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Tax cuts and special visas: Spain’s new law to attract foreign startups and digital nomads

Tax cuts and special visas: Spain's new law to attract foreign startups and digital nomads
Stock photo: Maria Tan/AFP
The Spanish government has rolled out a draft bill that aims to attract foreign digital nomads with a special visa, incentives for startups and investors as well as less personal income tax for non-resident remote workers.

On July 6th, the Spanish Government published new draft legislation known as the ‘Startups Law’, proposing the creation of visas for remote workers and digital nomads, as well as tax reductions for startups.

If approved, the new law will provide tax incentives for the creation of startups and hopes to attract foreign companies to establish themselves in Spain.

It also aims to entice foreign remote workers and digital nomads to choose Spain as their base by creating a new special visa for them and giving them the ability to access a reduction in the rate of Non-Residents Tax (IRNR).

The IRNR is a tax that until now was levied on the income earned in Spain, either from work or property, by both individuals or companies not resident or established in Spain. This means workers and companies who obtain income in Spain, but do not stay for more than 183 days.

The new draft law also contemplates including foreign remote workers in Spain, on the list of those who can submit their income for IRNR. If the new law is approved, the rules regarding non-residents tax will change, reducing the requirement of not having been a tax resident in Spain in the previous ten years to five years.

Those who request to submit to this tax regime would have to prove their status as international remote workers.

Spanish law defines remote workers as foreign employees of companies based outside the national territory who travel to perform their work obligations in Spain or foreign independent workers who work remotely through digital means and whose remuneration comes mostly from foreign companies, with a limit of income from Spain of 20 percent.

Until now, the IRNR tax rate for people with annual incomes of up to €600,000 was 24 percent, but the new bill proposes reducing it to 15 percent for a maximum period of four years.

For those earning above €600,000, the tax rate is and will continue to be 47 percent.

What are the main advantages for remote workers who choose Spain?

The new draft law also proposes the creation of a special visa for remote workers who wish to work from Spain.

To be eligible, they will have to prove their status as a remote worker and will legally be allowed to stay and work in Spain for a maximum of one year.

Once it has expired, remote workers may request a residence authorisation as a remote worker for a further two years.

Photo: Gino Crescoli from Pixabay

What are the advantages for startups and investors?

The proposed law is good news for startups, who will be able to benefit from reduced tax rates on corporation tax and IRNR. 

The law also includes the possibility for startups to request a deferral of the tax debt on corporate tax or income tax of non-residents in the first fiscal year and in the following, for a period of 12 and six months respectively.

In 2015, Spain was ranked among the worst countries to start a business in, so hopes are that the new law will change this. 

The draft law will now be submitted for public consultation before it passes to Congress to decide if it will be approved or not.

The Spanish government has added favourable conditions in terms of stocks by raising the tax exemption rate from €12,000 to €45,000 per year for shares or participations invested in new or recent startups. 

Regarding foreign investment, the maximum deduction base for investing in newly or recently created companies is raised from €60,000 to €100,000 per year.

For investments above that amount, the deduction rate will go from 30 to 40 percent – and the period that is considered recently created for eligible companies will go up from 3 to 5 years old. For biotechnology, energy or industrial companies, the bracket is wider: 7 years.

In addition, the draft law proposes that non-resident investors no longer need to get a foreign identification number (NIE), requiring only that both they and their representatives obtain Spanish tax identification numbers (NIF).

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