The New Startup Law

The New Startup Law contains a range of measures to help support entrepreneurs and ecosystem actors which can be broadly split into 3 main categories; tax relief, favourable regulations,  

Tax incentives 

The New Startup Law in Spain includes several tax incentives to promote investment in innovation and technology. One of the main tax incentives is the reduction of the corporate tax rate from 25% to 15% for a maximum of four years as long as the company is still considered a startup. The law also allows startups to defer payments of coporation tax debt for a period of twelve months during their first year of activity and 6 months in their second year without the need for collateral. Startups are also exempted from the obligation to make instalment payments during the same period.  

There are also increased exemptions for shares, interests or stock options awarded to startup employees. For these instruments the threshold for taxation has been increased from €12,000 to €50,000 a year. Furthermore, it defers the allocation of earnings derived from these instruments until they are made liquid through the company’s IPO, the sale to third parties or until a period of 10 years has passed.   

The law also provides a tax deduction of between 50% for investors who participate in a startup – raised from 30% previously – while also increasing the maximum base for this deduction from €60,000 to €100,000. Likewise, it increases the period for subscribing shares or interest from three to five years and up to seven years in special circumstances.   

Regulatory reform 

The New Startup Law in Spain includes several favorable regulations to promote the creation and development of new technology-based and innovative companies. For example, notary and registry fees will be eliminated for companies that incorporate electronically. In addition to this, companies will be able to register in the Mercantille Registry in just 6 hours using standard statutes, or 5 working days otherwise. Startups will also be exempted from the cause of dissolution for losses related generating equity imbalances within their first 3 years. Overall, the law provides a streamlined process for setting up a new business with simplified and more flexible administrative procedures.  

Digital Nomad Visas 

The law also contains within it a new visa-scheme for digital nomads which allows non-EU/EEA citizens to live and work remotely in Spain for up to five years. The scheme applies to both employed workers whose company allow them to travel and work remotely, and self-employed workers with clients spread across the world provided at least 80% of their income is derived outside of Spain. To qualify, workers must demonstrate the following: 

• Earnings of over €2,334 per month 

• Sufficient work experience or education 

• At least a 3-month relationship with your client(s) prior to application 

• A contract with the same company for at least a year 

• A clean criminal records certificate 

• Private health insurance with full coverage throughout Spain 

Additionally, there are tax benefits for those who obtain the digital nomad visa whereby they will be taxed through an improved Non-Resident Income Tax Regime. This will allow holders of the visa to pay a flat rate of 24% income tax instead of the progressive rate that can reach up to 48%.  

Incentivising R&D spending 

One of the most significant measures is the introduction of tax deductions of up to 25% for R&D expenses incurred by startups. These deductions can be applied to expenses such as salaries of R&D personnel, costs of research equipment and materials, and expenses for obtaining patents and other intellectual property rights. The law also increases the personal income tax deduction for investment in new or recently created companies, which can encourage investors to invest more in startups engaged in R&D. Additionally, the law provides for the creation of a regulatory sandbox, which will allow startups to test new products and services in a controlled environment without being subject to certain regulatory requirements.  

To benefit from the policies listed above, companies must register as a startup with the Empresa Nacional de Innovación, S.A. (ENISA). The criteria companies must meet are: 

• The company must be not have been operating for more than five years. 

• The company must have a scalable business model with high potential for growth and internationalization. 

• The company must be innovative, meaning it offers a new product, service, or technology or applies an existing one in a new way. 

• The company must be able to demonstrate its innovative nature through a business plan that outlines its strategy for growth and the use of technology. Within this, areas such as competence, team training, reliance on suppliers, technological innovation and more will be weighted. 

• The company must not have distributed dividends and must reinvest at least 15% of its profits.