Are you thinking of starting a new life in Spain and creating your startup here? The creation of companies always benefits not only the entrepreneur, but also the entire economic ecosystem. That is why there are more and more laws that encourage entrepreneurship and help entrepreneurs. One of these laws, of relative novelty, is the law of startups. But what does this law really consist of, and who benefits from it? In today’s post we will tell you everything you need to know to encourage you to create a new company in Spain.
What is a startup?
Before we start talking about the startup law, we must know what a startup is. It is a newly created company with great potential for growth that goes to market quickly in search of funding. In other words, the startup law does not affect all new companies, but only those that meet the following requirements:
- Have an innovative and original value proposition and, as of today, generally digital.
- Be a startup or be up to 5 years old in general, or 7 years old in the case of biotech, energy and industrial companies.
- Have the registered office, permanent establishment and the majority of employees in Spain.
- Not having distributed dividends and not being listed on any stock market.
- Have a maximum revenue of 5 million euros.
What does the law on startups consist of?
The aim of this law is to favor the administrative agility of this type of companies and to present attractive tax incentives to encourage investment.
How does it favor administrative agility?
- By eliminating notary and registry fees in the case of limited companies, and companies that are created electronically.
- Eliminating the requirement to obtain a foreigner’s identification number for non-resident investors.
How does it encourage investment?
- This law reduces the Corporate Income Tax and the Non-Resident Income Tax of general rate up to 15% in the first four fiscal years since the taxable base is positive.
- It raises the amount of the exemption from taxation of stock options from 12,000 to 50,000 euros per year and relaxes the conditions for the generation of treasury stock in limited liability companies.
- Also, it increases the maximum deduction base for investment from 60,000 to 100,000 euros per year and the deduction rate from 30% to 50%.
- It extends the period in which the law considers a company generally as newly created to 5 years, and to 7 years for companies in certain sectors.
- Deferral of the tax liability for corporate income tax or non-resident income tax in the first two years after the taxable income is positive.
- Eliminates the obligation to make installment payments of Corporate Income Tax and Non-Resident Income Tax in the 2 years following the year in which the taxable income is positive.
- Digital nomads can reside and work in Spain for 5 years and have the possibility of benefiting from a special tax regime and pay non-resident income tax.
- It eliminates the double contribution to the Social Security in case of pluriactivity for 3 years for those entrepreneurs who work simultaneously for an employer.
We hope this post has helped you and encourages you to create your new startup in Spain. Remember that at People Global Relocation we are available to help you with everything you need during your relocation. You can also read other interesting posts in our blog:
- Everything you should know about the income tax return
- Adoption in Spain: how does it work?
- What are Double Taxation Agreements?