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The government approves the so-called “Startup Law”

Isabel Robledillo 15 November, 2022

The Startups Law was created to provide greater legal coverage and economic support for technology-based start-ups and to help build an entrepreneurial ecosystem capable of becoming the driving force behind the modernisation of the economy.

The first thing this law establishes is to define what an emerging company or start-up is and, therefore, what type of company will be able to benefit from the new legislation.

  • They must be newly created companies, no more than five years old, i.e. no more than five years have elapsed since the date of registration of the public deed of incorporation in the Commercial Register, in general, or seven years in the case of companies in industry, energy, biotechnology or arising from scientific research.
  • Not have undergone a merger, spin-off or transformation operation.
  • Have their head office, registered office or permanent establishment in Spain.
  • 60% of the workforce must have an employment contract in Spain.
  • Its project must be "innovative".
  • Not distribute or have distributed dividends.
  • Not be listed on a regulated market.
  • Not have a turnover of more than 10 million euros.

 

The taxation measures established for taxpayers are the following:

CIT and Non-Resident Income Tax:

  • Companies which, having the status of start-up company, have a positive taxable income in the first tax period and in the following three years, in the terms established in Article 29.1 of the CIT Act, will be taxed at a reduced rate of 15%.
  • These companies may apply to the Tax Agency Administration at the time of the submission of the forms, for deferral of payment of the tax debts corresponding to the first two tax periods in which the tax base is positive. The Tax Agency will grant the deferral, with waiver of guarantees, for a period of 12 and 6 months, respectively, from the end of the deadline for payment in the voluntary period of the tax debt corresponding to the aforementioned tax periods (for the granting of this deferral it will be necessary to be up to date with the payment of tax obligations) and it will not entail late payment interest.
  • They will not be obliged to make the CIT prepayments regulated in Article 40 of the CIT Act and Article 23.1 of the Non-Resident Income Tax Act, respectively, which they must make on account of the forms corresponding to the immediately subsequent tax period, provided that they maintain their status as an start up company.

Personal Income Tax:

  • Exemption in the case of delivery of shares or units granted to the employees of a start-up company (stock options).

The amount of the exemption is increased to 50,000 euros. When it comes to the amount that exceeds this limit, a special rule is established, which allows its imputation to be deferred until the tax period in which any of the following circumstances apply:

  • The company's capital is admitted to trading on the stock exchange or any multilateral trading system, whether Spanish or foreign.
  • The relevant share or interest is withdrawn from the taxpayer's assets.

The general requirement for the offer to be made under the same conditions for all employees in the company, group or subgroups is waived, as it would be sufficient for the offer to be made as part of the company's general remuneration policy.

 

  • A special valuation rule is established for work income in kind derived from the delivery of shares or holdings granted to the employees of a start-up company, in which such income will be valued at the value of the shares or holdings subscribed by an independent third party in the last capital increase carried out in the year prior to that in which the shares or holdings are delivered.
  • An increase in the deduction for investment in new or recently created companies is established, increasing the deduction rate for the subscription of shares or holdings to 50%, on a maximum deduction base of up to 100,000 euros
  • Employment income obtained for the management of funds linked to entrepreneurship, innovation and the development of economic activity (carried interest tax regime). An additional fifty-first provision is added to the Personal Income Tax Law to regulate the classification and tax treatment of the remuneration obtained for the successful management of venture capital entities (known as "carried interest").

Income derived from holdings, shares or other rights that grant special economic rights in certain entities, obtained by the directors , managers or employees of these entities or of their managing entities or companies of their group, shall be considered as employment income.

Such earned income shall be included in the tax base at 50% of its amount, when the requirements mentioned in the additional provision are met.

  • Finally, in order for start-up companies to attract international talent, an update and improvement of the conditions to apply the special tax regime for employees moved to Spanish territory, known as the "Beckham Law", is registered.

The modifications established are as follows:

  • Not having been tax resident in Spain in any of the 5 tax periods prior to the one in which the move to Spanish territory takes place, as well as not obtaining income that would be classified as obtained through a permanent establishment located in Spanish territory. It reduces from 10 to 5 years to have been a tax resident in Spain during the years prior to the move.
  • There are new circumstances that allow the grounds for moving to Spanish territory to be considered fulfilled, i.e. not only when the worker moves to Spanish territory for work purposes or for an employment contract, but also when, without the posting being ordered by the worker's employer, the work activity is carried out remotely, through the exclusive use of computer, telematic and telecommunication means and systems. In particular, this circumstance will be understood to be fulfilled in the case of employees who have the international teleworking visa provided for in Law 14/2013, of 27 September, on support for entrepreneurs and their internationalisation.
  • Taxpayers who move to Spanish territory as a result of acquiring the status of directors of start-up companies, regardless of their percentage shareholding in the share capital of the entity, may benefit from access to the system.
  • The scope of application of the special regime is extended to the spouse of the posted employee and children under 25 years of age or disabled (with no age limit in this case), or even the parent of the latter, in the event that there is no marital relationship with the employee moved to Spain, and they meet certain requirements, such as:
  • They move to Spanish territory with the taxpayer and, if they do so subsequently, no later than the end of the first tax period in which the special scheme applies to the taxpayer.
  • They acquire tax residence in Spain as a result of their move to Spanish territory.
  • They meet the requirement of not having been tax residents in Spain in any of the 5 tax periods prior to the one in which the move to Spanish territory takes place, as well as the requirement of not obtaining income that would be classified as obtained through a permanent establishment located in Spanish territory.
  • The sum of the taxpayers' taxable income in each of the tax periods in which the special regime applies to them is less than the taxable income of the taxpayer who has moved to Spain as a result of an employment contract or the acquisition of the status of director.

Finally, letter a) of Article 14.1 of the Non-Resident Income Tax Act is amended to establish the exemption from this tax of the employment income in kind mentioned in paragraph 3 of Article 42 of the Income Tax Act.

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