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The figure of the Investor in the Draft Bill for the promotion of the startup ecosystem

| Publications | Tax / Corporate Law and M&A

The Government approves the Draft Bill on Startups, which aims to boost investment in the entrepreneurial ecosystem in Spain through tax benefits, investment support instruments and attracting talent. Javier Bustillo and Borja De Gabriel analyse the measures adopted and what they imply for this type of companies and their investors

The Council of Ministers approves the Draft Bill to promote the start-up ecosystem, known as the Start-up Law, which aims to boost investment in the entrepreneurial ecosystem by trying to make Spain attractive to this type of company and its investors through tax benefits, investment support instruments and attracting talent.

To be considered "Start-ups" or "emerging", companies must meet a series of requirements, such as:

  • have a turnover of less than 5 million euros;
  • the registered office and more than half of the employment must be located in Spain;
  • be less than 5 years old (which may be extended to 7 years in the industrial, biotechnology and energy sectors);
  • not be a listed company; and
  • not have distributed dividends.

Among the tax measures, the most important are:

Reduction of the tax rate on corporate income tax (IS) and non-resident income tax (IRNR), reducing the general rate from 25% to 15% (for a maximum of 4 years) for entities that maintain their status as "emerging companies". Deferral of the debt for these taxes during the first two financial years as an "emerging company", with a guarantee waiver (12 and 6 months). Elimination of the obligation to make instalment payments for both taxes during those two years.

Stock options: adoption of certain measures favourable to the use of options on the company's own shares or holdings, raising the amount of the exemption from 12,000 to 45,000 euros per year for employees of "emerging companies", with the offer not needing to be made to all the company's employees.

Business Angels: increase in the maximum deduction base for Personal Income Tax (IRPF) for investment in new or recently created companies, from €60,000 to €100,000 per year; the deduction rate increases from 30 to 40%; and the period in which capital increases are included is increased to 5 (or 7 years).

The requirements for access to the so-called Beckham Regime are modified, reducing from 10 to 5 years the requirement of not being a tax resident in Spain and extending the period of enjoyment from 5 to 10 years. The possibility of applying this regime is extended to spouses and descendants. However, the Draft Bill does not reflect the transitional regime for those taxpayers who have currently availed themselves of the benefits of the regime under Article 93 of the LIRPF, who could benefit from an extra 5 years.

Elimination of the obligation to obtain a Foreigners' Identification Number (N.I.E.) for non-resident investors, for whom the Tax Identification Number (N.I.F.) will suffice.

You can download the complete document from here.

For more information, please contact:

Javier Bustillo | Partner Corporate and M&A and Venture Capital

Borja de Gabriel | Partner Tax

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