The New 2022 Startups Law in Detail

Last December, the Spanish Government approved the submission to Parliament (Cortes) of the Bill on the promotion of the startup ecosystem, known as the Startups Law, which forms part of the package of reforms agreed with the European Union under the Recovery, Transformation and Resilience Plan.

On December 23, Law 28/2022, of December 21, on the promotion of the startup ecosystem (Startups Law), came into force

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If you are thinking of setting up a company in Spain, the new Startups Law is something you need to know about. The Spanish Startups Law has been designed to make it easier for entrepreneurs to launch and grow their businesses. There are a number of advantages for both entrepreneurs and investors

What is a startup?
The law considers a startup to be a newly created company or one that is less than 5 years old (7 years in the case of biotechnology, energy, and industrial companies and other strategic sectors, or companies that have developed their own technology designed entirely in Spain), that is independent of other companies, is not listed on a securities market, does not distribute and has not distributed profits, is innovative in nature, and has an annual turnover of up to €5 million.
Empresa Nacional de Innovación SA (ENISA), which reports to the Ministry of Industry, Trade and Tourism, will be responsible for accrediting companies as startups so that they can access the benefits established by the law, and there will be Entrepreneur Service Points (Puntos de Atención al Emprendedor, PAE) and a National Entrepreneurship Office, which will operate as portals or one-stop shops for information and access to public aid.
What is new in the law?
The main new features of the Startups Law are aimed at improving the tax position of both workers and investors, as well as at increasing administrative agility. Specifically, the most notable tax measures regulate matters such as the following:
• For the first four years from the year in which the tax base is positive, companies will benefit from a 15% tax rate on their business profits under Corporate Income Tax (IS). It should be remembered that the general Corporate Income Tax rate is 25%.
• For non-residents, the tax rate is reduced.
• The capital required to incorporate the company is one euro. However, the shareholders and the company will be jointly and severally liable until €3,000 has been paid up.
• If the company is in a situation in which it is unable to pay its taxes, deferral of payment will be granted without guarantees or late-payment interest for periods of between 6 and 12 months, depending on each specific case.
• In the two years following the year in which the tax base is positive, the obligation to make installment payments is eliminated.
• Entrepreneurs who work both on a self-employed basis and as employees will be relieved of double Social Security contributions for three years.
• A faster procedure is established for digital nomads to obtain visas and residence, together with a special tax regime.
• Foreign students with higher education qualifications who wish to start a business project after completing their studies will be granted a two-year work permit.
• The process of setting up a company is facilitated by eliminating or reducing notarial and registry fees, as well as the fees for publication in the Official Gazette of the Commercial Registry (BORME), provided that standard articles of association are used and the process is carried out electronically. Bureaucratic and administrative burdens in the incorporation of startups will therefore be reduced.
• Startups may be incorporated by means of a single electronic document (Documento Único Electrónico). Registration with the Commercial Registry will then be completed within 6 hours if the standard articles of association have been used, or within 5 business days otherwise.
• Non-resident investors will no longer need a foreigner identification number (NIE). In addition, special visas are created for the managers and employees of startups, allowing them to stay in Spain for up to 5 years.
• Where the startup falls within certain grounds regulated in insolvency legislation, during its first three years it is exempted from the ground for dissolution due to losses.
• The Corporate Income Tax rate falls from 25% to 15% for the first four years from the year in which a company makes a profit. For non-residents, the rate is likewise reduced by the same percentage and under the same conditions as for companies.
• Provision is made to allow emerging businesses to test their innovations in a controlled environment for one year, so that their usefulness and viability can be assessed.
Incentives for investors
• The maximum base for the tax credit for investment in this type of newly or recently created company rises from €60,000 to €100,000 per year.
• The tax credit available to investors rises from 30% to 50%.
• Special visas are created and made available to investors, allowing them, in certain circumstances, to stay in Spain for up to 5 years.
Incentives for workers
• The treatment of their remuneration will be improved where it is based on “stock options” or options over the company’s shares. In these cases, the tax exemption is raised from €12,000 to €50,000 per year.
• Taxation on the sale of the “stock options” is deferred until the shares (acciones or participaciones) are sold, or until the company starts trading on the stock exchange.
• Success fees of venture capital managers will be taxed at 50%.
• Employees who also carry on a self-employed activity will be relieved of Social Security contributions for 3 years.

Carried interest
The new Startups Law also clarifies the tax characterization of carried interest, that is, the remuneration obtained for the successful management of venture capital entities. It also establishes a specific tax treatment for such remuneration, in line with the rules in comparable countries.

A new figure: digital nomads
The aim is to encourage entrepreneurs and workers of this type of company to settle in Spain, as well as remote workers from all types of sectors and companies, known as digital nomads (entrepreneurs and teleworkers who relocate to Spanish territory). To this end, a faster procedure is established for them to obtain a visa and residence, together with a special tax regime. This measure includes the international telework visa and the international telework residence permit.