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The requirements for Spain's new Startups Law

Conor Faulkner
Conor Faulkner - [email protected]
The requirements for Spain's new Startups Law
Photo: Pixabay.

Foreign entrepreneurs waiting for Spain's highly anticipated Startups Law to come into force should know that the legislation comes with some requirements. The Local has outlined the major ones here.

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Spain’s new Startups Law (Ley de Startups), which the Spanish government first announced all the way back in 2019, could finally come into force as early as September 2022, as indicated by Economy Minister Nadia Calviño, although Spanish media outlets are reporting that it is more likely to be early 2023.

The legislation is a recalibration of the well-known 'Beckham Law'.

The original measure was a tax-decree aimed at foreigners living in Spain created in 2005 that got its name due to the famous England and former Real Madrid footballer David Beckham being one of the first people to take advantage of it. 

Regardless of when the new legislation actually comes into force for the first time, Spain will finally have a law directly aimed at the particularities of small technology-based companies.

The new 'Startups Law' hopes to attract foreign companies and talent, making it easier for startups to choose Spain by giving them incentives such as tax reductions. 

READ MORE: Spain’s new tax rates for the self-employed from 2023 onwards

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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 startup companies as well as investors and remote workers, in addition to their family members.

Self-employed workers will have three chances to make it work

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 advantages. Specifically, entrepreneurs are allowed to benefit from the Startups Law up to three times.

Deduction in Corporation Tax 

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 business. Both investors and their representatives will only need to obtain Spain’s tax identification numbers (NIFs).

Fortunately for budding entrepreneurs, the Startups Law will work retroactively, meaning that those who have started a new company before the legislation comes into force (expected in September but not confirmed) can benefit from its advantages provided they meet the requirements. 

The new law does have some specific requirements, however. You can find a full Spanish government summary of the legislation here, but The Local has outlined the major criteria for you below.

READ ALSO: The tax cuts and other benefits Spain’s new Startups Law will bring to entrepreneurs

Requirements

Up and coming companies 

Companies wanting to take advantage of the new Startup law must be relatively new companies - founded in the last five years. They also must not have been created as part of restructures or rebrands, or have been divisions of another company or acquired through mergers.

In the case of startups in the biotech and energy sectors the limit is extended slightly to seven years.

Innovation

Start-ups must be considered innovative. The business must be trying to solve a problem or improve an existing situation. An agency will be created to accredit both this status and that of an 'emerging' company: ENISA.

Dividend distribution 

Start-ups benefiting from the new law must not distribute dividends for as long as the law is in force. Furthermore, for tax purposes, the start-up must be permanently based in Spain.

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Spanish contracts

Similarly, 60 percent of a company's workforce must have employment contracts in Spain. 

Turnover 

To qualify for the new start-up law and special visas that come with it, companies must not exceed an annual turnover of €5 million.

Stock market

To qualify for the law, companies must be unlisted on the stock market.

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