On December 1, 2022, Congress approved the “Startup Law” – Law for the promotion of the ecosystem of emerging companies-, now pending its publication in the BOE, for its entry into force the following day.
This Law incorporates important novelties for the sector of entrepreneurs, venture capital companies and the so-called digital nomads or expatriates.
It is important to highlight that this Law will only be applicable to those companies that meet certain conditions that we summarize below and are previously validated by ENISA to be considered “emerging companies“:
- Headquarters in Spain.
- 60% of the workforce must have an employment contract.
- The Company develops an innovative project, in accordance with the definition contained in the Law.
- Whether they are newly created Companies or not, no more than 5 years have elapsed (it can reach 7 years if the company is considered technology-based under Law 14/2011 of June 1, on Science, Technology and Innovation).
- Its creation is not caused by a merger, transformation, and/or segregation operation of a company that is not considered an emerging company.
- Not having distributed dividends.
- Not listed on a regulated market.
It remains to be seen how the evaluation procedure by ENISA will affect investors and operations, which the law foresees to resolve within a period of three months from the date of application. Although the administrative silence will have a positive character, once the indicated period has elapsed, any request for information by the agency will suspend the indicated period.
In this first advance, we will focus exclusively on stock options, one of the points most requested by the sector to attract and retain talent: this remuneration mechanism is based on the delivery of shares/participations to startup employees.
Until now, the tax exemption was set at €12,000 per year. This limit on the amount of the exemption meant, in practice, for all those plans that exceeded it, a fiscal cost that was difficult to bear for those who were precisely betting on the future growth of the company, giving up receiving a monetary compensation commensurate with their worth.
This Law raises the exemption up to the sum of €50,000 per year and what is more important, although it will contribute under the labor regime, for the part of the income that exceeds 50,000 euros, a special temporary allocation rule is established that allows deferring its allocation until the tax period in which certain circumstances occur (company becomes listed on the stock market or the exit of the equity of the share taxpayer), and in any case, within a period of ten years from the delivery of the shares or participations.
Likewise, the Law establishes special valuation of the shares, which may be the value subscribed by an independent third party in the last capital increase carried out in the previous year or its market value.
The previous system, in everything that exceeded that limit, weighed down the application of this remuneration system.
From a commercial perspective, startup companies under the limited liability regime may acquire their own shares – treasury stock – in order to remunerate incentive plans, although with certain limits and requirements established by law.
In this brief preview, we want to highlight the importance of this Law in the field of recognition of the contribution of talent to the growth of society: the value of the employee is essential for increasing the value of the company and for this purpose, the mechanisms of the new Law encourage their participation in the future benefit.
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