The government of Spain has approved the Draft Law on the Promotion of the Startup Ecosystem, known as the Start-Ups Law. According to the official communication sent by the Ministry of Economic Affairs and Digital Transformation, this law is based on two pillars: “the creation and growth of innovative start-ups with a digital base and high growth” and the attraction of “international talent and investors”. The project is part of the Recovery, Transformation and Resilience Plan, the roadmap for the recovery and modernisation of Spain’s post-COVID-19 economy.

The text of the law begins by establishing the concept of start-up, defined as all those companies of an innovative nature (a condition recognized via a single window by ENISA, the National Innovation Company), newly created or with an age of up to five years (seven years for biotechnology, energy and industrial sectors) and recording revenues of up to €5 million. These start-ups must have their registered office or permanent establishment in Spain, generate the majority of employment there, and may not be quoted or have distributed dividends.

The bill outlines rates for corporate tax and income tax of non-residents, reduced from 25% to 15%. This reduction will be in force during the first four years, as long as the tax base remains positive. The law also increases the tax exemption of stock options from €12,000 to €50,000 per year and adds flexibility to the conditions for the generation of treasury stock in limited liability companies.

15%

The bill outlines rates for corporate tax and income tax of non-residents, reduced from 25% to 15%.

The Start-up Law also includes tax benefits for the creation of companies. Newly created companies will receive benefits, rising in a general way, over three to five years (or seven years for some sectors), and the maximum deduction base for investment in new or recently created companies has been extended (going from €60,000 p.a. to €100,000 euros p.a.), as has the type of deduction (from 30% to 50%).

For non-residents, the project offers the possibility of deferring the corporate tax debt or income tax of non-residents during the first two years of the tax base being positive, without guarantees or interest for delay, for a period of 12 months (for the first year) and six months (for the second year). The obligation to make instalment payments of these taxes in the two years after the tax base reports positive also disappears.

One of the main points of the law is structured around administrative agility, especially in relation to attracting foreign investment. To do this, the law guarantees the possibility of establishing the company digitally, defining the non-obligatory nature of obtaining the identification number of foreigners (NIE for non-resident investors), requiring only that both they and their representatives obtain tax identification numbers (NIF). The text also includes the provision of free notary and registrar services for the constitutions of limited companies, as well as in the publication in the Official Gazette of the Mercantile Registry.

The Start-Up Law also provides clarity on taxation for digital nomads, who will have the possibility to reside and work in Spain for five years and benefit from the special tax regime and income tax regime for non-residents, as well as reducing the requirement for previous non-residence in Spain from 10 to five years. In addition, the bill eliminates the double Social Security contributions for three years for workers with more than one contracted role.

After its approval by the Council of Ministers, the bill now faces parliamentary processing, which (under normal conditions) means it would enter into force around June or July 2022.

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Francisco Javier Curto Martin
Senior Manager. Tax Support

Local Knowledge – International Coverage

Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.

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