Spain's new law for startups and digital nomads: 15 things you need to know
Now that Spain has approved the country's new startups law, foreign entrepreneurs and digital nomads wanting to live and work here can look forward to a host of tax perks and other benefits, but there are also rules to consider.
After a long and drawn-out legislative road, Spain's much anticipated Ley de Startup was approved in the Spanish Parliament on Thursday November 3rd, 2022.
Simply put, the law aims to attract international investors, digital nomads and new companies to Spain with visa incentives, tax breaks, fewer bureaucratic hoops and other benefits.
Originally proposed back in 2019, the law has received 271 amendments during its journey through the Committee on Economic Affairs and Digital Transformation, the Spanish Cabinet and now the Spanish Parliament.
The last step before it comes into force is for it to be ratified by the Senate. Given the support the bill has already received from most political parties, this looks very likely to go ahead without issues in the coming weeks before the law comes into force in January 2023.
READ MORE: When will Spain's startups law come into force?
So what do foreign entrepreneurs, remote workers and digital nomads considering a move to Spain need to know about this "pioneering" legislation?
Here are 15 key takeaways from the new law:
What Spain considers a startup to be: In order to be eligible for the benefits of the new law, companies must be newly formed or emerging, that is to say, less than five years old or seven in the case of biotechnology, energy and industrial companies.
No mergers: The company cannot have been created from mergers or spin-offs from pre-existing companies.
A need for innovation: Startups 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.
Startup tax breaks: One of the main draws of the law is that it offers startups a cut in Corporation tax from 25 percent to 15 percent for a maximum of four years.
Tax deferral for startups and digital nomads: Startups can also request that Corporation Tax - and in the case of digital nomads non-resident Income Tax (IRNR) - be deferred without accruing interest for twelve and six months, respectively.
Tax deductions for startups: The startups law also increases the maximum deduction base for investing in startup companies (from €60,000 to €100,000 per year) and the rate of deduction (from 30 percent to 50 percent).
Based in Spain: The startup must be permanently based in Spain. Similarly, 60 percent of a company’s workforce must have employment contracts in Spain.
Disqualification reasons: Startups will be disqualified from the benefits of the law if they are acquired by a non-emerging company, if their annual turnover surpasses €10 million, if they generate "significant damage" to the environment, or if any of their s partners with a 5 percent share in the company are convicted of a criminal offence.
No dividend distribution: Startups must not distribute dividends or net return per member of a cooperative, nor pay contributions in a regulated market.
Less bureaucracy: The new law also aims to remove some of the bureaucratic hoops foreign investors have to jump through by eliminating the obligation for international investors to request an NIE (foreigner ID number) to carry out this type of business. Both investors and their representatives will now only need to obtain Spain’s tax identification numbers (NIFs).
It's retroactive: The law will work retroactively, meaning that those who have started a new company before the legislation comes into force can benefit from its advantages, provided they meet the requirements.
What Spain considers a digital nomad to be: The law defines digital nomads as "people whose jobs allow them to work remotely and change residence regularly".
Digital nomad tax breaks: Digital nomads who obtain income in Spain will be eligible to pay non-resident income tax (IRNR) rather than regular income tax (IRPF) for the first four years. IRNR is generally 25 percent in Spain. They will have to demonstrate that at least 80 percent of their income comes from foreign companies for this IRNR tax to apply.
New digital nomad visa: The 'startup law' establishes a visa for international remote working that allows entry and residence in Spain for a maximum of one year for non-EU citizens. Once it has expired, they can extend it by requesting a residence authorisation as a remote worker for a further two years and then extend it again, up to five years.
Foreign students: will have their stay period post-graduation to find employment or start a business extended from one year to two. Find out more here.
READ MORE:
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After a long and drawn-out legislative road, Spain's much anticipated Ley de Startup was approved in the Spanish Parliament on Thursday November 3rd, 2022.
Simply put, the law aims to attract international investors, digital nomads and new companies to Spain with visa incentives, tax breaks, fewer bureaucratic hoops and other benefits.
Originally proposed back in 2019, the law has received 271 amendments during its journey through the Committee on Economic Affairs and Digital Transformation, the Spanish Cabinet and now the Spanish Parliament.
The last step before it comes into force is for it to be ratified by the Senate. Given the support the bill has already received from most political parties, this looks very likely to go ahead without issues in the coming weeks before the law comes into force in January 2023.
READ MORE: When will Spain's startups law come into force?
So what do foreign entrepreneurs, remote workers and digital nomads considering a move to Spain need to know about this "pioneering" legislation?
Here are 15 key takeaways from the new law:
What Spain considers a startup to be: In order to be eligible for the benefits of the new law, companies must be newly formed or emerging, that is to say, less than five years old or seven in the case of biotechnology, energy and industrial companies.
No mergers: The company cannot have been created from mergers or spin-offs from pre-existing companies.
A need for innovation: Startups 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.
Startup tax breaks: One of the main draws of the law is that it offers startups a cut in Corporation tax from 25 percent to 15 percent for a maximum of four years.
Tax deferral for startups and digital nomads: Startups can also request that Corporation Tax - and in the case of digital nomads non-resident Income Tax (IRNR) - be deferred without accruing interest for twelve and six months, respectively.
Tax deductions for startups: The startups law also increases the maximum deduction base for investing in startup companies (from €60,000 to €100,000 per year) and the rate of deduction (from 30 percent to 50 percent).
Based in Spain: The startup must be permanently based in Spain. Similarly, 60 percent of a company’s workforce must have employment contracts in Spain.
Disqualification reasons: Startups will be disqualified from the benefits of the law if they are acquired by a non-emerging company, if their annual turnover surpasses €10 million, if they generate "significant damage" to the environment, or if any of their s partners with a 5 percent share in the company are convicted of a criminal offence.
No dividend distribution: Startups must not distribute dividends or net return per member of a cooperative, nor pay contributions in a regulated market.
Less bureaucracy: The new law also aims to remove some of the bureaucratic hoops foreign investors have to jump through by eliminating the obligation for international investors to request an NIE (foreigner ID number) to carry out this type of business. Both investors and their representatives will now only need to obtain Spain’s tax identification numbers (NIFs).
It's retroactive: The law will work retroactively, meaning that those who have started a new company before the legislation comes into force can benefit from its advantages, provided they meet the requirements.
What Spain considers a digital nomad to be: The law defines digital nomads as "people whose jobs allow them to work remotely and change residence regularly".
Digital nomad tax breaks: Digital nomads who obtain income in Spain will be eligible to pay non-resident income tax (IRNR) rather than regular income tax (IRPF) for the first four years. IRNR is generally 25 percent in Spain. They will have to demonstrate that at least 80 percent of their income comes from foreign companies for this IRNR tax to apply.
New digital nomad visa: The 'startup law' establishes a visa for international remote working that allows entry and residence in Spain for a maximum of one year for non-EU citizens. Once it has expired, they can extend it by requesting a residence authorisation as a remote worker for a further two years and then extend it again, up to five years.
Foreign students: will have their stay period post-graduation to find employment or start a business extended from one year to two. Find out more here.
READ MORE:
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