Spain adopts new law on start-ups

The Spanish government wants to encourage emerging companies with new tax incentives. That is why a new law on start-ups, which has been in the works since July 2021, came into force at the beginning of the year.

Prior to this new law, there was only a special tax regime that was primarily aimed at workers who had not been established in Spain in recent years.

However, liberal professions, entrepreneurs and investors were excluded from this special regime.

Now start-up founders finally have a legal framework for the development of their activities, especially with regard to tax issues.

Under the new regulation, start-ups are defined as companies that meet the following conditions:

• They must have existed for less than five years (exception for the strategic sector: seven years).
• The company's registered or permanent office must be located in Spain.
• They are developing an innovative business project with a measurable business model.
• They are not listed on the stock exchange
• Nobody is getting dividends from them
• 60% of the staff must have an employment contract in Spain
• Their annual turnover must not exceed 10 million euros

Criteria for assessing a start-up

The following criteria are evaluated by the Empresa Nacional de Innovación, S.A. (ENISA), the national innovation company: the degree of innovation, the attractiveness of the market, the age of the company, the measurability of the business model, the competition, the team or the scope of the clientele or users.

In total, the law includes more than 20 measures aimed at encouraging the creation and development of start-ups in Spain and attracting national and international talent and investment to the emerging business ecosystem.

Here are the main measures adopted to improve the legal framework

Introduction of a reduced corporate tax rate of 15% (25% in normal times) in the first year when the tax base is positive and the following three fiscal years.
Request for deferral of payment of corporate or income tax for non-residents for the first two years of positive tax base.
Introduction of an international telework visa to stay in Spain for up to one year.
The possibility for third country nationals to work in Spain for a company established outside Spain (nómadas digitales) for five years.
Extension of residence permits for foreign entrepreneurs and investors as well as for students.
Creation of a national authority for entrepreneurship (Oficina Nacional de Emprendimiento (ONE)).