Startup law keys you need to know

Law 28/2022, of december 21, on the promotion of the emerging business ecosystem, better known as the startup law, represents a significant step for fostering entrepreneurship in Spain. This legislation has been crafted with the aim of stimulating the creation and development of startups while fostering innovation, investment, and the attraction of talent in the business sector.

Below, we break down its main components and the benefits each of them brings.

Certifying as a startup

The startup law establishes a legal framework for certifying startups. This certification grants a series of significant advantages to companies that meet the requirements and, therefore, can apply for certification:

• Company Age. The certificate is available for companies that are 5 years or younger from the date of registration in the Mercantile Registry. In the case of biotechnology, energy, or industrial companies, and those determined to belong to strategic sectors or have developed technology entirely designed in Spain, this period may be extended to 7 years.
• Business Volume and Balance. The annual turnover of the startup must not exceed ten million euros. This threshold is intended to ensure that startups are genuinely small enterprises.
• Independence. The startup must be independent, meaning it cannot be controlled by other companies or entities in more than 25% of its capital.

The certification as a startup provides several benefits aimed at reducing the tax burden on these companies, supporting their growth in the early stages. Although this certification has more improvements for the receiving companies, these are the most prominent tax benefits:

• Reduction of corporate tax from 25% to 15%. This will be maintained for a period of 4 years, as long as the condition of being an emerging company is maintained.
• Deferral of tax debts. Certified startups can defer the payment of the tax debt corresponding to the first two tax periods in which the tax base is positive.
• Improvement of the stock options compensation policy. Previously, stock options received by employees of startups were taxed starting from 12,000 euros in personal income tax (IRPF). The startup law raises the exemption amount from 12,000 € to 50,000 €, aiming to incentivize the issuance of stock options by startups to their teams.
• Improvement of deductions for investors. The maximum annual deduction amount increases from €60,000 to €100,000, and the deduction percentage rises from 30% to 50%.

If you want to learn more about the application process for the Startup certificate or start the procedures to apply for it, you can visit our "Certify as a startup" procedure or take a look at the ENISA website, the entity responsible for granting this certification.

Attraction of international investment and talent

Another key objective of the law is to attract international investment and talent to Spain. To achieve this, the law includes the following measures:

• Visas for digital nomads. A new category of visas is created to attract so-called "digital nomads" or highly qualified individuals who decide to reside in Spain while working for themselves or providing services to foreign companies.
• Extension of residence periods for investors, entrepreneurs, highly qualified workers, and foreign students. The startup law increases the residence period from 1 to 3 years with the possibility of extending to 5 (from 1 to 2 years in the case of students).
• Administrative simplification. Procedures for requesting the NIE (foreigner identification number) will be simplified electronically.
• Streamlining procedures for foreign investors. They will no longer need to have an NIE but an NIF (tax identification number), which they can request through a simplified and electronic procedure.

You can check how to apply for it in our section on procedures to invest and work in Spain.

The startup law in Spain marks a significant advance in supporting emerging companies and promoting innovation. Certification as a startup and the associated tax benefits provide a significant incentive for qualifying companies to access special benefits. Furthermore, efforts to attract international investment and talent are crucial for the growth and competitiveness of the startup ecosystem in Spain. Through this law, the foundations are laid for a regulatory environment more favorable to innovative entrepreneurship.

If you want to know more, we invite you to take a look at our dedicated page on the "startup law", where we break down the essential contents in even more detail.