Know more about the Spanish Law for the Promotion of the Start-up Ecosystem

This law aims to facilitate the creation and growth of startups, primarily by reducing tax and social formalities, commercial law requirements and red tape. Below you will find detailed information about its objectives, the definition of a startup and how it affects your business to help you navigate this new legal framework.

Objectives

• Encourage the creation and growth of start-ups in Spain.
• Attracting and retaining international talent and capital.
• Encourage the interrelation between companies, financing agents and territories.
• Facilitating access to funding.
• Promote closer links between the University and vocational training, and start-up companies.
• Stimulate public and private investment in start-ups.

What does start-up company mean?

It has to simultaneously meet the following requirements in order to qualify for the benefits provided by the law:

• It must be a start-up company or a maximum of five (5) years from incorporation in general, and seven (7) years (biotechnology, energy, industrial, etc.).
• Not having arisen from a merger, spin-off or transformation of companies that are not considered as start-ups.
• Develop an innovative entrepreneurship project. An innovative project is one that aims to solve a problem or improve an existing situation through the development of new or improved products, services or processes.
• Not listed on a regulated market.
• Not distributing or having distributed dividends.
• Have its registered office, registered office or permanent establishment in Spain.
• Not reaching a turnover of more than ten (10) million euros.
• Have sixty percent (60%) of its workforce with an employment contract in Spain.
• Be up to date with their tax and social security obligations and not have been convicted of economic crimes. The latter also applies to shareholders who hold, directly or indirectly, at least 5% of the share capital and to the directors of the start-up company.
• Not to carry out an activity that causes significant damage to the environment in accordance with Regulation (EU) 2020/852.

How does this new law affects your business?

Measures of a fiscal nature

• Reduces the IS tax rate from twenty-five percent (25%) to fifteen percent (15%) for four (4) tax periods.
• Defers the payment of the tax debt corresponding to the IS tax and non-residents tax for the first two (2) tax periods.
• Increases the personal income tax exemption from EUR12,000 to EUR50,000 per year for the delivery of shares or holdings to employees.
• Abolishes the obligation to make fractioned payments for the IS tax and non-residents tax, taxpayers.
• Increases the personal income tax deduction for investment in new or recently created companies from thirty per cent (30%) to fifty per cent (50%), as well as increases the maximum investment to be eligible for the deduction from EUR60,000 to EUR100,000.
• Allows directors to opt for the impatriate regime, irrespective of their direct or indirect shareholding in the company in which they are appointed as directors.
• Ceasing the obligation for non-resident investors in start-ups to obtain a foreigner's identity number (NIE) and introducing the possibility of applying electronically for a tax identification number (NIF) from the tax authorities.
• Improves the impatriate regime by reducing to five (5) years the number of tax periods prior to the posting without the taxpayer having been a tax resident in Spain in order to be able to apply it and introduces the possibility of applying to the regime to employees remotely by telematic means.

Measures of a corporate nature.

• Makes possible for start-up companies in the form of LLCs to acquire own shares (treasury shares) to pay for remuneration schemes (directors, employees, etc.).
• Allows them not to incur a cause for dissolution due to losses in the first three years after their incorporation.
• Provides with streamlined mechanisms and deadlines for registering the incorporation of start-ups and all their corporate acts, as well as standard articles of association. It will be possible to register the shareholders' agreements of start-up companies in the form of an LLC.

Administrative measures

• Establishes trial licences for start-up companies operating in regulated sectors with a maximum validity of one (1) year.
• Allows start-ups that are beneficiaries of grants to request a reduction of the guarantee in exchange for a corresponding reduction in the amount of aid or advance payment.