives, the condition of emerging company must be maintained at all times.
Personal Income Tax (IRPF)
We are going to look at the IRPF tax advantages in two specific areas.
Deduction for investment in new or recently created entities.
The existing IRPF deduction for “investment in new or recently created entities” is improved. And it is further extended in the case of “start-up companies”. This allows individuals who choose to participate in one of these entities to benefit from a personal income tax deduction. Investment in “emerging companies” or “Startups” will have a more advantageous treatment than the rest.
A comparison is shown below:
| General Regime | Startups | |
| Deduction base | €100.000 (before €60.000). | €100.000 |
| Percentage deduction | 50% (previously 30%) | 50% |
| Deadline for investment | On establishment or expansion within the next 5 years (previously 3 years). | On establishment or expansion within the following 7 years. |
| Term of permanence | More than 3 años, less than 12. | More than 3 years, less than 12 years. |
| Participation | Maximun 40% together with spouse and relatives up to 2nd degree. | No limit for founding partners. |
However, in order for the company to be considered a new or recently created entity, the following requirements must be met:
- It must have legal personality in the form of an S.A., S.L., S.A.L. or S.L.L., always unlisted.
- It cannot be a holding company.
- In the tax period of the investment, the amount of equity may not exceed €400,000. In the case of a group, this limit will be applied to the whole group.
- The entity may not carry out the same activity that it was previously carrying out under different ownership.
Delivery of shares to company employees
Another situation where there are also tax advantages is the delivery of shares to company employees. These will be exempt when they are made free of charge or for a price lower than the normal market price. Here is a comparison between the different types of entities.
| General Regime | Startups | |
| Annual exempt amount | €12.000 | €50.000 |
| Delivery conditions | Offer with the same conditions to all employees. | As part of the company’s remuneration policy. It is not necessary to offer to all. |
| Imputation of the excess | In the year which the delivery materializes. | When the company goes public, when the employee transfer the participation, or 10 years from the delivery. |
| Valuation | Market value. | Market value, or subscription value by and independent third party in a capital increase carried out in the last year. |
| Common requierements | Maintenance for a minimum period of 3 years and percentage of participation of the employee up to 5% (alone or with spouse and relatives up to 2nd degree). | |
As we can see, and although there are still aspects to be determined, the new law offers a very interesting tax treatment for the entities that meet the requirements.
Therefore, it will be important to keep updated on the new developments that will be published in the future.
