On Friday, December 10, the Council of Ministers approved the draft law to promote the start-up ecosystem (better known as the Start-up Law). Its final approval is scheduled for mid-year and sacred holidays in between, most likely for September.
The Government has set a deadline of the last quarter of 2022, so although there may be modifications between the current legal text (of which we offer a summary in English) and the final approved text, before the end of the year, we will be able to talk about this new law, which was created to attract international talent and promote and simplify the creation of leading companies.
This law applies to the whole of Spain, although we will have to wait to see how the Basque Country resolves the tax aspects both for individuals and companies. In particular, it will be necessary to be aware of the applicable rate for corporate tax and for individual taxpayers, given the difference between the impatriate regime currently existing in our territory, with the modifications that in principle will be introduced in the rest of Spain.
The novelties introduced by the draft law for the time being are the following:
1- What is a start-up?
A start-up company is any company:
- Innovative in nature, including technology-based companies (those whose activity requires the generation or intensive use of scientific-technical knowledge and technologies for the generation of new products, processes or services and for the channelling of research, development and innovation initiatives and the transfer of their results),
- It must be newly created or up to 5 years old in general, or 7 years old in the case of biotechnology, energy and industrial companies,
- That have their registered office or permanent establishment in Spain.
- That the majority of the workforce (60%) has a contract in Spain,
- That will not distribute or have not distributed dividends
- Not listed on a regulated market, and
- That do not reach a turnover or revenue of up to 5 million euros.
The national innovation company, ENISA, an agency under the Ministry of Industry, Trade and Tourism will be responsible for the essential accreditation of companies as startups so that they can access the benefits established by law.
2- Facilitating the procedures for the creation of emerging companies or start-ups.
The incorporation of a company will be possible by means of a single electronic document (DUE). This possibility exists today, but the law simplifies it by establishing the registration in the commercial register in 6 hours, if the standard statutes are used, and in 5 working days in the rest of the cases as long as it is done telematically through this DUE (either by the founder or by persons authorized to act before the administration).
Notary and registry fees are eliminated in the case of companies created in accordance with the standard articles of association and by electronic means, i.e. the public deed and registration in the corresponding Companies Register will be free of charge.
In parallel, it is mentioned that when the current draft of the Law “Crea y Crece” comes into force, it will allow the incorporation of companies for an amount of one euro eliminating the current minimum of 3,000 euros. Similarly, this future law provides as a form of financing crowdfunding and the initial entry of venture capital.
It is expected that the National Office of Entrepreneurship that the Government will launch in 2022 will also be a kind of one-stop shop where digital entrepreneurs can access all kinds of information and processes on aid from different administrations, such as different ministries or autonomous communities as well as a website in both English and Spanish.
Also, and during the first 3 years, the startup is exempted from the cause of dissolution for losses related to or generating an equity imbalance (they are exempted from entering into insolvency proceedings).
The necessary procedures for the cessation of activity will be expedited, provided that they are completed electronically.
3- The corporate income tax rate is lowered
The corporate income tax rate is reduced from the current 25% to 15% for a maximum of four years and provided that the company maintains its status as a “start-up company”.
Deferral of the tax debt is allowed without guarantees or interest for late payment in the first year in which the tax base is positive and the following year (2 years) without guarantees or interest for late payment in a period of 12 and 6 months respectively.
The obligation to make installment payments is eliminated.
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MORE INFORMATIONThe generation of treasury stock in limited companies is made more flexible.
4- Improved taxation for founders, investors and employees
In Personal Income Tax, the maximum deduction base for investment in new or recently created companies is raised from 60,000 to 100,000 euros per year for both founders and investors. The reduction of the quota is raised from 30% to 50% in the periods in which the start-up is considered to be newly created, which will be 5 years in general and up to 7 years in certain sectors.
Likewise, in the IRPPF, the exemption from taxation of the income derived from stock options (options to acquire shares or holdings of the company itself, normally at a price lower than the market price) given to its employees rises from 12,000 to 50,000 euros. The taxation (and the application of the exemption) will be carried out in the year of the sale.
When the employee exercises the option (buys the corresponding shares), the taxation of the income in kind is eliminated in the IRPF for the difference between the marked price of the share and the price at which he/she can buy it, which will generally be lower.
The double Social Security contribution is eliminated for 3 years for those entrepreneurs who simultaneously maintain an employed job. Therefore, entrepreneurs who combine a double activity are exempted from contributing to the RETA.
5- The procedures are made easier for non-resident investors or founders.
The requirement to obtain a foreigner’s identification number (NIE) is eliminated for non-resident investors, so it will not be necessary to physically go to the corresponding police station to obtain this number and they will be able to set up the company with their passport (assuming that they will not be physically in Spain).
The electronic application for the tax identification number (NIF), an essential requirement for materializing and documenting the investment, whether for individual entrepreneurs or companies, will be facilitated through the CIRCE.
As for the figure of the serial entrepreneur, these people will be allowed to benefit from this scheme on up to three occasions or projects, provided that the companies are certified by ENINSA as a start-up or emerging company.
6- Start-up or Visa: visa for remote workers, digital nomads and entrepreneurs
A new visa for teleworkers is created. It will grant the possibility to reside and work in Spain for themselves or employers anywhere in the world for a period of 1 year with the possibility to renew it for 2 years.
This residence permit may be applied for directly while in Spain in a regular situation.
It is still up in the air how the taxation of this group will be resolved with its inclusion in the impatriate regime which, as mentioned below, could be applied for 5 years.
7- Improved Impatriate Regime (Beckham Law 2.0)
The application of the 24% tax on salary earned up to a maximum of 600,000 euros is extended to a period of 10 years (can be increased to 11) for those who have not been tax resident in Spain for the last 5 years (previously 10) and who in principle work for themselves or for international employers.
The eligibility for this scheme is extended to other members of the main impatriate’s family unit: his or her spouse or the parent of his or her children, children under 25 years of age and disabled children, regardless of their age.
8- Creation of regulatory sandboxes
Cooperation is promoted between consolidated companies and emerging companies to carry out joint projects of an innovative nature, and for these to invest in emerging companies or to acquire their products or services.
To this end, regulated environments (sandboxes) have been set up to test innovations in the sector and allow for interaction between more consolidated companies and emerging ones.