There have been discussions about Spain's new startups law and digital nomad visa for the last 16 months, but on November 3rd the legislation was finally approved by the Spanish Parliament and is expected to come into force in January 2023.
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.
Among its main perks are that startups and investors will get a reduction in Corporation Tax and the legislation will also include a new visa that will allow digital nomads to stay and work in Spain for a period of one year and then extend it up to five years.
READ MORE: 15 things you need to know about Spain’s new startups law
In 2015, Spain ranked among the worst OECD countries to start a business in, and seven years on entrepreneurs and business owners are still complaining about the lack of support and facilities, complicated tax models and high social security fees.
Noting the need for change, the law passed with an overwhelming majority in parliament. 177 MPs voted in favour, with 75 abstentions (by far-right party Vox and Catalan parties Junts and ERC) and 88 votes against (mostly from MPs belonging the right-wing PP).
Spain's ruling left-wing coalition government has understandably applauded the approval of the new startups law, referring to it as "pioneering" and "important". But how has Spain's business community reacted to the news?
Positive reactions
Many entrepreneurs and business owners have reacted positively to the news, noting that this law has been a long time coming.
The Spanish Association of Startups (AES), the Spanish Association of the Digital Economy (ADigital), Capital for a Sustainable Future (SpainCap), Endeavor, the Cotec Foundation, Startup Valencia, South Summit, Tech Barcelona and the Spanish Association of Biocompanies (AseBio) have all celebrated the approval of the law and referred to it as "a very important step for the Spanish entrepreneurial ecosystem and our economy as a whole".
Organizaciones a favor del emprendimiento y la innovación celebran la aprobación en el Congreso de la Ley de Startups | Asociación Española de Startups https://t.co/kvhs413tbn
— Mario Lopez de Avila (@nodosenlared) November 4, 2022
"The Spanish government has shown awareness when taking note of the demands of the sector and has approved a bill with a very similar structure to what we proposed," the associations said in a joint statement.
Juan López, partner of Kibo Ventures financial advisors in Madrid, told Business Insider: "It's not a law that has been passed in dribs and drabs and in bad faith by a single party. For us, the best news is that the startups (law) creates consensus, which means that it is a great time for startups”.
Joan Jofra, Platform Director at venture capital company Seaya echoed these sentiments by saying: "The process itself has been a success. We have achieved a public debate that has united the business ecosystem. There were associations, entrepreneurs, investors and large companies in the Spanish Parliament; this law is very unifying.
"We now have a Spanish government which understands what it is to set up a business. It's an everchanging business environment and there will be new challenges but the important thing is to find ways to adapt to them."
Íñigo Peña, CEO of Tetuan Valley, an early-stage startup operating in Madrid told the website: "Of course, the law provides a little hope to everyone. The simple fact of defining what a startup is, is already a big step. It was difficult to compete with other countries that have more flexible legislation. If we want to compete with hubs like England, France and Germany you have to have the same tools”.
Shortcomings and criticism
While most commentators seem to be in favour of the new law, several Spanish business news outlets and politicians have been pointing out its downsides too.
An opinion piece in El Periódico de España stated: "It is true that the law has shortcomings, such as the fact that five years is too short a period to define a startup, or that the regulatory ability of Spain's regions should be taken into account, but the comparison with the current framework makes this law necessary and timely…. Although a similar awareness is lacking regarding other companies that are not startups, that are just as or more crucial for employment and economic growth in the country”.
Spain's right-wing Popular Party was the outlier in the parliamentary vote on the startups law, with most of its MPs voting against the legislation for not being far reaching enough. PP MP Victor Píriz said the law was "shy on tax benefits for startups". Far-right party Vox abstained, claiming the ruling Socialists vetoed certain amendments which could have helped Spanish business owners, self-employed workers and SMEs.
Centre-right party Ciudadanos voted in favour of the legislation, but its MP María Muñoz said it comes "a bit late". The Republican Left of Catalonia (ERC) also supported the bill but referred to it as "watered down".
Spain’s media has also been weighing in on the debate.
Financial newspaper El Economista believes that the real problem with the law is that it does not distinguish between self-employed workers (autónomos) and those who work remotely for a company, who in addition to being digital nomads would be corporate nomads, and therefore often fall into a kind of legal limbo.
Furthermore, tech website Xataka argues that it will take more than a visa for Spain to become a good place for digital nomads and investors. They wrote that “To promote the startup ecosystem in our country, many changes are still needed”. They go on to explain that Spain is a paradise, except when it comes to tax matters. “Our country offers an excellent environment for remote working, but the economic conditions are not so attractive”, they added.
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