The new Spanish Startup Law in 90 seconds
The new Spanish Startup Law is already being processed in the Spanish Congress of Deputies. If you are a startup (or an investor), the question you are probably asking yourself is: will I be able to benefit from it and, if so, how and when?
This post is designed to quickly answer your questions. I leave aside collateral issues such as incentives for “digital nomads” (foreign tech professionals who want to work from Spain; contact me if you are interested in this topic). Let’s get started!
1. Which companies will be able to benefit from the new Startups Law?
These are the characteristics of the companies that will be able to benefit from the new Law:
a. Being innovative. An innovative company will be one whose “purpose is to solve a problem or improve an existing situation through the development of products, services or processes that are new or substantially improved compared to the state of the art and which carry an implicit risk of technological or industrial failure”.
b. Not older than 5 years (7 years in the case of biotechnology, energy, industrial and “other strategic sectors” to be defined).
c. Not having arisen from a merger, spin-off or transformation.
d. Have their registered office in Spain.
e. Have 60% of the workforce with employment contracts in Spain.
f. Not distribute or have distributed dividends.
g. Not be listed on a regulated market.
h. Turnover of less than 5 million euros per year.
i. Be accredited with ENISA as an “innovative start-up” and be registered in the corresponding commercial register (Registro mercantil).
2. What benefits will the new Startups Law bring?
a. Reduction of the general corporate tax rate from 25% to 15% in the first four years in which the taxable base is positive.
b. Deferral of corporate income tax or non-resident income tax may be requested in the first two years in which the tax base is positive, without guarantees (for 12 months) or interest for late payment (for 6 months). The obligation to make instalment payments for these two taxes is also eliminated.
c. Increase in the tax exemption for stock options from €12,000 to €50,000 per year.
d. Delay in the taxation of stock options until they become liquid (sale or IPO).
e. Up to 20% treasury stock is allowed in limited companies to finance remuneration plans.
f. The start-up will only be subject to dissolution if its net worth is less than half of its share capital three years after its creation.
g. The maximum deduction base for investment in new or recently created companies is raised from €60,000 to €100,000 per year. The deduction rate is increased from 30% to 50%. This incentive will be available to investors, but also to entrepreneurs themselves.
h. 100% discount from the RETA (self-employed social contribution) for three years for self-employed workers who have “effective, direct and indirect control” of the startup at the same time as they are registered and simultaneously work as employees for another employer.
i. Foreign investors will no longer need a NIF (Fiscal Identity Number), although they will need a NIE (Foreigner Identity Number; it can be obtained through a representative).
3. What should I do and when?
The new Law, I insist, is still in process. This means that everything mentioned here may change. But, broadly speaking, its main lines will, probably, be maintained.
The Law is expected to take about six months to be definitively approved, so it would come into force in mid-2022.
ENISA will then have to set up an accreditation system for “innovative startups”. This may take a few more months and the system will most likely take some time to work well.
Once the system is up and running and the startups duly accredited by ENISA are registered in the relevant company register, they will be able to benefit from its incentives. If all goes well, the first startups benefiting from the Law should appear by the end of 2022.