STARTUP LAW

Startup Law

A Law for the creation of an innovative entrepreneurial ecosystem in Spain with measures to attract foreign talent

The Plenary of the Congress of Deputies has approved the Law for the Promotion of the Emerging Companies Ecosystem, better known as the Startup Law. This standard is the first specifically aimed at creating an innovative entrepreneurial ecosystem in Europe.
With the Startups Law, the Government seeks to stimulate investment and attract talent, encourage collaboration between SMEs, large companies and emerging companies, promote R D i, also in the Administration, and encourage cooperation between companies emerging and entrepreneurs with Universities and research centers.
With this new Law on Startups, Spain intends to take another step in promoting innovation and entrepreneurship in Europe. He is also a founder of ESNA (European Startup Nation Alliance) together with Austria and Portugal, with the aim of doubling the number of technological unicorns in the EU by 2030.

What is a Startup?

A “startup” is defined as a company that:


- It does not exceed 5 years old (or 7 for strategic sectors).

- It does not trade on the stock market or distribute dividends.

- It has its headquarters or registered office in Spanish territory.

- 60% of the contracted workforce is in Spain.

- It has a maximum business volume of 10 million euros.

- Evidence of "innovative character", understood as the development of new or improved products or provision of services.


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Most relevant characteristics of the Startup Law:

01

Extension of residence permits to entrepreneurs, investors and foreign students.

The new standard establishes measures to attract and retain the best international talent, as well as entrepreneurs, investors and foreign students, facilitating their entry and residence in Spain.
To do this, new visas are created and the duration of residence permits is modified:

1. for entrepreneurs who want to start a business activity in Spain, the initial authorization of residence is extended from one to three years. In addition, they may apply for renewal for two years and obtain permanent residence after five years.
2. for foreign investors, the initial authorization of residence is increased from one to three years.
3. for students in practice, or that they are Looking for a job or want to start a business project Once they have completed their studies, the residence permit is extended from one to two years.

02

Creation of a “digital nomad visa”

The call "digital nomad visa" will last for one year and may be requested by foreigners not residing in Spain to work remotely for a company based in another country or for themselves.
Subsequently, the residence authorization for international teleworking may be requested, which will have a maximum duration of three years, renewable for periods of two years.
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03

Tax regime for expatriates: workers posted to Spain may benefit from the special tax regime

Workers, highly qualified professionals, entrepreneurs and investors, and their family unit, may choose to pay the Non-Resident Income Tax (IRNR) during the tax period of change of residence and the five following the general rate of 24% up to 600,000 euros of payable base.
To do this, they must meet the condition of not having resided in Spain during the five previous tax periods. In addition, to benefit from this tax measure, the travel to Spanish territory must be for the purpose of a qualified economic activity or that as a professional provides services to a startup.

04

Special taxation of emerging companies

Reduction of the tax rate in the Corporate tax. From the current 25% it goes to 15% for up to four years, from the first period in which the tax base is positive to the following three.

05

Bonus in Social Security contributions for founders of startups

The Startup Law establishes a bonus of one hundred percent of the quota corresponding to the minimum base established in general during the first three years, when the entrepreneurs simultaneously work for another company.

06

Establishment of a specific tax treatment for thecarried interestwith the aim of promoting the development of venture capital

A specific tax treatment is established for carried interest, that is, for the remuneration obtained for the successful management of venture capital entities linked to entrepreneurship, innovation and the development of economic activity Throughout the national territory.
Those derived directly or indirectly from participations, shares or other rights, including success commissions, will be considered as work income. It will be classified as 50% income from work, with no quantitative limit, as long as certain conditions of maintenance and minimum profitability for ordinary investors in the fund are met.

07

Reduction of bureaucratic requirements for foreign investors

With the aim of facilitating investment processes in Spanish companies by foreign investors, the Startups Law includes improvements for reduce red tape for investors who do not reside in Spain.

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