On December 29, 2021, I published a Post on this Blog about the Spanish “Start-Ups” Bill on the facilitation of entrepreneurship based on innovation, just to analyze some of its most outstanding aspects, especially those that placed more emphasis on making the regulatory framework in force more flexible. A year later, once this Bill has become Law 28/2022, of December 21, it is time to complete said analysis, pointing out that what the Spanish governement seeks with this new Law is to achieve a double objective: on the one hand, to establish a program that allows the creation and growth of “Start-Ups”; and on the other, to set the bases that support the attraction of highly qualified professionals, such as digital nomads among others.
But, what is meant by a “Start-Up”? . According to this Law, “Start-Ups” are those companies that: a) are newly created or, not being so, have not elapsed more than five years since their registration in the Companies Registry, or seven in the case they are strategic companies; b) they have not arisen from a merger, spin-off or transformation operation of companies that are not emerging ones; c) they are not listed on the Stock Market; d) they do not distribute dividends; e) their headquarters or registered offices are in Spanish territory; f) 60% of their workforce is hired in Spain; and g) they develop an innovative entrepreneurship project through new or improved products, services or processes.
The program for the creation and growth of “Start-Ups” is basically based on the granting of tax benefits to companies and entrepreneurs, the cutting down of administrative red tape and the easing up of business management. Thus, in the fiscal chapter, the Corporate Tax rate goes down from the current 25% to 15% for a maximum of four years as long as the taxable base is positive; the maximum base of reduction for entrepreneurs in Personal Income Tax increases from € 60,000 to € 100,000 per year; and the type of deduction goes up from 30% to 50%, a deduction that maybe it is not as much as expected, but it is still worthwhile of taking it into account.
In order to promote administrative simplification, the Law provides a single telematic window for the certification of innovative companies as Spanish “Start-Ups” (ONE); besides, it eliminates the obligation to obtain the Foreigner Identification Number (NIE) for non-resident investors, being sufficient for these purposes with simply obtaining the Fiscal Identification Number (NIF); and, last but not least, it significantly reduces notary fees. In addition, the Law increases billing from 5 to 10 million euros in the delimitation of a “Start-Up” and streamlines the incorporation procedure of these companies so that it can be carried out within a period of six hours in a completely digital way.
Regarding the easing up of business management, it is important to note that the new Law eliminates the double contribution to Social Security for those entrepreneurs who simultaneously work as employees. Besides, it also establishes the deferral of the debt of Corporate Tax or Non-Resident Income Tax in the first two years, without any guarantee or late-payment interest, for a period of twelve (12) or six (6) months respectively, provided the taxable base is positive. Finally, it improves the taxation of “Stock Options” by raising the amount of the current exemption from € 12,000 to € 50,000 per year and allows the company to voluntarily acquire its own shares in treasury stock.
To attract foreign talent, the Law ameliorates the access to the expatriates regime: thus, it reduces from 10 to 5 the number of tax periods prior to their moving to Spain in which the expatriates must not have been tax residents in Spain; and it extends the scope of application of the regime to those who carry out an economic activity classified as entrepreneurial; to highly qualified professionals who provide services to “Start-Ups” companies or who perform training, research, development or innovation activities; to digital nomads; and to the expatriate’s relatives. Thanks to this regime, the expatriate, even if considered a tax resident in Spain, will be taxed in a limited way, only for income from a Spanish source, in Personal Income Tax.
Now, with regard to digital nomads, that is, people whose jobs allow them to work remotely and change residence frequently, the Law creates a new category of visa and residence permit. The visa allows them to enter and reside in Spain for a maximum of 1 year while working for themselves or for an employer anywhere in the world. But those who, being holders of a residence visa, are going to exhaust said year of residence and want to continue in Spain, can apply for a residence permit for a maximum period of 3 years, renewable for a period of another 2, being able to obtain a permanent residence after 5 years. To these benefits must be added that of moving with their families, either at the beginning or at some later time.