New Spanish Startups Law to promote innovation, attract digital nomads

The Council of Ministers of Spain gave the green light on Friday to the Bill for the Promotion of the ecosystem of emerging companies, dubbed the ‘Startups Law’, for submission to Parliament.

Deputy Prime Minister and Minister of Economic Affairs Nadia Calviño stated that with this regulation to promote innovative entrepreneurship, Spain intends to be among the most attractive countries in the world for the creation of startups.

The bill has been drafted “thinking very especially of generating opportunities for young people and attracting investment and talent,” she said.

The Spanish government understands that this law is necessary to provide a specific regulatory framework for these types of companies, which constitute the basis of the new digital economy.

They are usually businesses that generate highly qualified jobs and have a lot of potential to grow if they manage to overcome difficulties inherent in their own nature, such as the lack of financing and the lack of capacity to attract and retain high value-added workers in their initial phases.

Requirements to create a startup

The bill establishes that startups will be considered to be those companies that are innovative, newly created or with an age of up to 5 years in general, or 7 years in the case of biotechnology, energy and industrial companies. These companies must have their registered office, permanent establishment and most of the employment in Spain; not having distributed dividends and not being listed, and having income of up to 5 million euros.

The deputy prime minister stressed that the new regulation will facilitate the procedures for the creation of new startups with the elimination of notarial and registration fees in the case of companies that are created under the standard statutes and electronically.

Likewise, the constitution of a company will be possible through a single electronic document and registration in the trade register in 6 hours, if the standard statutes are used, and in 5 business days in all other cases.

The requirement to obtain the foreign identification number (NIE) for non-resident investors is also eliminated and, during the first 3 years, the startup is exempted from the cause of dissolution due to losses related or that generate an equity imbalance.

The Empresa Nacional de Innovación SA (ENISA), dependent on the Ministry of Industry, will be in charge of the accreditation of companies as startups so that they can access the benefits established by law. There will be Entrepreneur Service Points and a national Entrepreneurship Office that will provide information and access to public aid.

Benefits for investors

The government says the new law will provide “a very favorable tax scheme, both for companies and their investors and for their workers.”

For investors, the tax rate on corporate and non-resident income taxes is reduced, the deferral of tax debt is allowed without guarantees or late payment interest. The obligation to make installment payments is eliminated and the maximum deduction base for investment in newly or recently created companies is raised from 60,000 to 100,000 euros per year.

Digital nomads

Workers will see improved treatment of the forms of remuneration based on options on shares of the company itself or stock options. The double contribution to Social Security is also eliminated for 3 years for those entrepreneurs who simultaneously maintain a job as an employee.

In addition, to attract the so-called digital nomads (entrepreneurs and teleworkers who move to Spanish territory) a more agile procedure is established for them to obtain a visa and residence, as well as a special tax regime.

“These individuals will have the option of residing and working in Spain for 5 years, and will be eligible for a special tax regime, paying Non-Resident Income Tax,” the Ministry of economic affairs specified in a press release.

With the aim of drawing talent back to Spain, Spaniards who have been non-residents in Spain for at least 5 years are included in this measure.

The bill will now go to Parliament to begin its processing. It is scheduled to take effect in mid-2022.