Knowledge and innovation are critical factors in ensuring economic growth and productivity in any business.
With the approval of the recent Startup Law, Spain has joined the race initiated by European countries to attract investment, entrepreneurship and talent. Spain has also declared its support for the recently signed EU Startups Nations Standard: a set of practices designed to foster entrepreneurship in the European Union and the creation of new innovative companies by creating the conditions to encourage their scalability.
Many measures have recently been implemented by the government to encourage the growth of this type of company in Spain, including measures related to migratory, labour, financial, fiscal, tax topics and many more.
In this way, Spain has provided new companies and the agents involved (workers, investors, emerging companies, etc.) with legally attractive instruments to guarantee the attraction and retention of scientific, technological and innovative talent, allowing the best candidates and human resources to be recruited and relocated on a stable basis, decisively encouraging their relocation to Spain.
On 1 December 2022, Congress definitively approved Law 28/2002, of 21 December, on the promotion of the start-up ecosystem, known as the «Start-up Law». The law introduces important novelties, among which, tax benefits for emerging companies/EC/ or startups. Check our previous PUBLICATION to learn about the requirements that a company must simultaneously fulfil to access the benefits and support measures announced in the Law:
1.1. The initial taxation of start-ups is eased, reducing the corporate tax rate from the current 25 % to 15 % for a maximum of four years, provided that the company maintains its status as a start-up. In addition, the deferral of payment of tax debts during the first two years of activity is extended to all start-ups.
1.2. Provided that the company qualifies as an Emerging Company, the law establishes a mechanism for remunerating employees by means of the delivery of shares or participations in the company (including stock options) by the company:
a) With the aim of attracting talent and providing a remuneration policy suited to the situation and needs of this type of company, the taxation of remuneration formulas based on the delivery of shares or holdings to employees, known as stock options, is improved. The exemption is increased from 12,000 to 50,000 euros;
b) A special rule is established for the temporary imputation of the non-exempt surplus (i) stock market listing or an MTF, or; (ii) outflow from the taxpayer’s assets to the corresponding share or holding; or (iii) 10 years from the delivery of the shares or holdings;
c) A valuation rule is established for the delivery of shares/units in emerging companies: (i) value subscribed by an independent third party in the last capital increase in the year prior to the delivery; or (ii) if there is no increase, the market value;
d) The requirement of an offer on the same terms for all employees is eliminated;
1.3. Deduction for investors for investment in «new or recently created companies»- /not only EC/:
State allowance is established for investment in start-ups of up to 50% of the investment in company shares for a maximum amount of €100,000 per year.
Not all investments in start-ups are tax-deductible. To qualify for these allowances, the company in which the taxpayer invests must meet a series of requirements established for emerging companies /EC/ or startups. Check our previous PUBLICATION for the requirements that the emerging company has to meet. At the same time:
a) There is an increase from €60,000 to €100,000 in the deduction base;
b) The deduction percentage is increased from 30% to 50%;
1.4. Impatriate regime («Beckham Law»):
Access to the special tax regime for impatriates is facilitated, as follows:
a) The requirement of non-residence for tax purposes in Spain prior to the move is lowered from 10 to 5 years;
b) The list of reasons for relocation giving entitlement to apply the regime is extended:
a. Digital nomads / telecommuting from Spain through the exclusive use of computer, telematic and telecommunication means and systems;
b. Administrators-EC- with a shareholding of more than 25% in an entity /except for asset-holding entities/;
c. Economic activity in Spain qualified as entrepreneurial activity;
d. Highly qualified professional, providing services in Spain to emerging companies or carrying out training, research, development and innovation activities that represent more than 40% of the total income obtained;
c) Extension of the regime to the impatriate’s spouse and children under 25 years of age;
d) Effective 2023 and retroactive in case of relocation in 2022;
e) Extension of the application deadline to 6 months after obtaining authorization to reside as a digital nomad.
1.5. Benefits for the successful management of venture capital companies:
The tax qualification of the remuneration obtained for the successful management of venture capital entities (known as carried interest) is regulated, while establishing a specific tax treatment for such remuneration, in line with the regulation of our neighbouring countries, which encourages the development of venture capital as a channelling element of business financing of particular relevance, all with the aim of boosting entrepreneurship, innovation and economic activity.
Strategic tax planning, even in the initial growth phase of EMERGING COMPANIES, requires a detailed study and professional legal advice. If you are interested in the subject, tell us your concerns and find out how we can help you.
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