The tax cuts and other benefits Spain's new Startups Law will bring to entrepreneurs
Foreign entrepreneurs have been waiting for years for Spain's highly anticipated Startups Law to be finalised. The latest news is that it will come into force in September 2022; and new details on the benefits it will bring have also been released.
Spain's new Startups Law, which the Spanish government first announced in 2019, could finally come into force in September 2022, as indicated by Economy Minister Nadia Calviño.
For the first time, Spain will have a law directly aimed at the particularities of small technology-based companies.
The new Startups Law hopes to attract foreign companies, making it easier for startups to choose Spain by giving them incentives such as tax reductions.
Although there is still a long way before the final text of the Startups Law is published, and it may have to go through several amendments yet, here’s the latest on the draft law so far and the benefits it will bring.
There will be no obligation to pay the social security self-employed fee for multiple activities
One of the most important announcements is the elimination of having to register as self-employed (autónomo) in the Special Scheme for Self-Employed Workers (RETA) for three years, provided that the entrepreneur who launches the startup is in turn hired as an employee by another company.
This is the case for 25,000 self-employed workers in Spain who currently combine working for themselves with being hired by someone else.
Overall, it's good news as Spain’s social security fee is among the highest in Europe at €294 a month, an amount that's set to change from 2023 onwards.
READ MORE: Spain’s new tax rates for the self-employed from 2023 onwards
Self-employed workers will have three chances to benefit from the new law
The failure of a business is something that is being contemplated for the first time in legislative text in Spain.
The startup bill will make serial entrepreneurship easier, meaning that a freelancer who has started a business, which ultimately doesn't work, can try again and can continue to benefit from the same advantages. Specifically, entrepreneurs are allowed to benefit from the Startups Law up to three times.
Improvement in the tax treatment of stock options
Stock options are often a form of remuneration for work that is frequently used in startups. It consists of offering directors or employees the possibility of obtaining shares of the company where they work. Specifically, the tax exemption amount will rise from €12,000 to €45,000.
In addition, tax will only be paid on these shares when the sale of them takes place, or when the company goes public.
Deduction in Corporation Tax to 15 percent
It will give startups and investors a reduction in Corporation Tax from the current 25 percent to 15 percent.
The elimination of obstacles for foreign investment
One of the main problems foreign investors encounter when they want to invest in a Spanish startup is bureaucracy.
As a result of this, the new law aims to eliminate the obligation for international investors to request a NIE (foreigner ID number) to carry out this type of action. Both investors and their representatives will only need to obtain Spain's tax identification numbers (NIFs).
Tax breaks
The new law includes a series of tax benefits in order to make national investment more attractive.
The maximum deduction base for investment for newly or recently created companies will be raised from €60,000 to €100,000 per year and the type of deduction will increase from 30 to 50 percent.
The period of time that a company is considered 'recently created' will increase
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 still - 7 years.
Who will be able to benefit from Spain's new Startups Law?
The Startups Law is open to anyone from the EU or third countries, as long as they haven't been resident in Spain in the five previous years. It will allow them to gain access to a special visa for up to five years.
This visa will be open to executives and employees of startups, investors, and remote workers, as well as their family members.
See Also
Spain's new Startups Law, which the Spanish government first announced in 2019, could finally come into force in September 2022, as indicated by Economy Minister Nadia Calviño.
For the first time, Spain will have a law directly aimed at the particularities of small technology-based companies.
The new Startups Law hopes to attract foreign companies, making it easier for startups to choose Spain by giving them incentives such as tax reductions.
Although there is still a long way before the final text of the Startups Law is published, and it may have to go through several amendments yet, here’s the latest on the draft law so far and the benefits it will bring.
There will be no obligation to pay the social security self-employed fee for multiple activities
One of the most important announcements is the elimination of having to register as self-employed (autónomo) in the Special Scheme for Self-Employed Workers (RETA) for three years, provided that the entrepreneur who launches the startup is in turn hired as an employee by another company.
This is the case for 25,000 self-employed workers in Spain who currently combine working for themselves with being hired by someone else.
Overall, it's good news as Spain’s social security fee is among the highest in Europe at €294 a month, an amount that's set to change from 2023 onwards.
READ MORE: Spain’s new tax rates for the self-employed from 2023 onwards
Self-employed workers will have three chances to benefit from the new law
The failure of a business is something that is being contemplated for the first time in legislative text in Spain.
The startup bill will make serial entrepreneurship easier, meaning that a freelancer who has started a business, which ultimately doesn't work, can try again and can continue to benefit from the same advantages. Specifically, entrepreneurs are allowed to benefit from the Startups Law up to three times.
Improvement in the tax treatment of stock options
Stock options are often a form of remuneration for work that is frequently used in startups. It consists of offering directors or employees the possibility of obtaining shares of the company where they work. Specifically, the tax exemption amount will rise from €12,000 to €45,000.
In addition, tax will only be paid on these shares when the sale of them takes place, or when the company goes public.
Deduction in Corporation Tax to 15 percent
It will give startups and investors a reduction in Corporation Tax from the current 25 percent to 15 percent.
The elimination of obstacles for foreign investment
One of the main problems foreign investors encounter when they want to invest in a Spanish startup is bureaucracy.
As a result of this, the new law aims to eliminate the obligation for international investors to request a NIE (foreigner ID number) to carry out this type of action. Both investors and their representatives will only need to obtain Spain's tax identification numbers (NIFs).
Tax breaks
The new law includes a series of tax benefits in order to make national investment more attractive.
The maximum deduction base for investment for newly or recently created companies will be raised from €60,000 to €100,000 per year and the type of deduction will increase from 30 to 50 percent.
The period of time that a company is considered 'recently created' will increase
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 still - 7 years.
Who will be able to benefit from Spain's new Startups Law?
The Startups Law is open to anyone from the EU or third countries, as long as they haven't been resident in Spain in the five previous years. It will allow them to gain access to a special visa for up to five years.
This visa will be open to executives and employees of startups, investors, and remote workers, as well as their family members.
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