Approved the startups project law by the Council of Ministers on December 10, 2021. The project to promote the startup ecosystem, better known as the Startup Law, has already been sent to the Spanish Parliament. If it passes the parliamentary process, it would come into force in mid or late 2022.
The aim of the project is to position Spain at the forefront of Europe in supporting the ecosystem of innovative technology-based companies, attracting investment and talent.
Startup project law
It adapts the administrative, tax, civil and mercantile framework applicable to startups, with a series of measures that we summarize below.
This law will only apply to technology-based companies that simultaneously meet certain conditions:
- Being newly created or with a maximum age of 5 years. With an exception of 7 years in biotechnology, energy, industrial and other strategic sectors or companies that have developed their own technology.
- With head office or permanent establishment in Spain.
- 60% of the workforce must have an employment contract in Spain.
- Be an innovative company.
- Not distribute or have distributed dividends.
- Not be listed on a regulated market.
- If it belongs to a group of companies as defined in Article 42 of the Commercial Code, the group or each of the companies that compose it must comply with the above requirements.
- Maximum annual turnover of 5 million euros.
- Not be the result of a corporate restructuring operation (merger, spin-off or transformation, concentration or segregation).
Agility in the management
National SME Innovation Company (ENISA)
Through this one-stop shop, the declaration of the innovative nature of the company will be granted in order for it to be eligible for the benefits of this project. The proposed innovation may be a product or a business innovation. The Entrepreneurship Assistance Points (PAE) and the National Entrepreneurship Office (ONE) will act as information points on support and aid measures. Supported by a reference web portal in Spanish and English.
Free notary and registry fees are foreseen for the incorporation of limited companies, as well as for the publication in the Official Gazette of the Mercantile Registry (BORME). The creation of the company by telematic means is encouraged. They will be able to register digitally and be incorporated within 6 hours with standard statutes. This would be extended to a maximum of 5 days if personalized bylaws were drawn up. Non-resident investors are not required to obtain a foreigner’s identification number (NIE), requiring only that they and their representatives obtain a NIF.
Incentives of the startup project law
A series of measures are specified in different fields.
Firstly, reduction of the tax rate to 15% (as opposed to 25%) on corporate income tax (IS). And non-resident income tax (IRNR) applicable to the first year with profits and the following 3 years.
In addition, the deferral of the tax debt, Corporate Income Tax or Non-Resident Income Tax will be granted in the first 2 fiscal years since the taxable income is positive. This without guarantees or late payment interest, and for a period of 12 and 6 months. The obligation to make fractioned payments of IS and IRNR in the 2 years following the year in which the taxable income is positive is eliminated.
Finally, the deduction for investment in new or recently created companies. The maximum base is also increased from €60,000 to €100,000 per year at the same time the deduction rate is increased from 30% to 50%. The period in which it is considered as “recently created” increases from 3 to 5 years, in general, or to 7 years for companies in certain sectors.
In the case of digital nomads. It is foreseen that those international entrepreneurs and teleworkers who move to Spain will be able to reside and work in Spain for 5 years. They will be able to benefit from the special tax regime for impatriates (“Beckham Law”). The requirement of no previous residence in Spain is reduced from 10 to 5 years.
The elimination for 3 years of the double contribution to the Social Security in case of pluriactivity is foreseen. For entrepreneurs who simultaneously work for an employer as an employee.
Stock options for startup workers
First, the amount of the tax exemption for stock options is increased from €12,000 to €50,000 per year. It will no longer be a requirement to apply equality of conditions in the offer of stock option remuneration.
Finally, the tax payment is deferred until such time as the shares are sold or the company goes public.
Startups will not be subject to dissolution due to losses that reduce the net worth to an amount less than half of the capital stock. Provided that it is not appropriate to file for insolvency proceedings. This will be the case during the first 3 years after its incorporation.
Self-owned shares. The acquisition of own shares is allowed, up to a maximum of 20% of the capital, to be delivered to the administrators, employees or other collaborators of the company. But this is only for the
exclusive purpose of executing a remuneration plan.