The law for the promotion of the Emerging Companies Ecosystem, better known as the Startups Law, has been approved by the Government of Spain and will come into force in January 2023. It is a law created to reduce excessive bureaucracy and to provide sufficient incentives that help create a start-up business model.

This new Law promotes tax incentives to attract more international talent and boosts investment in R+D+i, to achieve a market of technological and innovative companies that can make Spain a world benchmark when it comes to undertaking. However, only those legal entities that meet the requirements can be considered an Emerging Company or Startup

Requirements to be an emerging company or Startup

It is important to keep in mind that there are a series of requirements that must be met to be considered an emerging company. Art. 3 of the Startups Law informs that all companies that want to benefit from this new Law must comply with:

  • Invoice less than 10 million euros per year.
  • Created less than 5 years or 7 years ago for biotechnological, energy, and industrial companies.
  • To be considered innovative.
  • Headquarters or permanent establishment in Spain.
  • 65% of the workforce with a contract in Spain.
  • Not be listed nor have distributed dividends.
  • Not be the result of a merger, division, or transformation of companies without consideration of emerging.

On the other hand, Article 4 of the law warns that all companies that meet the requirements established by the Startups Law must request a certificate of innovative entrepreneurship from ENISA. Only then will they be able to take advantage of the benefits provided by it.

What companies are left out of the Startup Law?

The law clearly specifies a series of cases in which companies would be left out of the new Law and will not be considered Emerging Companies in any case.

The foreseen cases that prevent you from taking advantage of the benefits of the law are:

  • Having been convicted by final sentence: unfair administration, punishable insolvency, corporate crimes, money laundering crimes, financing of terrorism, crimes against the Public Treasury and Social Security,
    prevarication, bribery, influence peddling, embezzlement of public funds, fraud and illegal exactions or urban crimes, as well as the penalty of loss of the possibility of obtaining subsidies or public aid.
  • Not being up to date with the payment of tax obligations and with Social Security.
  • Having lost the option to contract with the administration.

Tax Incentives for Emerging Companies

With the idea of helping the growth of companies considered emerging, a series of important tax incentives have been planned that make the Startup Law a possible business accelerator that helps to face 2023 with greater guarantees than previous years. The benefits are mainly six:

  • IS and IRNR: IS is reduced from 25% to 15% for a maximum of four years, provided that the status of emerging company is not lost.
  • Deferral: for two years, all companies considered emerging may extend the deferral of the payment of tax debts.
  • Stock Options: taxation of remuneration formulas based on participations or shares to attract talent and help meet the needs of this type of company is reduced. For this reason, the exemption is increased from €12,000 to €15,000 per year and a temporary imputation rule is provided that allows the imputation to be deferred for 10 years or until certain circumstances occur.
  • IRPF deduction for investing in new or recent companies: the type of deduction is increased from 30% to 50% and the maximum base from €60,000 to €100,000. The period for subscribing shares or participations is increased from three to five years, counting from the constitution of the entity, and up to seven for certain categories of emerging companies.
  • Tax regime for displaced workers: improvement of the tax regime for displaced workers in Spain (known as the “Beckham Law”) with a reduction from 10 to 5 years of the last tax period in Spain prior to displacement, in order to benefit from this tax regime. Employees who use computer media and systems, telematics, etc., as well as managers of emerging companies are included. Taxation by this special tax regime is allowed for children under 25 years of age, spouses and, in certain cases, parents.
  • Management of venture capital funds: as long as they are linked to the venture, the tax classification for remuneration obtained from managing venture capital entities (known as “carried interest”) is regulated, making it much more advantageous for the purposes of personal income tax for administrators, managers or employees of these entities or their management entities.

Conclusions on the arrival of the Startup Law

At addwill we consider the arrival of the expected Startup Law very positive. The benefits of its application are interesting because they can promote a paradigm shift in the national business network, so weighed down by its bureaucracy and constant regulatory changes.

In this sense, tax incentives are attractive, especially highlighting the increase in the maximum deduction base from 60,000 euros to 100,000 euros, and also the increase in the deduction rate from 30% to 50%. Getting investors to provide capital to grow emerging companies is configured as one of the most difficult challenges for an entrepreneur, so with this tax benefit for investors, capital can be accessed more easily.

It is also worth highlighted the modification of the special regime for expatriates, due to the attraction that it may entail for foreign entrepreneurs and “digital nomads”, making it theoretically accessible to professionals, entrepreneurs and investors residing abroad who wish to move to reside in Spain, but, as this is always the case with the Spanish legislator, the regulation contains complex aspects; so, it will be necessary to carefully analyze compliance with the requirements on a case-by-case basis, as well as the interpretation of this regulation made by the Directorate General of Taxes through the resolution of Tax Consultations.

As always, from addwill we are at your disposal if you want more information or require advice on this matter from our professionals. You can contact us by phone + 34 934 875 200 or email us at