On July 6, the Council of Ministers approved the draft Law for the Promotion of the Ecosystem of Emerging Companies, known as the Startups Law, an old demand of Spanish entrepreneurs.
The Ministry of Economy and Digital Transformation, through the State Secretariat for Digitalization and Artificial Intelligence, held a public hearing until July 21.
Main measures contemplated in the preliminary draft of the Startups Law
The main measures of the preliminary draft of the Startups Law correspond to the fiscal area, reducing the taxation of emerging companies from 25% to 15% of Corporation Tax, up to a maximum of four years from its creation.
It contemplates raising the maximum deduction base for investment in newly or recently created companies from 60,000 to 100,000 euros per year to encourage investment. It is also accompanied by an increase in the type of deduction, which goes from 30 to 40%, as well as the period in which a company can be considered newly created. In general, it goes from 3 to 5 years, although in certain sectors it can reach 7.
The text also includes the non-obligation to obtain the foreigner identification number, known as NIE, for non-resident investors. Only these investors and their representatives will be required to obtain tax identification numbers, nothing more.
The text establishes a specific framework for emerging companies (startups), responding to their uniqueness and the main demands of the sector, in order to give global visibility to the Spanish ecosystem of emerging companies, attract investment and talent.
The Government defines startups as companies with less than 5 years (7 in biotechnology or industry), that are not listed on the stock market, are innovative and have a turnover of less than 5 million euros per year.
It is intended to regulate and make flexible all the activities that emerging companies have to carry out with the Administration throughout their life cycle, especially in their early stages, due to the amount of paperwork involved in developing a newly created innovative company and that they penalize it with respect to other SMEs in aspects such as taxation or visa processing, the regulation of which is contemplated by the new Law.
One of the most important objectives of the Start-Up Law is to avoid brain drain as much as possible and to attract talent and investment.
Newly created companies can also request the deferral of non-resident corporate tax or income tax debt for a period of 6 to 12 months.
Stock options will also be favored. The amount of the exemption has been raised from 12,000 to 45,000 euros per year in the case of delivery of initial shares, while the conditions for generating treasury shares in public limited companies are made more flexible.
In addition, it is intended to facilitate the creation of a specific tax regime for professionals who telework and have moved within Spanish territory, as well as a specific visa for those who work in the country for a foreign company.
Reactions to the Startups Law
The sector has welcomed the draft with some satisfaction, but they urge the Executive to update the current legislation to adapt it to the current technological and globalized context. Many assure that the reduction of corporate tax will not work for many startups because the first years, in this type of companies, usually generate losses. On the other hand, it is also considered that it will be difficult to define exactly what a startup is or that the time during which these companies can benefit from the benefits is only 4 years, when many projects take much longer to see the light of day.
The draft establishes a specific framework to promote the creation and attraction of emerging companies in Spain, attract investment and talent, one of the reforms of the Recovery and Resilience Plan, as highlighted by Nadia Calviño, Minister of Economy.