In an increasingly globalised and interdependent economy, attracting talent and investment is becoming ever more important. Technology has lowered the barrier to entry and the explosion of remote work has allowed knowledge-based, digital companies to rapidly grow. This blog explains why Spain is great for start-ups.
These companies, known as start-ups, are the driving force behind the recovery and modernisation of the Spanish economy. Spain’s economy is expected to grow by 6% during 2022 as the country expects almost 19% of its €27 billion EU’s pandemic recovery funds in R&D and digitalisation.
The New Startup law – ¨Proyecto de Ley de fomento del ecosistema de las empresas emergentes¨
Spain has a new law called “Proyecto de Ley de fomento del ecosistema de las empresas emergentes”. This creates attractive tax, commercial and labor conditions for start-ups the world over. This will make Spain more attractive for start-ups.
Start-ups, by their very nature, break the template and are, therefore, difficult to regulate. Too many laws stifles their growth. Sometimes laws create unintended issues like worker exploitation or inadequate measures for dealing with GDPR breaches.
Their risky approach is also highly innovative and marries uncertainty with success. This makes it difficult to finance them and satisfy their hunger for hiring workers in the initial start-up stages where there is no income flow to pay them through traditional approaches, like salaries and bonuses.
The Law, which was drafted in December 2021, defines a “start-up” as a recently created company. This is usually within the past five years but can be as old as seven years in some instances. They are also independent of other companies, not listed on a stock market and has an annual turnover of up to €5 million. This is attractive for start-ups considering Spain.
The new law has the following for start-ups in Spain:
- Reducing corporate tax to 15% during the first four years of their existence as a start-up in Spain.
- The possibility to defer the tax liability for corporation tax or non-resident income tax in the first two years after turning tax income is positive. This would also eliminate interest for late payments for up to 18 months.
- The Tax exemption on stock options is increased from €12,000 to €50,000 per year for start-up shares or holdings derived from the exercise of call options. This makes the conditions for generating treasury stock in LLCs much more flexible. Also, taxation can be deferred until the moment at which they become liquid as a start-up in Spain.
- The maximum deduction base for investment in start-ups will be from €60,000 to €100,000 a year. The rate will be 50%.
- The government will eliminate the double Social Security contribution for the first three years. This means that entrepreneurs who work for another company at the same time won’t make two social security payments.
- Non-resident investors will not need to have a Foreign ID Number, or NIE. They will only need to present their tax ID number (known as a NIF).
- The ability to create a company for €1 via online means.
- All costs related to notaries and registrars when setting up a limited company will be free of charge as a start-up in Spain.
- Attracting foreign talent, international teleworkers and digital nomads to Spain will be encouraged.
What about Visas?
Those workers can enjoy a special visa for five years, which allows them to benefit from a special tax regime as a non-resident income tax for 11 years. Also, the need to access this tax regime has been reduced from ten years not previously lived in Spain to five years. This will help boost the repatriation of talent. This is also attractive for start-ups considering Spain.
This Law has measures that reduce the obstacles detected to the creation and growth of these companies of a legislative nature, referring fundamentally to tax and social charges, to the needs of the said commercial Law and bureaucratic procedures, as well as to the ease of attracting foreign talent.
Our team of lawyers is here to help smooth the process by helping you. With Spain promoting remote work and encouraging startup activity, there’s no better time to move you or your business. Speak with Lexidy LegalTech Boutique today if you’re considering Spain for your start-up.
