Improvements to the Startups Act that comes into force in 2023

After a long road and a long wait, the Spanish Congress approved the law for the Promotion of the Startup Ecosystem, better known as the Startup Law, which came into…

After a long road and a long wait, the Spanish Congress approved the law for the Promotion of the Startup Ecosystem, better known as the Startup Law, which came into force on December 23rd of last year. The purpose of this law is to encourage the development and growth of startups in Spain by creating better incentives and reducing the bureaucratic paperwork and administrative requirements that come with their creation.

The final goal is to promote a business environment conducive to the growth of innovative and sustainable companies that can contribute to economic and social development in Spain. Undeniably, this is a great step towards strengthening the entrepreneur ecosystem in the country.

Related: Fastest Growing Startups In Spain: Outside Madrid And Barcelona

Spanish entrepreneurial ecosystem

According to the Spanish Tech Ecosystem Report, Spain’s entrepreneurial ecosystem has grown fivefold in the last six years. This report likewise explains that the national ecosystem reached a value of 46,000 million euros in 2021, compared to 10,000 million in 2015.

Furthermore, the Mapping Spain’s Tech Sector report also revealed that after Covid-19 there was an increase in the creation of Startups, similar to what happened in 2018 when the number of startups in Spain doubled after the economic crisis. This data concludes that the entrepreneurial technology sector is one of the engines of the country’s economic recovery.

Another study revealed that since 2018, Startups have managed to close significant funding rounds exceeding 10 billion euros. Also, several local startups, such as Cabify, Glovo, and Wallapop have reached the category of unicorns due to their value exceeding 1 billion dollars. This report also states that by the end of 2023, the value of several unicorn-status startups will double.

Features of the startup law in Spain

This law brings several new features that intend to benefit startups and qualified talent, including the bureaucratic paperwork reduction and a series of tax incentives for emerging companies: such as a corporate tax reduction of up to 15%, as well as the possibility of deferring tax debt or the elimination of fractioned payments.

For María Benjumea, founder of South Summit, this is a “law for innovation and qualified talent. It is just what we need to respond to the fast-paced economic moment we are living in”, adding that all the actors involved in the entrepreneurial ecosystem have been working on this law for a long time.

So, what are the main features of this law? The Startup Law in Spain seeks to facilitate the creation and development of Startups based on several key points. The main improvements of this law include the reduction of bureaucratic processes to ensure more agility, the possibility of not having to incur dissolution due to losses until three years since their establishment, a  100% bonus on the quote of the special regime of Self-Employment for self-employed partners who continue to be employees, and the elimination of notary and registry fees in the case of limited liability companies and companies established online.

Related: Tips For Recruiting And Retaining Talent For Startups

Digital Nomad Visa

Thanks to the Startup Law in Spain, digital nomads will be able to live and work in Spain for five years and can benefit from a special tax regime, which is that they will be able to pay the Non-Resident Income Tax. This regime allows the first 60,000 euros of income to be taxed at 15% instead of 24%. This benefit applies from managers and employees of startups to investors and digital nomads, and it can also be extended to their family members.

Through the Digital Nomad Visa, attracting talent is now more attainable since foreign citizens can live in Spain and work remotely for companies located outside the country, and the requirement of minimum income is between 2,000 and 3,000 euros monthly.

Related: Digital Experience And Startups: Main Focus For Their Customers

Fiscal Policy

As mentioned above, among the  startup law improvements we can find the bureaucratic reduction and a series of tax incentives and fiscal measures for emerging companies, such as an corporate Income Tax reduction of up to 15%, the possibility of deferring tax debt, the elimination of the regime of pluriactivit, and a tax reduction on investment. At last, another measure was to increase the maximum deduction base for investment from 60,000 to 100,000 euros per year.

International talent

Attracting talent and talent retention are other significant motivations behind this legal framework since it will now be easier for foreign students to obtain a two-year work permit once they finish their studies.

It’s clear that through this legal framework, the Spanish government aimed to adjust the relevant framework to the peculiar character of startups in the administrative, fiscal, civil, and commercial domains to assist these businesses throughout their life cycle, particularly in the early stages. We could expect that these measures will boost the development of the local startup ecosystem and encourage innovation in Spain.

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