New details: Spain's rules and benefits for foreign startups

Spain's new 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 non-EU applicants to gain access to a special visa for up to five years. 

The law came into force in early 2023 and gives both startups and digital nomads several benefits.

For the purposes of this article, we will focus specifically on the rules and requirements for startup companies.

For those wanting to find out more about Spain's digital nomad visa, click here. 

If you’re thinking about moving to Spain to create a startup company, there are several rules and requirements you should keep in mind to see if you're eligible. 

Firstly, your company must be legally registered in Spain. This means having a registered office or headquarters established in Spain.

But what exactly does Spain define as a startup? Basically, if you want to apply for a residency visa through the Startups Law, then your company must have been created or registered within the previous five years. If your company is older than this, it is no longer considered a startup and you will not be eligible for this type of visa or the associated benefits. The period is extended to seven years for those startups in the industrial, biotechnology or energy industries.

If you are employing other workers, you must make sure that at least sixty percent of your workforce has an employment contract within Spain. It means that you can hire remote workers in other countries, but the majority of them need to be in Spain, creating more jobs on Spanish soil.

Your startup company must not be the result of a merger or a subsidiary or transformation of another company. This means that your company has been newly created or established and that it hasn’t existed previously in a different form.  

The company must not be listed on the regulated stock market and it must not distribute dividends either. 

What are the tax benefits?

Besides being able to get residency in Spain, the Startups Law allows companies to benefit from several tax breaks.

Startups will be able to pay non-resident tax rates or IRNR, rather than the regular tax rates for residents. The IRNR tax rate is generally 25 percent, but for startups that meet the above requirements, the rate will be reduced to 15 percent in the first tax period in which the company makes a profit, as well as the following three tax periods or the first four years.

This will be dependent on them continuing to meet all the rules.

READ ALSO: Your questions answered about Spain’s digital nomad visa

The new law also aims to eliminate the obligation for international investors to request an NIE (foreigner ID number) to carry out their business. Both investors and their representatives will only need to obtain Spain’s tax identification numbers (NIFs).

Startups will no longer be eligible for reduced tax rates if:

• The startup earns a net profit of over €10 million.
  
  
• It is acquired or bought out by another company that doesn’t meet the rules.
  
  
• It is no longer considered a startup because its older than five years or seven years in the case of industrial, biotechnology or energy industries.
  
  
• The company ceases to exist.
  
  
• The company causes environmental damage which goes against the EU Regulation 2020/852 of the European Parliament and of the Council of June 18th, 2020.
  
  
• Anyone who has at least a five percent stake in the company or that amount in shares is convicted of a criminal offence laid out in the Start-Up Law.