Spain has for some time now been approving measures that will facilitate the creation and operation of new businesses, and thus bring new talent to the country. A series of measures have been approved that seek to provide much more attractive tax incentives for investors and reduce the bureaucratic obstacles to the creation of new companies.
A few months ago, we reported on the approval of the law on start-ups and the visa for digital nomads. The visa, included within a new start-up law, was approved by the Spanish parliament in early November and now, the bill just needs final ratification by the Senate before going into effect.
Here we will review the main measures approved to facilitate business generation, encourage growth and promote the establishment of start-ups in Spain:
Create and Grow Law
Law 18/2022, on the creation and growth of companies, was published on 29 September. The final text of the law aims to promote the creation and growth of companies by adopting measures to speed up their incorporation; improve regulation by eliminating obstacles to the development of economic activities; reduce commercial delinquency and facilitate access to more and better means of financing.
Among the various new features regulated, we would highlight the following:
1. Incorporation of limited companies with one euro of share capital.
In other words, the cost of setting up a company is reduced from three thousand euros (€3,000) to one euro (€1). However, two specific obligations are imposed on these companies, the purpose of which is to safeguard the interests of creditors:
i. The first is that at least 20% of the profit must be transferred to the legal reserve until the sum of this and the share capital reaches the amount of 3,000 euros, and the second is that, in the event of liquidation, at least 20% of the profit must be transferred to the legal reserve.
ii. Secondly, in the event of liquidation, if the company’s assets are insufficient to meet the company’s obligations, the shareholders are jointly and severally liable for the difference between the amount of 3,000 euros and the amount of the subscribed capital.
2. Telematic incorporation of companies.
The online incorporation of companies is facilitated through the Information Centre and Business Creation Network (CIRCE) single window, which guarantees a reduction in terms of time, notary and registration costs.
3. Limited liability company on a rolling formation.
It will no longer be possible to set up a limited liability company on a rolling formation basis, as it becomes meaningless as a result of the change in the minimum share capital.
4. Termination of new enterprise limited liability companies.
Newly created limited liability companies, whose usefulness has been overtaken by the implementation of the Single Electronic Document (DUE), will no longer be a type of company covered by the law.
5. In addition, the Law on Creation and Growth introduced a number of amendments aimed at improving collective investment and venture capital in Spain.
As we mentioned at the beginning of this article, a new start-up law was approved by the Spanish parliament in early November and is expected to officially launch in January 2023.
As the final text has not been approved, it is not possible to specify much about the specific provisions, however, this is what we know so far:
1. It establishes the requirements for the companies to which this rule will apply:
i. They must be technology companies (those that require intensive use of new technologies and technical know-how).
ii. It must be a newly created company (no more than five years after its incorporation).
iii. It must have headquarters or a permanent establishment in Spain.
iv. 60% of the workers must have a contract in Spain.
v. The company must not distribute dividends.
2. Company incorporation procedures are simplified: the intention is to carry out the entire incorporation process online to eliminate or reduce as far as possible all bureaucratic obstacles.
3. Corporate Tax rate is reduced: the tax rate will be reduced from the current 25% to 15% in the first four years after the taxable income becomes positive.
4. Changes to stock options: they are allowed to be tax-free up to €50,000, as opposed to the current €12,500. Also, their taxation will be deferred to the time of the sale.
5. Attracting talent:
- The Non-Resident Income Tax regime is improved, which applies to managers and employees of start-ups, investors and digital nomads, who will be able to access a special visa that will grant them residence for up to five years. It also favours the return of talent by reducing to five years the previous non-residence in Spain to access this special regime.
- Digital nomads can also benefit from the legislation. The procedures for obtaining visas are streamlined, especially for Spanish start-ups or digital freelancers, who will have a reduced tax rate.
- Investors who do not reside in Spain will require a NIF, not a NIE.
6. New specific and favourable taxation for Business Angels.
This newsletter provides general information and does not constitute legal advice.
Categorised in: Spanish Law
This post was written by Pilar Cerrutti